Wills and Intestacy - Gifts and Beneficiaries on Death (7) Flashcards
What are the different types of gift that can be handed down in a will?
Types of Gift: Wills may refer to several types of gift.
(1) Legacy: Personalty (though often used to describe realty too).
(2) Devise: Realty.
(3) Pecuniary Gift: Money.
(4) Specific and General Gifts: Important to distinguish the two.
Specific: A specific item of the estate, i.e. ‘my car’. If this is not owned on death, the gift fails.
General: A non-specific item, i.e. ‘a car’. If this is not owned on death, it must be bought.
(5) Residuary Gift: The residue estate (after debts, expenses and other gifts).
(6) Demonstrative Gift: Any type of gift to be paid or funded from a specific source.
>I.e. ‘£1000 from my HSBC account’.
What must be remembered when establishing a gift on death?
Establishing Gift on Death: On death, it must be established whether a gifted asset is still owned or, if general, must be purchased.
(1) General Rule: Generally, gifts ‘speak from death’, meaning the will refers to the assets owned on death (s24 WA).
>’My jewellery’ refers to the jewellery owed on death, not execution.
(2) Specific Gifts: However, specific gifts ‘speak from execution’, usually if written in the present tense or comprising a specified singular owned asset (not a class of assets).
>’My necklace’ refers to the necklace owned on execution, as it refers to a specific gift.
>’My jewellery’ does not, as it refers to a group of assets capable of increase or decrease.
>’My current collection of necklaces’ refers to the necklaces owned on execution, as written in present tense.
>If the specific asset is no longer owned on death, the gift fails (‘adeems’).
How is a beneficiary established on death?
Establishing Beneficiary on Death: On death, it must be established who classes as a beneficiary. This is straightforward if mentioned by name, but more difficult if referred to by description, i.e. ‘my son’.
(1) General Rule: Generally, beneficiaries ‘speak from execution’.
>’My youngest daughter’ refers to the youngest daughter on execution, even if the testator has had another daughter between execution and death, i.e. a new youngest daughter.
>However, this may be altered by a codicil republishing the will, which would refer to the ‘youngest daughter’ at the time of codicil.
(2) Contrary Intention Exception: This is excepted by contrary intention in the will.
>I.e. ‘My youngest daughter on my death’.
(3) Trusts Exception: Beneficiaries speak from death for gifts conveyed by will trusts.
>’To my daughter on trust’ takes effect on death. If another daughter has been born between execution and death, the gift fails, as there is more than one daughter - the trust fails for certainty of objects.
>It is therefore prudent to specify beneficiaries by name, i.e. ‘to my daughter Ellie on trust’.
Beneficial Classes
Beneficial Classes: If the will makes a provision for a class or group of beneficiaries, it must be determined who qualifies.
(1) Children: A gift to someone’s ‘children’ includes biological and adopted children, as well as illegitimate children, but not step-children - subject to any contrary intention in the will (Reading v Reading).
Issue: Issue refers to all direct descendents (and a gift to them will go to all living issue - this differs to intestacy, as there is no per stirpes distribution under a will unless specified).
(2) Spouse: References to a ‘husband/wife’ do not include civil partners and vice versa (unless otherwise stated).
>A gift to ‘my wife’, who is in fact a civil partner, will fail.
(3) Class Closing: Gifts may be made to open classes, meaning classes that may continue to grow in size, i.e. ‘to my grandchildren’. The class ‘closes’ when the first member of that class becomes entitled in possession, meaning no one else can join the class.
Example: (A) leaves £100,000 to ‘my grandchildren’ contingent on attaining eighteen. (A) has 4 grandchildren on death, but 6 when the first turns 18. As the first takes ⅙ of the fund, it would be unfair to allow a new 7th grandchild to join the class, as it would mean taking money back from the first.
Exception: If a gift is made to ‘each of’ the members of a class, the class closes on death, i.e. ‘to each of my grandchildren’ -> no grandchildren born after death will qualify.
Gender Reassignment
Gender Reassignment: Beneficiaries may have undergone gender reassignment. They are treated as the opposite gender if they have obtained a full gender recognition certificate from the Gender Recognition Panel (GRA 2004).
(1) Effect: For wills created since 4 April 2005, the beneficiary loses entitlement under their old gender and gains it under their new gender (there is no change for a will created before 4 Apr 2005).
>If a beneficiary loses entitlement as a result of their transition, they can apply to the High Court for remedy.
(2) Personal Representatives: PRs are not required to enquire about reassignment, and are not liable for incorrectly distributing the estate on the basis of an old gender (provided they had no notice of reassignment) (s17).
>Reassigned beneficiaries can claim against any other person who inherited or has acquired their share (except against equity’s darling).
How may gifts fail on death?
Failure of Gifts on Death: Gifts often fail on death, meaning they do not pass to the intended recipient.
(1) Effect: The gift will typically lapse into residue, and pass to the residuary beneficiary or by substitution (or it may be the case that the gift no longer exists).
(2) Substitution: Instead of returning to residue, a failed gift may pass by substitution.
Express: The will may expressly outline who a failed gift shall pass to, i.e. ‘if any gift shall fail, it shall pass to my brother Jack by substitution’. A substitution clause for the residue is called an ‘Ultimate Gift’ clause.
Implied: Unless expressed otherwise, a gift to the testator’s own issue that is disclaimed, forfeited or has lapsed will pass to that issue’s issue (s33).
>I.e. ‘My car to my son John’. John predeceases the testator, but leaves behind his own child, Joe. Unless the clause provides an express substitution clause, the car will pass to Joe.
Uncertainty
Uncertainty: A gift with uncertain subject matter will fail, unless rectifiable or exclusively charitable (court decides).
Beneficial-Witness
Beneficial-Witness: If a beneficiary or their legal spouse witnesses the will, a gift to either of them will fail. This is because they would otherwise have a vested interest if required to prove the will. However, the will itself is still effective.
(1) Exception: If the will is still valid in the absence of the beneficial-witness signature, i.e. executed with at least 2 additional independent witnesses, the gift is valid.
(2) Codicil: A codicil may republish the will. Provided the new witnesses are independent, the gift becomes valid.
Divorce or Dissolution
Divorce or Dissolution: A gift to a legal spouse is invalidated by formal divorce or dissolution, and any appointment of the spouse as executor also fails. The former spouse is treated as predeceased for the purposes of the will (s18).
Disclaimer
Disclaimer: A beneficiary may disclaim a gift, meaning they reject it. They are treated as predeceased for the purposes of that gift, and the gift passes by residue or substitution. This is prohibited if they have intermeddled (i.e. gained income from gift).
Ademption
Ademption: A specific gift will adeem if it is no longer owned on death, subject to a contract for sale, or is substantially no longer as described in the will. It is irrelevant if the gift has been replaced by a replica.
(1) Change In Form: A gift that changes form may adeem.
Volume: A change in volume is usually fine (i.e. my shares rising from 100 to 1000 shares).
Name: A change in name is usually fine (i.e. Halifax Ltd Shares to Halifax Limited Shares).
Nature: A change in nature will usually adeem (i.e. shares in Halifax, Halifax then bought by Lloyds).
(2) Codicil: Republication by codicil may prevent a gift from adeeming (circumstantial).
>I.e. Will says ‘my car’ in 2004. Car is sold in 2005, and a new car is bought. A codicil published in 2006 will republish the original will, which now refers to the car owned in 2006.
Lapse
Lapse: A gift will lapse if the recipient predeceases the testator (including disclaimer and divorce). It then passes by residue or substitution. If residue lapses (unless substituted), it will pass by partial intestacy.
(1) Period of Survival: Beneficiaries under a will only need to survive by any amount of time, unless the will states otherwise.
>For simultaneous deaths, such as by car crash, it is presumed that the oldest person dies first, unless there is strong evidence to the contrary (Scarle v Scarle). This is the ’law of commorientes’ (s184 LPA).
(2) Survivorship Clause: The will may require a period of survival, i.e. ’Beneficiaries must survive me by ten days’.
>This is important to prevent a gift being doubly inherited from the outset, incurring two lots of IHT.
>I.e. The gift passes to a brother who dies one second later, and so will be subject to IHT on two estates.
(3) Class Gifts: The effect of death on gifts to a class may differ by the type of gift.
Joint Gift: Joint gifts pass wholly to the surviving members, only lapsing if they all predecease.
Equal Shares: If a gift is made in equal shares, the share of the deceased lapses, but the remaining members still inherit their original share.
Equally: If a gift is made equally if more than one, it passes wholly to the surviving members, only lapsing if they all predecease.
Forfeiture
Forfeiture: A gift will forfeit if the beneficiary unlawfully kills the testator. They are treated as predeceased, and the gift passes by residue or substitution (incl. implied). This applies to gifts whether inherited by will, intestacy or survivorship.
(1) Unlawful Killing: Murder, manslaughter, assisted suicide and careless driving (unless insane).
(2) Court Relief: The court can provide whole or partial relief except for murder (Forfeiture Act 1982).
Application: Application must be made within 3 months of conviction. Extension is not possible.
Order: Courts will order relief in the interests of justice.
>Beneficiary was relieved for assisting the suicide of her terminally ill spouse by filling out administrative documents for Dignitas (Ninian v Findlay).
