Interest on Cash Gifts Left in a Will

When Interest Starts Running

A general pecuniary devise, sometimes called a pecuniary legacy, is a gift of a specific dollar amount in a will. For example, "I leave $50,000 to my niece." The estate does not always distribute these gifts right away. Settling debts, selling property, and handling administrative tasks can take time. The law accounts for this by building in a one-year grace period.

After that first year, the beneficiary is entitled to interest on the unpaid amount. The interest rates used are set by state law. This encourages timely distribution and compensates beneficiaries when delays are unavoidable.

What the Testator Can Change

The will itself can override this rule. A testator who wants interest to accrue sooner, later, at a different rate, or not at all can include that instruction in the will. Without such a direction, the statute's default applies automatically.

How This Affects Families and Taxable Estates

For family members waiting on a cash gift, this rule provides a financial cushion. The interest compensates them for the time value of money during the delay. For personal representatives managing the assets of the estate, cash gifts left unpaid past the one-year mark carry a built-in cost. Prompt distribution, when practical, avoids that accumulation.

In larger or taxable estates, the interest obligation can interact with federal estate tax and gift tax calculations. If the estate owes federal gift or federal estate tax, the cost of accruing interest adds to the total burden. Understanding these interest rates and their impact helps families plan for the full cost of settling an estate.

If you are a personal representative, keep track of when your appointment date was. That one-year clock starts ticking from the day the court first appoints you, not from the date of death.