Interpretation of Wills Flashcards
Specific gifts
- Gifts of a particular item owned by the deceased at the date of death
- Must be drafted precisely
- In the absence of a clause which provides for an alternative gift, if the testator does not own the item at the date of death, the gift fails and the beneficiary receives nothing
Chattels
Chattels includes vehicles, modes of transport, pets (all tangible, moveable property).
Excludes:
- money or securities for money
- items used solely or mainly for business purposes
- items owned solely for investment
Specific gifts of land
- Property owned as Joint Tenants passes outside the succession estate and is not distributed under the will
- Property owned solely by the testator or as tenants in common is included in the succession estate and passes in accordance with the will
General legacies
- “A” (“a car”, rather than “my”)
- General legacy does not normally fail as PRs would have to pay the specified property, if it was not part of the estate
Pecuniary gifts
A pecuniary legacy is a gift of money
Residuary gifts
A residuary legacy is a gift of all the testator’s property which has not already been disposed of under the will or any later codicil
Failure of gifts of residue
- If an asset given by an earlier gift of the will fails, the subject matter usually passes under the residue
- However, the failure of a residuary gift results in partial intestacy
What is the general rule for when the will speaks in relation to property?
The general rule for property is that unless contrary intention is shown, the will speaks from the date of the testator’s death
How is contrary intention shown?
The word “my” indicates contrary intention
- This means the item being given is owned at the date of execution of the will
- The effect of this is that if the testator no longer owns the specific property, the gift adeems and the beneficiary receives nothing
How are items which comprise a collection identified?
Items that comprise a collection are identified at the date of death
- If there is a gift of a collection which is capable of growing, the will speaks from date of death
- e.g., ‘my stamp collection’ - those included in the collection at the date of death
How are people identified?
People are identified with reference to the date of execution
- unless there is express wording in the will of the contrary
Class gifts and the class closing rules
Where a gift is given to a class of beneficiaries (e.g., my grandchildren), a testator should expressly state when the beneficiaries will be determined
- Without express wording, the class closing rules apply and the class closes when the first beneficiary in the class obtains a vested interest
- Beneficiary with a vested interest receives share immediately, other beneficiaries have contingent interest (grandchildren who are alive when the class closes, but not yet satisfied the contingency e.g., reach 18)
Gifts in a will and IHT
- A gift in a will is made free of IHT and IHT would be payable out of the residue as a general testamentary expense
- It is standard practice for legacies to be drafted expressly as free from tax
- Testator can oust the general rule by stating a gift is to bear its own IHT if they wish
Who bears the liability for property subject to a charge?
The gift of a property subject to a charge bears the liability of that charge
- This means that the beneficiary inherits the property subject to the charge (e.g., a beneficiary inherits a property subject to the mortgage)
Expenses / cost of transfer for gifts
In the absence of any express provision, specific beneficiaries bear the burden of the:
- cost of delivery of the item of the property to them (cost of transfer)
- expenses incurred since the date of death in preserving the item
The effect of a gift lapsing
- Lapse of a non-residuary gift –> asset passes under gift of residue
- Lapse of a residue gift –> risk of giving rise to partial intestacy, unless there is express substitution clause
- s33 may operate if the gift is left to an issue who pre-deceases but leaves their own issue
s33 Wills Act 1837
s33 applies where there is a will containing a gift to the testator’s issue AND the intended beneficiary dies before the testator leaving descendants of their own who are living at the testator’s death
- This means the gift is shared equally between the issue of the deceased beneficiary
- It is good practice to include substitution provisions expressly for clarity
- s33 only applies to gifts to issue
Charitable gifts
Cy-pres doctrine:
- a charitable gift stated to be for general charitable purposes results in application of cy-pres doctrine. This means that the gift can be given to a different charity with a similar purpose where the original gift cannot be given effect
Incorporation of documents into a will
Provisions of a will should normally be contained in one properly executed document. If changes or additions are made, this should be done by a codicil or by revocation
Incorporating unexecuted documents into a will - how is this done successfully?
An unexecuted document may be incorporated into a will by referring to it in the will.
To successfully incorporate:
a) the document must exist when the will is executed
b) will must refer to the document as being in existence at the time of execution
c) document must be clearly identified in the will
What is the effect of incorportating a document?
If it is validly incorporated, it becomes part of the will
How should you advise clients on incorporating documents into the will?
Incorporation of unexecuted documents can be useful where a client wants to create a detailed schedule of personal possessions
However, advise clients that this should be avoided as there are practical considerations / complications which will arise if the conditions for incorporation are not satisfied and the document cannot be located after death
Letters of wishes
Where a trust is created under a will, they may have an expression of wishes. These letters are drafted by the testator and set out how the testator would like the trustees of the estate to manage their discretionary powers
- Letters are not legally binding
Questions to ask a client drafting a will in relation to gifts / construction? (Interview context)
Specific gifts
- What is your intention in the event that the original item no longer exists? Would you like the beneficiary to receive something, even if it is not possible to give effect to the original gift
- express substitution clause? ultimate gift over clause?
Construction
- when the testator wants the property / person to be identified from?
- E.g., for a collection: “do you intend for the gift to be of the collection owned at the date of the will, or to include an items acquired in the future”
People
- identify the person
Class gifts
- when do you want the beneficiaries to be determined (e.g., those alive at execution; those alive at death; all of them?)
- avoid uncertainty by stating when the class closes expressly
Questions to ask regarding specific gifts of land
- Is there a particular beneficiary in mind to inherit the property?
- What should happen if the property is no longer owned by the testator when they die?
- How is the property currently held (can only pass under the will if solely owned or held as tenants in common)
- Are there any third party interests that affect the property? Or is the property held on trust?
- Is there a mortgage? Advice on liability relating to the payment of any outstanding loan, if the property is subject to a secured charge or mortgage
- If the testator wants to hold the property on trust: who has the right to occupy? should they pay rent? expenses with upkeep? sale?
Questions to ask regarding taxation of gifts?
- Do you want the gift to be made free of inheritance tax or for the gift to bear its own inheritance tax?
- Do you want the specific beneficiaries to bear the costs of transfer? Or would you rather these costs are paid out of the residuary?
- Where a property is subject to a charge (e.g., property has a mortgage), does testator want the beneficiary to inherit the property subject to the charge?
Questions for substitutional gifts?
What does the testator want to happen in the event that a gift lapses - substitutional gift to be specified in its place?
- Note the effect of s33 for gifts to issue only
How are people identified with reference to a codicil (published after the will)?
Execution of a codicil republishes the will it amends - people are identified with reference to the date of codicil
