Gifts 19 - Lecture notes 1 PDF

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Gifts...

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08 Gifts by Will Devise – real property ! ! Bequest – person property ‘I give ... ’! ! Legacy - originally gift of money only but now any gift of personal property !

Devices (2 types)! -

specific and residuary

Legacies (5 types)! specific, general, demonstrative, pecuniary and residuary ! Specific devises and legacies some part of the testator's estate, which is identified and separated from the rest of the estate. Dixon CJ in McBride v Hudson (1962) 107 CLR 604 at 617. What marks a bequest as specific is that its subject matter is designated as something that does at the time of the will , or shall at the time of the death of the testator, form an identifiable part of his property and is, so to speak, distinguished by the intention of the testator as ascertained from his will to separate it in his disposition from the rest of his property for the purpose of bequeathing it as the distinct subject of a testamentary disposition. I give my freehold property known as 295 Queen Street situated in Melbourne to X’ General legacies 'I give to my niece a Ferrari motor vehicle'.! ! I give my nephew of 'one thousand dollars' and a gift to my great aunt of 'five hundred shares in Downunder Productions Pty Ltd'. It is immaterial that the testator actually owned such items of property at the date of death. Such a gift does not refer to the testator's actual property, and the legacy is to be furnished out of the general estate. 1

To compel the executors of the will to purchase property of that description for the beneficiary, or alternatively to pay the beneficiary the value of that property. Demonstrative legacies a gift of a general nature (usually money) which, however, is directed to be paid out of a specified fund or a particular part of the testator's estate. Re Webster [1937] 1 All ER 602 testator left a gift to his son of £3000 to be paid out of a particular business. On the testator's death, the business was worth less than the specified sum. ! ! Held! that the gift was demonstrative, and therefore the son received not only the value of the business, but was entitled also to call upon the general estate to make up the difference. For a gift to be demonstrative, the words of the will must indicate that the gift shall be taken (primarily) out of a particular fund, but if the fund is inadequate, or indeed, has gone out of existence, then call may be made on the general estate Pecuniary legacies A pecuniary legacy is a gift of a sum of money. That gift may be either specific, general or demonstrative. Usually it is a general legacy, although it can be specific, for example, 'all the money contained in the shoe box in my study'. Residuary devises and legacies A residuary devise or legacy technically comprises all property not already disposed of in the will. Should a legacy or devise fail for any particular reason then that gift will become part of the residuary estate unless there is a contrary intention. If the residuary gift fails, then that part of the estate will be distributed according to the intestacy rules - Wills Act 1997 (Vic), s 35; ! ! ! ! !

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The doctrine of ademption Durrant v Friend (1852) 64 ER 1145.! ! T was a master of a ship on a voyage to India. Under his will he left a gift of specific chattels to a legatee including his sea clothing, charts, quadrant, sextant, telescope, compasses and two flutes. The ship was lost at sea and the goods perished, along with T. The chattels were insured.! ! Held! The gift was adeemed, so that the legatee had no claim on the insurance money, which went to the residuary estate. Ademption had occurred in that the gift was no longer in existence at the death of the testator. The general principle therefore is that a specific gift will fail by ademption if the subject matter of the gift ceases to exist as part of the testator's property at the time of death. ! Brown v Heffer (1967) 116 CLR 344 at 348. - HCT! ! Ademption of a specific gift by will occurs where the property the subject of the gift is at the testator's death no longer his to dispose of ... an obvious case of ademption is that in which the testator has completely divested himself of the property in his lifetime so that at his death there is in his estate nothing which even substantially answers the words of gift. !

Changes in the nature of the gift Whether the gift, although changed, is still substantially in existence. If it has been sold, for example, then no doubt will arise, and the beneficiary is not permitted to trace the procedure of that sale into other property. See Durrant v Friend above Re Slater [1907] 1 Ch 665 at 672 Cozens-Hardy MR stated the test You have to ask yourself, where is the thing which is given? If you cannot find it at the testator's death, it is no use trying to trace it unless you can trace it in this sense, that you find something which has been changed in name and form only, but which is substantially the same thing. ! ! !

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Gifts of shares problematic! ! Facts of Re Slater [1907] 1 Ch 665 T had held shares in the Lambeth Waterworks Company. Those shares were the subject of a specific gift in the will. The company was taken over by the Metropolitan Water Board and the testator was issued with shares in the board. The latter shares were held not to be substantially the same as the earlier shares, as the two organisations were of a different nature. !

Ademption and mental incapacity! ! Re Viertel [1997] 1 Qd R 110! ! will in 1982 devising her house and furniture and effects to beneficiaries. T then admitted to a home and some time later appointed the beneficiaries as her attorneys pursuant to an enduring power of attorney. Pursuant to the power of attorney, the beneficiaries, in ignorance of what was contained in the will, sold the house and invested the proceeds of sale in the name of the deceased in debenture stock.! ! Held! ademption did not apply, and the beneficiaries were therefore entitled under the will to the proceeds of sale. Thomas J noted this as an exception to the doctrine of ademption, placing particular emphasis on the fact that the attorneys' action was made in ignorance of the terms of the will and the likewise ignorance of the testator of the action of the attorneys. ! Daniels v Scrivener [1997] 2 VR 595! ! an administrator had been appointed under the Victorian Guardianship and Administration Board Act 1986 (Vic) in respect of the testator. By an earlier will, the testator had left a specific gift of money in a particular account to beneficiaries. The administrator withdrew a substantial sum from that account and re-invested in a better income-providing investment.! ! ! ! ! 4

Held! no ademption - Whilst the court acknowledged that the change in the asset was substantial and not one of mere change in name and form, the action of the administrator was within the statutory powers, and under specific provisions of the Act. !

Contracts and options If a T leaves a specific gift of real estate to his son. After the will is made, he enters into a contract to sell the real estate to another. Before the contract can be completed, the testator dies. The contract is then completed by the executors who receive the proceeds. The general principle is that ademption will occur in these circumstances. Re Morton [1963] VR 40 !

See Re Sikes [1927]1 Ch 364 ‘my piano’ (Session 7) In Will of Smith [1916] VLR 540.! ! T left a gift of 'my house and land in Urquhart Street, Coburg' to his wife. At the time the will was made he owned 44 Urquhart Street, but before his death purchased 46 Urquhart Street and then sold 44. Held ! Full Court of the Victorian Supreme Court held that there had been no ademption and the wife was therefore entitled to 46 Urquhart Street. The section was applied, no contrary intention being shown. In the words of Madden CJ (at 544): There is nothing strange or absurd in assuming that the testator intended to substitute the one house for the other, and left his will unaltered simply because he intended it to pass his house ... There is nothing in the will itself inconsistent with the supposition that he intended this house, which still remained part of his estate, to pass. Construction of the will – surrounding circumstances ! ! ! !

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The doctrine of lapse If a testator leaves a gift in a will to a beneficiary and the beneficiary dies before the testator [ or in Victoria does not survive the testator for a period of 30 days - Wills Act 1997 (Vic), s 39 ] then normally the gift will fail because of the doctrine of lapse. The personal representatives of the deceased beneficiary have no claim under the disposition. If the gift is not residuary, then it will fall into the residuary estate. If the gift itself is residuary, then it will be distributed according to the rules relating to intestacy. Substitutional clauses Because of the doctrine of lapse, it is common for professionally drawn wills to contain substitutional clauses. A testator cannot avoid the doctrine by a declaration that it is not to apply - Re Ladd [1932] 2 Ch 219. ! Common law exceptions to the doctrine: charities Public Trustee v Cerebral Palsy Association (2004) 28 WAR 496 Spastic Welfare Association of Western Australia, with a gift over to the Salvation Army (Western Australia) Property Trust, should the Association no longer exist at the date of his death. In fact the Association was dissolved after the will was made, and its property became the property (including right and liabilities) of the Cerebral Palsy Association. Lapse did not occur as the court found that for all practicable interests and charitable purposes, the Spastic Welfare Association did not cease to exist, and was subsumed by the Cerebral Palsy Association. In the alternative, the court held that even if the Association had ceased to exist, the exception relating to a general charitable purpose would apply to save the gift from lapse. Statutory prevention if the intended beneficiary, being issue of the testator, dies before the testator and leaves issue, then that issue will take the gift that the deceased beneficiary would have taken. Wills Act 1997 (Vic) s 45. ! ! ! ! ! !

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Class gifts and joint tenancies A class gift - 'to my children'! ! The law relating to lapse has little scope to play here.! ! A testator who leaves a gift to a class of persons is normally taken to mean that he or she leaves the gift to those persons who belong to the class at, or after, the date of the testator's death. Thus, a child of the testator who dies before the testator never in reality becomes a member of the class! Wills Act 1997 (Vic), s 45 Similar principles apply to joint tenancies. A gift to two or more people as individuals, for example , 'I leave my real property to Rick and Gene' , constitutes a joint tenancy if there are no words of severance. - If, therefore, Rick should die before the testator, the right of survivorship operates, so that Gene's interest is correspondingly enlarged and he will take the whole gift !

Commorientes: survivorship The doctrine of lapse, if it is to be applied, obviously depends upon the beneficiary predeceasing the testator. At Common Law - no presumption of death! Order of death – Property Law Act 1958 (Vic) s 184 Presumption - older dies first !

Presumption of death: survivorship Period of 7 years – no news of a person Axon v Axon (1937) 59 CLR 395 !

Disclaimer A beneficiary under a will, or indeed, under intestacy, cannot be forced to accept the benefit, but may disclaim it. 6 Rules relating to disclaimer (1)

As disclaimer does not amount to a disposition of the property (it is treated as never having been acquired by the disclaiming party) it may be made by deed, in writing and by conduct. Townson v Tickell (1819) 106 ER 575 7

(2)

A disclaimer may be made at any time before the beneficiary has derived any benefit from the gift, but not after acceptance. Re Hodge [1940] Ch 260

(3)

A disclaimer may not be retracted if the personal representative has acted upon it or other parties have altered their position in reliance upon it. Re Young [1913] 1 Ch 272

(4)

It would appear that if there are two or more gifts left to the same beneficiary, provided that they are independent, the beneficiary may disclaim some and not the others – construction Re Hawkins (1880) 13 Ch D 470

(5)

In the case of intestacy, if a person entitled on intestacy disclaims the benefit, that benefit will pass to other members of the class to which the disclaiming beneficiary belonged, and if there are none, then to the next class entitled. R v Skinner [1972]1 NSWLR 307

(6)

One cannot disclaim where there is no present entitlement. Disclaimed before death of T: no effect Re Smith (dec'd) [2001] 3 All ER 552 !

Forfeiture for killing Public policy. !

Effect of forfeiture a specific gift to the killer will fall into the residuary estate, but if there is no residuary gift (or if the killer is solely entitled to that residuary gift) then the property subject to the gift will be distributed as on intestacy. The killer is not entitled to take upon the intestacy. Particular problems are caused here where substitutional clauses have been included in the will. Public Trustee v Hayles (1993) 33 NSWLR 154! ! Young J held that the killer holds the benefit on trust for the persons that the court thinks on the evidence to be appropriate. The equitable doctrine of satisfaction The doctrine of satisfaction springs from a general equitable presumption to the effect that if a person is under an obligation to do an act, and then does some other act that can be

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regarded as fulfilling the original obligation, the latter act is presumed to have been done in substitution for that obligation (and not in addition to). Satisfaction of commercial debts by legacies If A owes B the sum of $5000. A executes a will in which he leaves a legacy to Beth of $5000. Can B claim both the debt and the legacy ? In some circumstances, equity will presume that the legacy was intended in satisfaction of the debt, so that B can either claim the debt or the legacy, but not both. Royal North Shore Hospital v Crichton-Smith (1930) 60 CLR 798 – Dixon J •

First, the legacy must be equal to or greater than the debt.

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Second, the legacy must be as beneficial as the debt, so that if, for ! example, the legacy is contingent or uncertain in amount or is different in kind or is payable at a later time than the debt, the application of the doctrine is displaced.! ! Satisfaction of portion debts by legacies ! ! A portion may be described as a provision for the child, which is intended to establish the child in life, as opposed to a mere casual payment. ! ! In this situation a parent confers a portion debt on his or her child, by a legally enforceable promise or obligation, and by a later will, leaves the child a legacy. Suppose that the portion is $20,000 and the legacy is the same amount. Can the child claim both? ! ! In some circumstances equity will presume satisfaction so that the portion debt will be satisfied by the legacy and the child may either take the debt or the legacy, but not both.! ! Montefiorc v Guedalla (1859) 45 ER 294 at 298 ! ! the court will not impute to a parent the intention twice to discharge the same ! obligation of providing for his child -a rule founded as it seems to me on very! sufficient reasons for there can be no doubt that in the absence of it, the affairs ! of families would in many cases be involved in the utmost confusion. !

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Taylor v Taylor (1875) LR 20 Eq 155 at 15708 Jessel MR stated: I have always understood that an advancement by way of portion is something given by the parent to establish the child in life, or to make what is called a provision for him ... You may make the provision by way of marriage portion on the marriage of the child. You may make it on putting him into a profession or business in a variety of ways ... Again, if in the absence of evidence you find a father giving a large sum to a child in one payment, there is a presumption that it is intended to start him in life or make a provision for him; but if a small sum is so given you may require evidence to show the purpose. A portion debt, therefore, is an obligation created by the testator usually under a covenant, to make such a provision for the child. !

Satisfaction of legacies by portions (sometimes called equitable ademption) This is the converse situation to that considered immediately above. Here the parent executes a will, leaving the child, say, a legacy of $20,000, and subsequently makes, or legally promises to make, an inter vivos disposition of that same sum to that child. Is the child entitled to both? Equity will presume that the testator/parent intended to displace the earlier legacy by the later disposition and therefore the child may not elect, but must take the later gift. Re Furness [1901] 2 Ch 346. It is therefore more correct to say that there has been ademption of the legacy in the will. !

Satisfaction of legacies by legacies T makes a will in which he leaves a legacy of $5000 to a beneficiary. Later, in the same will, he leaves an identical amount to the same beneficiary. Are the legacies cumulative or substitutional ? ! ! Hurst v Beach (1821) 56 ER 929 (1)

if the testator indicates, either expressly or impliedly, that both legacies are payable, then that intention prevails; !

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(2)

if the testator's intentions cannot be ascertained from the terms of the will, and the legacies are of the same amount and are given by the same instrument (or if in different instruments of the same amount, and given for the same motive) then prima facie there is a presumption that only one legacy is payable; and

(3)

if the legacies are of different amounts, or of a different nature, or are expressed to be given for different reasons then both legacies are payable. This will also be the case where contained in different instruments, subject to the above.

! The equitable doctrine of election Either by mistake or by design, a testator may leave a gift of property to a beneficiary and then in the same will leave a gift of property belonging to that beneficiary to another person. Example Gayle, the testator, makes a will in which she leaves $130,000 to Andrew and Andrew's block of land to Judy. Apart from disclaiming the gift altogether, Andrew has two options here: (1)

He may take (under) the will. If he does so, then he will accept the legacy of $130,000 and transfer his block of land to Judy. Whether he adopts this course of action will no doubt be predicated on how much his block of land is actually worth.

(2)

He may take (against) the will. If he does so, then he will accept the legacy of $130,000 and retain his block of land. However, the doctrine of election requires him to compensate Judy for the property that she would have otherwise received.

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