There are a lot of terms to understand during the Probate process. To simplify things, this article explains the difference between a residuary beneficiary and a legacy beneficiary in Probate, including what each is entitled to inherit and the order in which the Estate is distributed.
For free initial advice and guidance call our Probate Advisors on 03306069584 or contact us online and we will help you.
What is a Beneficiary?
A beneficiary is a person or organisation who is entitled to inherit from a deceased person's Estate.
If the deceased didn't make a Will, then this is called dying 'intestate' and inheritance laws called the Rules of Intestacy will determine who the beneficiaries are. These rules prioritise certain relatives of the deceased, starting with their spouse or civil partner. The way in which the Estate will be distributed will depend on who the deceased has left behind and how much their Estate is worth.
For more information, see The Rules of Intestacy Explained.
If the deceased left a Will, then this will name who they have chosen to be their beneficiaries. They can choose as many beneficiaries as they wish and they can divide their Estate between them in any number of ways. They can choose to name friends, relatives, charities or organisations as beneficiaries of their Estate.
A legacy beneficiary is a beneficiary who has been left a specific item or a specific sum of money. This could be a valuable possession, such as an expensive watch, which is called a specific legacy, or it could be a fixed sum of money, such as £2,000, which is called a pecuniary legacy.
An Estate will only have legacy beneficiaries if the deceased left a Will, as the Rules of Intestacy will not identify legacy beneficiaries.
A residuary beneficiary is a beneficiary who has been left a percentage of what's left in the Estate after all debts and expenses have been settled. They are called residuary beneficiaries because they receive the residue of the Estate.
If the deceased left a Will, then the legacy beneficiaries could be left different proportions of the Estate (i.e. 70% to my son, 15% to my niece and 15% to my sister) or they could be left equal shares. If the deceased didn't leave a Will, then these proportions will be determined by the Rules of Intestacy.
Order of Distribution
The Estate cannot be distributed until all debts and expenses have been paid. Once this has been done, then if the Estate has both legacy beneficiaries and residuary beneficiaries, there is a strict order in which the rest of the Estate must be distributed.
Legacy beneficiaries are entitled to receive their inheritance first. Once these legacies have been paid, then the remaining Estate will be divided between the residuary beneficiaries.
What this means is that if there is only a small amount of money left in the Estate once all debts and expenses have been settled, and this money is used to pay the legacy beneficiaries, then the residuary beneficiaries could be left with little or nothing.
For this reason, the residuary beneficiaries are the only individuals, other than the Executor, who are entitled to see the Estate Accounts.
These accounts are prepared by the Executor and show all of the money that has come into and out of the Estate as assets have been sold and debts have been settled. If the residuary beneficiaries have concerns about the way in which the Estate has been handled, then they can challenge this.
To speak with a Co-op Probate Advisor call 03306069584 or contact us online and we will call you.