Relationship Between Inter Vivos GIFT, Donatio Mortis Causa AND Doctrine OF Ademption PDF

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LAW 501 EQUITY AND TRUST ASSIGNMENT...

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RELATIONSHIP BETWEEN INTER VIVOS GIFT, DONATIO MORTIS CAUSA AND DOCTRINE OF ADEMPTION

1. INTER VIVOS GIFT

A.

DEFINITION OF INTER VIVOS GIFT

Inter vivos gift is defined as a gift which is made during lifetime and cannot be revoked once it is given to the beneficiary. Inter vivos gift in Latin, is, between the living and in a legal term referring to a transfer or gift made during one's lifetime, as opposed to a testamentary transfer (a gift that takes effect on death) under the subject of trust. The term is often used to describe a trust established during one's lifetime, i.e, an Inter vivos trust as opposed to a Testamentary trust which is established on one's death, usually as part of a will. An Inter vivos trust is often used synonymously with the more common term Living trust, but an Inter vivos trust, by definition, includes both revocable and irrevocable trusts. The term inter vivos is also used to describe living organ donation, in which one patient donates an organ to another while both are alive. Generally, the organs transplanted are either non-vital organs such as corneas or redundant vital organs such as one of the two kidneys or part of a liver.

B. HOW DOES IT FUNCTION Inter vivos trust can be created over land where a settlor wishes to declare a trust over a piece of land. For example, the land can be given as a gift by the father to the daughter while he’s still alive. In addition, inter vivos trust can also be created over personal property. Referring M’Fadden v Jenkyns case, no formalities are required for creating an inter vivos trust of personal property. Inter vivos gift can also be given in monetary form as in the case of Kloosman v Aylen, the father when he’s alive back then, gave a sum of money as inter vivos gift to both his daughters as a compensation for taking good care of him when he’s clearly incapable on taking care of himself

C.ELEMENTS OF INTER VIVOS GIFT There are three instances where inter vivos gift can be invoked or applied. In reference to the case of Lee Ing Chin @ Lee Teck Seng & Ors v Gan Yook Chin & Anor, where the court stated that there are only three ways in which an inter vivos gift may be transferred. Firstly, it can be applied by an outright transfer. An outright transfer is referred to as a transfer of property in the form of gift where both the legal title and equitable title is transferred to the recipient of choice. In contrast to a declaration of trust where the settlor or testator will appoint a trustee to hold the legal title and beneficiary to hold the equitable title. Secondly, is by declaration of trust where the property is transferred absolutely to trustee on behalf of the beneficiaries and Lastly is by declaration of trust by owner in which he appoints himself as the trustee. However, an inter vivos gift that is not affected in one of the three ways mentioned above, it can only take effect either as a testamentary gift under a will of a testator or pass under an intestacy. In addition, if the donor intends to make a testamentary gift he must observe the requirements of the Wills Act 1959

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2. DONATIO MORTIS CAUSA To create an effective trust, the formalities of the trust must be considered first with addition with the 3 certainties must be fulfilled which are there must certainties of intention, certainties of subject matter, and certainties of object matter. In the case of Milroy v Lord (1862), there are 3 modes to create a binding trust. Either one from the modes provided must be done, if not the trust will fail or void. With reference in the case of Re Fry, it was held that Equity will not perfect an imperfect gift. However, there are 3 contexts in which an imperfect gift will be perfected which are Donatio Mortis Causa, the rule in Strong v Bird, and the doctrine of propriety estoppel.

A. WHAT IS DONATIO MORTIS CAUSA? DMC means Deathbed Gift which refers to a transfer of property made in contemplation or anticipation of the death of the maker It arose specifically to create an exception to the rule that a testamentary gift must be made properly or else it will not effective. Any trust which fall under DMC that fails to satisfy the formalities provided either in strict approach or self-effort rule, is still enforceable. In condition the gifts must be made during the donor’s lifetime, made in expectation or immediate death, and which are intended to take effect on donor’s death. It must be noted that, the donor must intend, in effect, to give up her rights to the property at the time of making his DMC.

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B. HOW DOES IT FUNCTION? With reference as in the case of Caine v Moon, there are 3 requirements must be established in order to make a valid DMC, which are; i.

The gift must be made in contemplation of impending death 

The gift must be made in contemplation of death; not possibility of death at some time or other time, but the death within near future, what may be called death for some reason believed to be impending. Thus, death must be contemplated from an identified source.



With reference in the judgement of Farwell J in Re Craven’s Estate (1937), the gift was considered as DMC, as the donor died 5 days after the gift was made.

ii.

Subject matter must have been delivered to the donee. 

The delivery of subject matter must be made before the death of the donor not after the death.



There must be actual and physical delivery of the item or constructive delivery by passing via other means of obtaining the property to show the intention of the donor.



In the case of woodward v woodward, the gift (transfer of a car) was made before the last breath of the deceased to his son, and it also has shown the intention of the donor when he give the keys of the said car to his son. Therefore, the DMC is said to be valid.

iii.

The gift must be conditional on death and to be perfected only on the donor’s death. 

The intention of the donor must be that the gift is dependent on the death of the donor.

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

Therefore, the give shall be reverted if the donor escape death.



In the case of Re Lilington, the facts that the daughter said “the bank note is for you if I die “means the mother only entitled for the bank note if the daughter die, if the daughter manage to recover, therefore the daughter shall have the right over the said property.

3. DOCTRINE OF ADEMPTION

A. WHAT IS DOCTRINE OF ADEMPTION? Ademption defined in Webster's Revised Unabridged Dictionary as an act of revocation or taking away of a grant donation, legacy or the like. However, under Common Law doctrine, Doctrine of Ademption refers to the act of revoking a gift mentioned in a will by destruction, or selling or giving away the gift before death. It is the failure of bequest of property in a will. Ademption may occur when the property given to the beneficiary in a will no longer belongs to the decedent at the time of death. The gift may have been destroyed, sold or given away between the time of the will and the time of death. The gift is adeemed when property mentioned in a will cannot be given to the beneficiary. In addition, Roger McEowen, a Leonard Dolezal Professor in Agricultural Law, and Director of the ISU Center for Agricultural Law and Taxation defined Ademption as a legal rule used to determine what happens when property bequested under a will is no longer in the testator’s estate when the testator dies. He also added that, in general, for devises of specific items of property, called specific gifts, the property is adeemed, and the gift fails. For example, if a parent leaves a tractor to a specific person, but the parent didn’t own the tractor at the time of death, then the gift is said to have been adeemed and the beneficiary would receive no gift at all. Some gifts, however, are never adeemed. An example would be a gift of cash. If there is not enough cash in the testator’s estate to satisfy the gift, then other assets in the residuary estate are sold to raise the necessary cash. Some gifts are in a gray area, where the testator’s specific intent must be determined. Also, ademption may be waived if the property leaves the estate after the testator has been declared incompetent and a guardian has been appointed.

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B. HOW DOES IT FUNCTION?

General rule of this doctrine clearly mentioned that, when a property under a will is no longer in the possession of the deceased when he passed away, then the proceeds gained from the sales of the house or assets will not be transferred to the beneficiary. The doctrine will take place and revoke the gift mentioned in the will which left beneficiaries empty handed with no gift given to them. The bequest is failed due to the fact that gift, was not in deceased’s possession as it might be destroyed, sold or given away before the execution of the will takes place. As in the case of Re Estate of Anton, the decedent’s stepdaughter deeded a tract of real estate to step-mom and her husband. They had a duplex built on the property. Later, The husband died in 1976 and step-mom (the decedent in this case), became the sole owner of the duplex. In 1981, she then executed a will which left half of her interest in the duplex to the stepdaughter. The other half was to go to her son. In 1986, step-mom entered a nursing home and later a retirement home. In the meantime, she executed power of attorney to her daughter. Since it was a durable power, the daughter had the authority to act on mom’s behalf as soon as it was executed and the daughter could continue to act even if her mother later became incapacitated. Subsequently, the daughter began methodically selling mom’s assets to fund her care, and did so until the only asset left was the duplex. Later, the daughter listed the duplex for sale when her income is not enough. After her mom died, the stepdaughter claimed that she was entitled half of the proceeds of sale of the duplex. The trial court denied the stepdaughter’s claim, reasoning that the power of attorney remained in effect until mom died and that mom’s intent was to sell assets to fund her nursing home care. The gift of the duplex was adeemed. The Court of Appeals affirmed. However, the Supreme Court held that ademption had not occurred because the evidence in the case showed that the decedent had only a general knowledge that assets may have to be sold at some time in the future to fund her care. She did not have specific knowledge of the need to sell the duplex. Thus, this indicate that the sale was involuntary to the decedent and ademption did not occur. Stepdaughter only entitled to one-half of the proceeds of sale as they hadn’t been expended for the decedent’s care. 6

This shows that even though the deceased died with no possession of the duplex, as it was sold by her stepdaughter to fund her care, but the daughter still entitled for one-half of the proceeds of sale as remedies due to the fact that the gift was sold for necessary purpose and not adeemed. Furthermore, in the case of Turner v Turner, again the doctrine of Ademption was not able to be applied. This case rooted from Isabella, who is a Testatrix, she granted Mr Alan Bisset, who is a solicitor, a power of attorney which he has the power to do all things which attorney can do. Later, Isabella executed a will, which includes appointing pursuer and 1 st Defender as her trustees and executors with instruction for 1 st Defender to make over her heritable property and to make over the residue of the estate, which is to be done by pursuer. Subsequently, Isabella;s mental capacity diminished and Mr Alan sold the property. 8 years later, Isabella died and pursuer and 1st Defender became her executors. After that, 1st Defender argued that the attorney’s act was regarded as transaction carried out by a curator bonis, which refers to a legal representatives appointed by court to manage deceased property, thus his act not affected by conversion of property or ademption. On the other hand, Mr Alan and Pursuer counterclaimed that the property was adeemed as it was sold by Mr Alan prudently, as the house would be at disadvantage if it were to be left empty, with attendance maintenance cost. Thus, the court held that the property was not adeemed and 1st Defeneder entitled to the proceeds of the sale of the property as the Mr Alan’s act were not proved to be necessary due to the fact that there is other sufficient funds for her care when she became mentally diminished. Moreover, in Jenkins v Jones, it was held that, property was not adeemed and the gift succeeded due to the fact that the farming stock was sold by third party prior to testator death was done without testator’s knowledge, this is again implies that even though there was no property when the testator died, his son can still claim the property as it was disposed without testator’s own intention and was not a necessary act, similar in Turner v Turner.

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4. RELATIONSHIP BETWEEN INTER VIVOS GIFT AND DONATIO MORTIS CAUSA

Inter Vivos gift is Inter vivos gift is defined as a gift which is made during lifetime and cannot be revoked once it is given to the beneficiary while Donatio Mortis Causa is defined a transfer of property made in contemplation or anticipation of the death of the maker and only takes effect after the donor dies. The difference between these two principle is that inter vivos gift immediately transfer absolute ownership from donor to donee upon completion of formalities to transfer legal title of the gift, on the other hand, donatio mortis causa the gift only takes effect after the donor dies and the gift was made upon expectation of donor's death and also the donor also intent to part with his rights over property completely. An example of inter vivos gift being made can be seen in the case of Kloosman v Aylen where the father made cash gifts of £100,000 to each of his two daughters upon the sale of his property. The gift was made during the lifetime of the donor to the done. An example of donatio mortis causa being invoked can be seen in the case of in Cain v Moon, the court laid out the requirement of donatio mortis causa, which was stated above on how Donatio Mortis Cause functions which indicate that, without fulfilling all the requirements, then the gift made cannot be invoked as inter vivos gift. Furthermore, in the case of Sen v Headley, deceased was diagnosed with terminal cancer. While in hospital the Claimant was told by deceased that his house would belong to the claimant, and that she would find the deeds to the property in a steel lockbox to which she had the keys. Later, deceased passed away and claimant bought an action against deceased’s estate, claiming to be entitled to the property on the basis that the actions of the deceased before he passed away, amounted to a valid “donatio mortis causa” DMC. The court again laid out the requirements to invoke donatio mortis causa as in Cain v Moon case, which includes, (I)

the gift must be made in expectation of death.

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(II)

the gift must be made upon the condition that it is to take effect only upon the donors’ death.

(III)

there must be a delivery of the subject matter of the gift, or of title which amounts to be parting with right to the subject matter of the gift.

Thus, judging from the requirements, deceased’s act of informing the claimant the location of the deeds which is inside the steel box, where the key is in claimant’s possession,was an act to gift the property as a gift in contemplation of his death and intended to take effect upon his death. The husband also parted with his rights completely to his ex-wife and have no intention to be back at the property thus the gift was considered to have been made under donatio mortis causa to the wife. Both of these cases clearly lay out the requirement to invoke donation mortis causa as both of them share the similar requirements. Thus, in a nutshell, similarities between these two type of gifts is that both of them are made during the lifetime of the donor and the clear difference between these two types of gift is that the nature of Inter Vivos Gift is a gift made during the lifetime of the donor and would take immediate effect without having to wait for donor's death for it to take effect, On the other hand, gift made under Donatio Mortis Causa only takes effect only upon the death of the donor with the donor clearly intent to make the gift upon contemplation of his death and he parted completely with the rights to the subject matter. An Inter Vivos Gift, is a valid gift under equity as the property transfers the legal title from the donor to the done. However, Donatio Mortis Cause, the legal title of the gift, had not yet transferred due to the fact that the subject matter was not mentioned in a will by the donor and can be considered as invalid gift. But, the concept of Donatio Mortis Causa itself will eventually make the gift valid, by taking into account donor’s condition such that he is expecting his death very soon, and subject to requirements laid out in the latter case of Sen v Hedley. An inter vivos gift is a validly made gift under equity as it transfers the equitable and legal title from the donor to the donee. However, In donatio mortis causa, the legal title of said gift had not been transferred to the donee nor a trustee and also the subject matter is also had not been mentioned in a will from the donor, this can be considered an invalid gift as the gift is not perfected but the concept of donatio mortis causa enables such act as it considers the inability of the donor to not properly able to transfer the legal rights or make a will on the subject matter

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as he is expecting death very soon. However, to invoke donatio mortis causa, one must follow the requirements laid out in the case of Sen v. Headley.

5. RELATIONSHIP BETWEEN INTER VIVOS GIFT AND DOCTRINE OF ADEMPTION

Inter vivos, which means between the living in the Latin, is a legal term referring to a transfer or gift made during one's lifetime. Moreover, Inter vivos gifts, includes property related to an estate, are not subject to probate taxes since they are not part of the donor's estate at death. On the other hand, Doctrine of Ademption refers to the act of revoking a gift mentioned in a will by destruction, or selling or giving away the gift before death. It is the failure of bequest of property in a will. The relationship between these two sub-topics can be exist when doctrine of double portion comes into action. The presumption that exist is whenever a person leaves a considerable amount of his or her estate to one of their children in bequest and again, give an inter vivos gift to the same child before their death, thus, the inter vivos gift is considered as replacement for the gift made in the will to ensure equality upon inheritors. In addition, by applying doctrine of ademption, the gift made in the will be destroyed due to the gift was adeemed as it was given away before that person died. This shows that both inter vivos gifts and ademption was applied due to the presence of double portion. Furthermore, inter vivos gift does not always considered as a replacement in circumstances where doctrine of double portion strikes in which will also lead to the application of doctrine of ademption. This can be seen in the case of, Ng Kwok Seng & Anor v Mei Ling Ng, whereby in this case, the plaintiffs which are 2 sons, sought to cover monies in joint account that is given to defendant, who is daughter of the deceased. Subsequently, after the death of the deceased, a portion of land is divided into 2 which is to be given to daughter and the other half will be divided between two sons. Later, the plaintiffs claimed that the inter vivos gift, which is the account, is adempted due to the fact daughter already received part of the land as in the will. Plaintiff also contended that...