‘What’ on Earth are Testamentary Dispositions?!

When making a Will you need to consider the 4 Ws – ‘Who, What, Why and When’. Hilary Sisson, Paralegal in the Wills & Probate department at Ridley & Hall has considered the ‘Who‘ in a previous article, and this article takes a look at the ‘What’.

A Will disposes of, or makes dispositions of the whole of your estate (after payment of funeral costs, debts and the cost of dealing with your affairs) to the people of your choice, after your death. Your estate is made up of whatever you have in your sole name at the date of your death, which can be cash in bank accounts, savings or investments, or it could be personal items, shares or property. So, put simply, dispositions are the distribution or transfer of property or money to someone, in this context by gift under a Will.

There are 3 main types of gifts, sometimes referred to as legacies, which can be included in a Will. These are specific, pecuniary and residuary:

Specific Gifts

Specific gifts can be a single item such as a house, an ornament or a particular piece of jewellery but it can also be a single type of a certain item such as “all my jewellery”, or a collection of some kind. Alternatively, you might want to give all your chattels to someone. The term ‘chattels’ was clearly defined in the Administration of Estates Act 1925 – so not particularly recent! The original legal definition included a long list of things including household furniture, linen, musical instruments, horses and carriages and stable furniture amongst other things! Fortunately the definition has now been updated to be anything which you own which is solely for your own personal use but not for business use – to give an example, a van used for work purposes would not be a chattel but the family car would be.

Pecuniary Legacies

Pecuniary legacies are where you leave a particular sum of money under your Will to an individual beneficiary or a class of beneficiaries. You can leave a set sum to either individual people, organisations or charities, or a set amount to be shared between a group of them. To illustrate, you could leave “£10,000 to each of my grandchildren who are alive at my death” or “£10,000 to be shared equally by my grandchildren who are alive at my death”. If you choose to leave a legacy to a charity, this would have a tax advantage, as charities are exempt beneficiaries for inheritance tax purposes.

It is also a point to note that specific and pecuniary legacies are paid before the residue is distributed.

Residue or Residuary Estate

The residue or residuary estate is what is left after the payment of funeral expenses, debts, inheritance tax, specific and pecuniary gifts have been taken out of the total ‘pot’ of your estate. There are two main ways of dealing with your residuary estate (if we ignore the option of putting it into trust, which is a wholely separate subject that we will save for another day!)

The first option is to leave your estate to a class of beneficiaries, such as your children, grandchildren or a group of named individuals, to share whatever there is the pot equally between them. The second option is to divide the pot into shares or percentages so that you can then give unequal amounts to your chosen beneficiaries, say 50% to children, 30% to grandchildren and 5% each to 3 friends and a charity, which equals 100% and will therefore dispose of all of your residuary estate.

Whatever the type of gift you want to make you should always consider the question of what is to happen if the beneficiary dies before you. Do you want the gift to go back into the pot or do you want to name a substitute beneficiary? If a beneficiary did die before you, would you want that beneficiary’s share to pass down to their children or someone else?

Hilary-SissonThe experienced and approachable members of the Wills & Probate department at Ridley & Hall can discuss your circumstances, talk through your options and offer advice to assist you in making these decisions. Please contact us on 01484 538421 for further information.

Watch out for the ‘Why’ and the ‘When’, in related articles to follow.