Interest on Pecuniary Legacies to Executors

Martyn Frost FCIB, TEP, Trustee Manager, Barclays Bank Trust Company Limited
and
Chairman of the Association’s Private Trusts Committee
(taken from Isssue No 2 – February 1997)

 

There have been some doubts expressed as to the correct period for which interest is payable on executors’ legacies. Is it simply from one year after death until payment, or is it more closely tied to the concept of compensating the executor for his time and effort and therefore to be linked to when he started his work on the estate?

Theobald on Wills (15th Edition) at page 271 refers to this issue by saying that interest should run from the time that the executor `assumes the office`. The authority for this view is Angermann v Ford [1861] 29 B. 348. This case was concerned with a Mr Ford who, having renounced probate in 1853, his co-executor having proceeded to prove, retracted his renunciation in 1859. Mr Ford proved the will in that year, but the administration was still incomplete at the end of it. He contended that by acting as executor he was not only entitled to his legacy of £1000 but interest from one year after the testator’s death.

The Court’s view was that he was entitled to his legacy once he had proved the will, but that interest was payable `from the time the legacy became due and therefore it must not commence until he proved the will`.

The rather abbreviated law report (by current standards) does not indicate if the Master of the Rolls gave any further explanation about the interest period. Clearly the reference to having `proved the will` was right in the circumstances of this case, as all the prior administration had been done by the co-executor, and Mr Ford’s duties did not commence until he proved the will. It is however a little disappointing that there are no reported additional comments on the expression `became due`, as this could perhaps have solved our current question of if the due date is the time when the duties commence. Despite this the linking of this expression to Mr Ford’s actions in proving the will does seem to indicate that the court had something more in mind than the end of the executor’s year in more normal circumstances.

The current editor of Theobald, Mr J G Ross Martyn of 5 New Square, Lincoln’s Inn, has been most helpful in offering his further views on his reading of this case and its influence on how we should consider the question of interest. Mr Ross Martyn considers that a legacy to an executor carries interest from when he assumes the office of executor even if this date is (as it usually will be) inside the `executor’s year`(unless there is a contrary direction in the will). His reasoning, which he has agreed that I may quote in full, is as follows:-

  1. `The general rule is that legacies are payable from the end of the executor’s year, and that interest runs from that time. `… by a rule that has been adopted for the sake of general convenience, this Court hold the personal estate to be reduced into possession within a year after the death of the testator. Upon that ground interest is payable upon legacies from that time unless some other period is fixed by the Will.` Wood v Penoyre [1807] 13 Vesey Junior 325 at 333, 334.See also Williams, Mortimer & Sunnocks on Executors Administrators and Probate (17th Edition) p112.
  2. The general rule yields to the intention of the testator, either express or presumed. An intention to give interest from death is presumed, for example, when a testator is the father of or in loco parentis to the legatee, provided the legatee is a minor; or the legacy is given in satisfaction of a debt to the testator.
  3. Interest runs from the end of the executor’s year not only for convenience, but also as a matter of justice. `Where the estate is sufficient to pay the whole of the legacies in full and there is a residue, it is unjust that residuary legatees who are entitled to nothing until all the legacies have been paid, should benefit by the delay in paying them which they would do if the interest which the money has been earning in the meantime was paid to them and therefore the legatees are entitled to interest on their legacies`: Re Wyles [1938] 313 at 316.
  4. `The rule is that, where a legacy is given to an executor, prima facie, it is given to him for his trouble; and if he refuses the office, he is not entitled to it`:Piggott v Green [1833] 6 Simons 72 at 74.
  5. Because a legacy to an executor is prima facie given to him for his trouble, presumed intention (2) and justice (3) alike suggest that the executor ought to receive interest from the time he proves the will, whether that be before or after the end of the executor’s year.`

These views seem to me to add considerably to what has gone before and seem to build logically on the idea that if a legacy is given to an executor for his trouble, this could be a reason to start the interest period running at the time when that trouble is incurred, thereby giving him better recompense for taking on the office of executor.

The rate of interest payable would be as for other interest on pecuniary legacies namely 6%.

I understand from Mr Ross Martyn that he will be addressing this issue more closely in the next edition of Theobald and I am grateful to him for allowing me to reproduce his views in this note.

© Martyn Frost
February 1997