Legacy occurs when it is time to remove an account from the system.
For citizens this occurs at death. A portion of the persons prefs will cease to exist. This is the method by which prefs are removed from the system. The other portion will enter probate and be distributed to descendants and willed to individuals and entities. I like for this rate to be a progressive rate.
For individuals with a small amount of prefs, most should be passed on as a legacy. For massive stockpiles of prefs, most will need to be forfeited. This will help keep capital from accumulating and centralizing over time.
For Corporations that cease to exist, all prefs owned by the legal entity should distribute to the pref owners. The prefs will degrade when the owners pass away. Some corporation accounts can become 'pass through' accounts where taxes do not get charged to prefs passing through. This is an alternative to legacy for corporations. This can be achieved by 'folding the blockchain' over the entity that is 'going out of business.'