What is a beneficiary and what is their role?

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Part 1

What is a beneficiary?

The term ‘beneficiary’ refers to any person or organisation that is entitled to receive an inheritance from someone’s estate following their death. This inheritance might be a specific item such as a vehicle or property, or it might be funds from the estate.

The beneficiaries of someone’s estate are determined based on their Will. If there is no valid Will, the beneficiaries are determined through the Rules of Intestacy, a set of laws that places relatives in order of importance, with spouses and children always having priority.

When there is a Will, the beneficiaries are divided into three different categories based on the gifts that they are due to receive. These are specific gifts, pecuniary gifts and residuary gifts. Based on this distinction, the beneficiaries are entitled to varying levels of information about the probate process and some might have a heavier role in holding the executor accountable than others.

Part 2

Specific Gifts

A specific gift is a gift of a specific item such as a vehicle. Beneficiaries of specific gifts tend to receive their inheritance sooner than pecuniary and residuary beneficiaries because the gift is often an item that can simply be handed over by the executor after the death.

If the asset is not a physical item, but rather something that needs to be released or transferred from an organisation, the beneficiary may be waiting a little longer. This might be the case if the specific gift is shares in a company, for example.

Moreover, if the estate contains significant liabilities (debts and taxes) that need to be paid off, the gift may need to be sold alongside all other assets within the estate to pay these liabilities. It is sometimes the case that liabilities are so high that no beneficiaries receive an inheritance.

In cases where the specific gift is something that generates income, the beneficiary is entitled to all income generated from the date of death onwards, regardless of when the asset is transferred. However, the beneficiary will also be responsible for all debts, costs, and taxes associated with that gift. This might be the case when property is included as a specific gift.

Beneficiaries of specific gifts have no real role in the probate process and only need to wait for the executor to get around to bestowing their gift upon them. However, they do have a say in whether the asset they have been gifted is transferred to them as is, or instead sold. If the beneficiary chooses for the asset to be sold, the proceeds will be transferred to them after a successful sale.

Part 3

Pecuniary Beneficiaries

Pecuniary beneficiaries are those entitled to receive a specific sum of money from an estate. For example, someone might write in their Will that they want their grandchild to receive £10,000.

Pecuniary beneficiaries will need to wait longer than beneficiaries of specific gifts in most cases. This is because a grant of probate will usually be required to access funds from financial organisations. Different banks have different limits for how much money they will release without needing to see a grant of probate or a grant of letters of administration, but this amount is usually between £5,000 and £50,000.

Furthermore, pecuniary gifts cannot be received until all liabilities on the estate have been paid. This includes Inheritance Tax and any other outstanding tax, alongside any outstanding debts left unpaid by the deceased. Once these payments have been made, the executor or administrator is free to transfer pecuniary gifts to the beneficiaries. It is possible that after the payment of liabilities, pecuniary gifts may be diminished.

Pecuniary beneficiaries have no role in the probate process. However, they can hold the executor to account in some way if they are not adequately upholding their role. The executor is required to pay out all pecuniary gifts within a year of the date of death (known as ‘The Executor’s Year’). If they fail to do this, the pecuniary beneficiaries are entitled to claim interest on the legacy that they are due to inherit.

Part 4

Residuary Beneficiaries

Residuary beneficiaries are those who inherit whatever is left of the estate after all liabilities have been paid and all specific and pecuniary gifts have been distributed. As a result, residuary beneficiaries will be the last to receive their inheritance.

While they hold no responsibility for the estate administration, the residuary beneficiaries do have a bigger role than the other beneficiaries. This is because they may need to actively hold the executor accountable for their decisions during estate administration.

The executor has a responsibility to act in the best interests of the beneficiaries. This is especially true of residuary beneficiaries as every decision that the executor makes with regards to the estate will impact how much money they inherit at the end of the probate process. If the executor decides to hire professional legal help from a solicitor, for example, this will take money away from the sum owed to the residuary beneficiaries.

While administering an estate, the executor must keep track of all expenses that come in or out in what is known as the Estate Accounts. Expenses shown on the Estate Accounts include any debts and taxes that have been settled using money from the estate, as well as any income received from the sale of assets such as property and any monetary gifts given to pecuniary beneficiaries. The executor must also list every expense that they are claiming back from the estate such as solicitor fees, house cleaning fees, estate agent fees, necessary travel costs, and more. The final amount left in the Estate Accounts when probate is completed is what will be divided up and distributed to the residuary beneficiaries.

The residuary beneficiaries have access to both the Will and the Estate Accounts from the moment that a grant of probate has been acquired. At the end of the process, the residuary beneficiaries should look carefully through the Estate Accounts to ensure that all calculations made by the executor are correct and that no mistakes have been made and no unnecessary expenses claimed.

If the residuary beneficiaries feel that the executor has made a significant mistake or abused their position by making unnecessary charges to the estate, they are entitled to take legal action and hold them personally financially liable.