Gifting in wills
“I give devise and bequeath…”, this is a commonly employed phrase by will-makers, also known as testators, when they wish to gift properties to beneficiaries. Despite the good intentions of the testators, gifts under a will do fail from time to time, and sometimes it is because the way the will had been drafted.
1. What happens when the testator no longer owns the property he intended to gift at the time of death?
This seems like a straightforward question and indeed a common occurrence, but depending on the nature of the property answers could vary significantly.
When a testator devises a specific gift under a will, for instance, his car, but sold his motor vehicle during his lifetime, the gift will be “adeemed” (ie, revoked). As the recipient, the beneficiary will not be entitled to claim any proceeds of sale. When the property ceases to be owned by the testator who replaced it by other things of similar nature (although perhaps differ in value), the recipient of the gift may or may not be entitled to the replacement.
Continue with the previous example, when a testator leaves his beneficiary “my car”, and thereafter replaced his old car with a new one, the beneficiary should be entitled to claim the new car even though the testator probably did not intend to give away the new car when he made the will. On the other hand, when a testator say in his will that he “give my Mercedes-Benz Maybach registration ABC 123 to my wife” and thereafter replaced it with a different model, then the wife will miss out on any entitlement of motor vehicles due to the specific nature of the gift.
2. Decisions made by people other than the testator to disown any property
It is fairly common as a testator grows older, he grants power of attorney to a trusted associate or a guardian may be appointed to take care of his affairs. An attorney or guardian who may or may not be aware of the contents of the testator’s will could sell the testator’s properties notwithstanding they are subject to the testator’s will. However, this does not mean the entitlement of the gift recipient is extinguished.
Victorian Courts have found that in situations where the proceeds of sale, or the remaining part thereof, could be identified with sufficient certainty, the beneficiary is entitled to the remaining proceeds if the testator would have intended for the beneficiary to enjoy the benefit of the gift had he possessed the requisite testamentary capacity at the time of the sale of the property. In fact, the Administration and Probate Act 1958 (Vic) now entitles a beneficiary of the testator to receive the traceable income or capital gain generated from the proceeds of sale of disposal of the property by a guardian or an attorney, or the beneficiary could apply to the court for remedies if he believes that he has suffered an unjust disadvantage.
This does not mean, however, that the beneficiary is automatically entitled to the proceeds of sale if the property was sold when the testator lacked capacity. The wording of the will itself plays an important part when it comes to the principle of ademption. If you are not sure whether to make a gift general or specific, it is best to seek legal advice.
Contact us today
At Barrett Walker, our legal and accounting expertise ensures that you receive the most comprehensive, accurate legal and taxation advice tailored for your needs.
Please note the contents contained in this article are intended to be general advice only and should not be construed as specific legal or financial advice.
If you require any specific legal advice please do not hesitate to call our friendly team on 03 9428 1033 or email us at advice@barrettwalker.com.au.