Legal Definitions - legacy duty

Legacy duty, also historically known as legacy tax, was a type of inheritance tax levied directly on the individual or entity receiving an inheritance or bequest (a "legacy") from a deceased person's estate. Unlike an estate tax, which is imposed on the total value of the deceased person's estate before it is distributed, legacy duty was calculated based on the value of the specific gift or share received by each beneficiary. The responsibility for paying this duty typically fell upon the recipient of the legacy, rather than the estate itself.

While many jurisdictions have abolished or significantly modified this specific form of taxation, understanding legacy duty provides context for how governments have historically taxed the transfer of wealth upon death.

• Example 1: Inheritance of a Cash Sum

  A will specifies that a nephew is to receive a cash sum of $75,000 from his deceased aunt's estate. Under a system that imposed legacy duty, the nephew, as the beneficiary, would have been responsible for paying a tax directly on that $75,000 he received. The amount of the duty would depend on the tax rate applicable to that specific legacy, which could sometimes vary based on the relationship between the deceased and the beneficiary.

• Example 2: Bequest of Real Estate

  A father leaves his vacation home, valued at $300,000, to his daughter in his will. In a jurisdiction with legacy duty, the daughter would be liable for paying the legacy duty on the appraised value of the vacation home she inherited. This tax would be her personal obligation, separate from any estate taxes that might have been paid by her father's estate on its overall value.

• Example 3: Donation of a Specific Asset to an Organization

  An art collector bequeaths a rare sculpture, valued at $150,000, to a local museum. If legacy duty were in effect, the museum, as the recipient of this specific legacy, would theoretically be responsible for paying the duty based on the sculpture's market value. This illustrates that legacy duty applied not only to individuals but also to organizations receiving bequests, although charitable exemptions often existed.