IHTM12086 - Legacies and devises: abatement

Where after payment of the deceased’s debts and liabilities there are insufficient funds to pay all the legacies in full they have to be abated.

Part II Schedule 1 Administration of Estates Act 1925 provides the rules for abatement. The same rules apply in Northern Ireland under part II SCH1 Administration of Estates (NI) act 1955.

The rules of abatement are subject to any contrary intention shown in the will.

Different abatement rules apply for IHT purposes where

• the assets are not enough ( IHTM12087) to pay the gifts in full, IHTA84/S37 (1) or
• abatement is caused by grossing up ( IHTM12088), IHTA84/S37 (2).

Rules of abatement

In general law legacies ( IHTM12082) are paid in the following order:

• specific
• general
• residuary.

Therefore where there are insufficient funds in the estate the legacies are abated in reverse order

• residuary - if there is insufficient to pay the other legacies then the residuary beneficiary takes no benefit
• general - if there is insufficient to pay specific legacies the general beneficiaries take no benefit (provided some funds remain after settlement of the specific legacies general beneficiaries take a restricted benefit). A demonstrative legacy will not abate with the general legacies until after the particular fund is exhausted.
• specific - these legacies will take priority in distribution of the assets.

Within each category of gifts, the various legacies will abate rateably.

Example

T leaves a specific holding of ICI stock worth £10,000 to M, £30,000 each to four people and a charity, and any residue to two children.

At T’s death the estate is worth £110,000 including the ICI stock.

Abatement -

• M takes the ICI stock in full
• The pecuniary legacies exceed the net estate. As they fall within the same class of gift, each will abate rateably,

there is no residue.