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Where there are insufficient assets in the estate to pay all the legacies bequeathed by Will, the legacies must abate in accordance with the general law (IHTM12086). Where this results in the value of a charitable legacy being reduced in value, you must use this reduced value for the charitable legacy for the purposes of the 10% test.

Example

Robert died on 14 June 2012 leaving an estate valued at 拢500,000 after deduction of liabilities. He left a specific bequest of an antique vase worth 拢120,000 to his daughter and legacies of 拢150,000 to each of his three sons. He left 拢20,000 to English Heritage and the residue to be divided between his four children equally.

At first sight, the estate is likely to qualify for the reduced rate; the baseline is 拢175,000 and 拢20,000 exceeds the 10% test.

However, Robert has left legacies totalling 拢590,000 and his net estate is only worth 拢500,000. Under the rules of abatement, his daughter receives her legacy of the vase, leaving legacies totalling 拢470,000 to be paid from an estate worth 拢380,000. As the legacies are all in the same class of legacy, they will abate rateably so the legacies to the sons will reduce to

拢150,000 脳 (拢380,000 梅 拢470,000) = 拢121,277

and the legacy to the charity will reduce to

拢20,000 脳 (拢380,000 梅 拢470,000) = 拢16,170

The abated value of the charitable legacy does not meet the 10% test, so the estate will not qualify for the reduced rate. In cases where abatement applies you should look carefully at the terms of any Instrument of Variation (IHTM35011) to ensure that abatement does not continue to apply, even after the Will has been varied.