Interest on a Cash Bequest
Against a backdrop of incremental Bank of England interest rate rises, some beneficiaries under estate administrations may be raising questions. These beneficiaries, entitled to a set sum of money under a Will (known as a pecuniary legacy), are enquiring about the accrual of interest on their bequests.
This concern arises particularly due to the delays often associated with HM Courts & Tribunals Service’s process of issuing probate, which is generally required for executors to gain access to estate assets to disburse any legacies.
The Executor’s Year: calculating interest on delayed legacies
Typically, a beneficiary of a pecuniary legacy receives the exact amount stipulated in aWill. However, if the estate is not settled within a year, beneficiaries might be eligible for interest on their legacies. This one-year period is commonly referred to as the Executor’s Year.
If a pecuniary legacy remains unpaid after this period, interest begins to accrue from the end of the Executor’s Year until the legacy is paid. This interest is not compounded, which mean it’s calculated only on the principal amount, and any partial payments made during this period will be considered in the interest calculations.
How interest on legacies is calculated and applied
The rate of interest applicable to such unpaid legacies is determined by the Court Funds Office basic account rate. This is subject to fluctuations based on changes in Bank of England’s rates, similar to those experienced by conventional bank and building society account holders. If you need confirmation of what interest is due, you can speak to an accountant or Kent tax advisor.
Legal nuances influencing interest accrual on legacies
It’s important to note that the accrual of interest on legacies under a Will can be influenced by specific provisions within the Will itself. A Will may articulate a contrary intention that alters the general rule of interest accrual after the Executor’s Year. Moreover, this provision for interest does not apply to specific bequests of financial assets under a Will, nor to statutory legacies under an intestate estate, which are governed by their own distinct rules and rates where applicable.
Staying informed: the importance of understanding changes in interest rates
Nick Hughes is an accountant who works with high-net-worth individuals, focusing on trust and estate planning both in the UK and internationally. He advises that beneficiaries should be awarethat while they are generally entitled to the face value of their legacies, the addition of interest depends on both the timing of the payment and specific terms set forth in the Will.
“As interest rates continue to evolve in response to economic policies, beneficiaries should stay informed about these changes and how they might impact any interest accruable to their legacies,” he says. “Understanding these details is crucial, especially in times of economic fluctuation, to ensuring that all rights and entitlements under the law are fully realised.”
Speak to a probate and estate administration expert
If you need help with your pecuniary legacy, seek the assistance of a Kent accountant for probate services today. They will help you understand the details of interest accrual and advise on how Bank of England rates may impact your inheritance.