Gifts and Failure of Gifts PDF

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GIFTS AND FAILURE OF GIFTS Introduction 

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Property passing under a will: S.3 of Wills Act: Except as hereinafter provided, every person of sound mind may devise, bequeath or dispose of by his will, executed in manner hereinafter required, all property which he owns or to which he is entitled either at law or in equity at the time of his death notwithstanding that he may have become entitled to the same subsequently to the execution of the will. Immovable property is governed under the law of the country, while movable property is governed under the law of the domicile of the testator. Property not disposable by will: Property not owned by testator, choses in action, trust property. Property disposable by will: Immovable property (s.27 of WA), movable property (s.28 of WA)

Interest   

Power of disposition by will: to the extent of creation/disposition of those interest to donee which is recognized by law. A gift under a will may fail due to lack of interest/ failure of interest. Eg: donee pre-deceased testator (s.19 of WA), disclaimer, ademption, etc.

Gifts    

Legacies & devices: described gifts of property Legacy: gift/bequest of chattels Device: land · Gift: equally acceptable Basically, gift can be classified into 5 categories.

Classification of gifts Specific      

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S.2 of PAA: “specific legacy” means a legacy of specified property. A gift of a particular item/group of property owned by the testator, distinguished in the will from other property of the same kind. Specific legacy indicates that it is a movable property while specific devisee denotes immovable property. The properties shall be free from encumbrances (charge, caveat). Takes priority over general legacies and are liable to abatement only if the assets are insufficient to pay the debts Eg: if the testator made a gift which leaves insufficient money to pay the debts, funeral expenses and cost of administration, then the money for those expenses will be taken from pecuniary legacies and not from specific legacies. Main characteristic: subject to the doctrine of ademption (ie must be in existence at the time of death). Re Abdullah Saleh Shooker: A legacy comes within the definition of "debt" in the Moratorium Proclamation. Therefore, the executors should pay interest on the legacy at the rate of six per centum per annum from the end of one year after the testator's death.

Lim Soo Siam v Leow Yong Moey & Ors

It was held that the legacy of $10,000 to the testator’s daughter for marriage expenses was partially adeemed by her marriage during the testator's lifetime and by the payment by the testator himself of her marriage expenses and that the balance should be paid to her for her sole use. General    

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Does not refer to any specific or particular object. A gift of property to be provided out of the testator’s estate whether or not the property so described forms part of the testator’s estate upon his death. Usually takes in form of money. Soo Bian Joo v Soo Boon Leong: A gift arising from the general personal estate of the testator and has no application to the distribution of property to the persons entitled under intestacy. Re Gage: A gift of ‘the sum of £1150 five per cent war loan 1929-1947 stock’ was held to be a general gift even though the testator held the stock when the will was made as there was no indication that the testator was referring to a property belonging to him. Q: How to determine: from the construction of the will, as affirmed in Shanti Rupchand Binwani. Subject to abetment if the testator’s estate is insufficient to pay debt. Not subject to ademption, unlike specific legacies.

Demonstrative   

General in nature but directed to be paid out of a specific fund (eg: education fund). Ashburner v Macguire: A gift of ‘£1000 from my account at Barclays Bank’ is a demonstrative legacy. Not subject to ademption.

Pecuniary  

A gift of money. Usually general, but may be demonstrative or specific.

Residuary   

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A gift of the testator’s remaining property. If there is no other gift is given, the gift of the whole estate is a residuary gift. Residuary devises or bequests shall include estates comprised in lapsed and void devises or bequests. S.19 of WA: Unless a contrary intention appears by the will, such property as is comprised or intended to be comprised in any devise or bequest in such will contained, which fails or is void by reason of the death of the devisee or legatee in the lifetime of the testator or by reason of such devise or bequest being contrary to law or otherwise incapable of taking effect, shall be included in the residuary devise or bequest respectively, if any, contained in the will. If the property lapses under s.25, the property shall also become residue under s.19. Distribution of residuary property is based on the will.

Failure of Interest Disclaimer   

A gift in a will may be accepted of disclaimed. Once accepted, the property shall be disposed. Acceptance: accept by the done with all the benefits and burdens attached to it in accordance with the law.

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Q: mode of acceptance? Townson v Tickell A man is allowed not to accept any gift via the will if he chooses to do so. He is however, cannot afterwards disclaim it when he has at first accepted such gift and cannot accept only part of it, and disclaim part of it. If the beneficiary disclaims, the property will become residue. Disclaimer is made by person of Sui juris (age of majority and sound mind) so that they know the impact of the disclaimer. Mode of disclaiming: informal acts, record, deed. Effect: same portion as if no gift has been made, however not void the gift in regard to all persons for all purpose. Main requirement for receiving/ inheriting property: beneficiary must survive the testator.

Lapse  

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S.19 of WA: Unless a contrary intention appears by the will, such property as is comprised or intended to be comprised in any devise or bequest in such will contained, which fails or is void by reason of the death of the devisee or legatee in the lifetime of the testator or by reason of such devise or bequest being contrary to law or otherwise incapable of taking effect, shall be included in the residuary devise or bequest respectively, if any, contained in the will. Failure of a testamentary gift due to a situation where the donee pre-deceases the testator. General rule: donee to survive testator. Exceptions to the general rule: - Gift to testator’s issue  S.25 of WA: Where any person, being a child or other issue of the testator, to whom any property shall be devised or bequeathed for any estate or interest not determinable at or before the death of such person shall die in the lifetime of the testator leaving issue, and any such issue of such person shall be living at the time of the death of the testator, such devise or bequest shall not lapse, but shall take effect as if the death of such person had happened immediately after the death of the testator, unless a contrary intention shall appear by the will.  Requirements: - the property should be diverted to testator’s child or issue. - the issue must survive the testator - if the issue dies then the gift will lapse under s19  Purpose: preserve the gift given to the child stated in the parents will. - Alternative gift  There is a substitute beneficiary.  Foo Yin Choo v Foo Siew Lan The testator gave his adopted son 1½ shares out of 10 shares in his residuary estate. The legatee predeceased the testator, but the later made no new will or codicil. However, the testator’s will provided that if the son of the testator died before the date of distribution, leaving issue, his share would go to such issue. The learned trial judge held that legatee's share in the residuary estate had not lapsed. On appeal, the court held that it was clearly the testator’s intention that no residuary legatee's share should lapse if it was possible for the substitutional gift to take effect. In this case the share of the legatee in the residuary estate did not lapse. - Future gift  Will not lapse as it is in future.

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If the will does have clause for residuary estate, then the property will be distributed according to the Distribution Act. Re Midgley: Testatrix by will bequeathed pecuniary legacies and gave the residue of her estate to her executors on trust and the residue to be held for six named persons, including PH, in equal shares absolutely. By codicil, testatrix revoked the bequest to PH of the onesixth share of her residuary estate and gave PH a pecuniary legacy in lieu: It was held that there was an intestacy as to the one-sixth share originally given to PH because the residuary gift was to six persons by name, not to a class of persons, and where there was not a class gift there was no reason to prevent lapse.

Ademption   

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A specific gift (not general or demonstrative gift) will fail if the subject matter of the gift does not form part of the estate at the time of death. Eg: the property is sold/ given away /destroyed. Ademption can be done when the testator gives the property to the beneficiary during the lifetime or when there is a settlement to give such property to the creditors. It can be done not necessarily by way of selling. Ademption can be done partially. Eg: 2 houses are bequeathed to daughter. House A is sold and thus adempted partially. House B is given to the daughter. Lim Soo Siam v Leow Yong Moey & Ors It was held that the legacy of $10,000 to the testator’s daughter for marriage expenses was partially adeemed by her marriage during the testator's lifetime and by the payment by the testator himself of her marriage expenses and that the balance should be paid to her for her sole use. Takes place upon the actual conveyance and transfer of the gifts. If the property is not conveyed and transferred even if the testator says to transfer to the beneficiary, it still belongs to the testator and the beneficiary cannot say that the property is adempted. Low Gim Har v Low Gim Siah The court affirmed that ademption of a specific gift occurs when the subject matter of the gift is disposed of or destroyed before the will takes effect, when it ceases to conform to the description by which it is given, or when the nature of the gift has changed its character. The present case does not fall within any of the established categories of cases for ademption. At the date of the death of testator, the shares remained the same as before and ademption had not taken place. Q: What if nature of the property changes? - depending on the words used by the testator and the testator’s intention as opined in Re Bridle.

Satisfaction  

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When the testator bequeaths a gift to the beneficiary with the intention that it extinguishes a prior debt owed to the beneficiary. Conditions: - The debt must precede the will (occurs before the will) - Amount of the legacy is greater or of the same amount of the debt - The legacy must be as advantageous to the creditors as the debt. Nothing is given to the creditor in the residue, other than stated in the will. - Nature of the debt must be the same of the legacy. If the debt is pecuniary in nature, then the payment must be in the form of money. - No contrary intention in the will to give debts to the beneficiary. What if the amount of the legacy is lesser? - if creditors consent to it, then it is satisfaction.

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- if creditors contended that the testator should pay accordingly, the testator should do so. Re Fletcher: The testator bequeathed £625 to his wife, the exact amount that he then owed her. Later, he repaid the debt and drew a pen through the bequest (but did not effectively revoke it). It was held that the legacy had been adeemed by the payment of the debt.

Public policy   

A gift /condition of a gift may be void as a whole /in part if it against public policy. Eg: testator cannot give property to terrorists in the will. Thrupp v Collett: A gift of £5000 to be applied ‘in purchasing and procuring the discharges of person, who… may be committed to prison for non-payment of fines, fees or expenses, under the game laws’ was held to be void against public policy since the gift was obviously calculated to encourage offences prohibited by the legislature.

Abatement   

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An estate is said to be insolvent if the assets of an estate are insufficient to pay for the funeral, testamentary and administration expenses and debts. Order of settlement of testator’s debts: Funeral expenses > debts > testamentary disposition If residuary estate is not enough to pay all the debts, then legacies will be reduced, ie abate. When the legacies are used to settle the debts, the beneficiaries cannot claim as the creditor’s debt need to be settled first. Order of legacies abate: residuary gifts > general legacies > specific legacies Demonstrative gifts will not abate unless the fund out of which gifts are to be paid is itself exhausted. In such situation, the demonstrative legacies will be treated as general legacies. Tan Boon Soo v Choa Eu Seng: Legacies to males and females are liable to abate alike and in proportion to the amount of their respective legacies if the assets are insufficient for the payment in full. An executor has no option to prefer one legatee over another unless it is the testator’s intention. General legacies are not exempted from abatement as they can be applied to any particular purpose. If an executor voluntarily pays a legacy in full and afterwards it is necessary for all the legacies to abate, he will be liable to the unpaid amount. In the event of the executor’s insolvency, the legatees who have been paid in full are liable to be called upon to refund the amount which he has received in excess.

Non-compliance with condition   

A gift may be made as a conditional gift, subject to certain rules and condition. The condition attached must not conflict with certain recognized restrictions and should be consistent with other provisions of the will. If the condition has not been complied, the property will become residuary estate...