Gifts Under Wills
Legacies, bequests and devises
• There are three main types of gift under a
will.
• Legacies and bequests are gifts of
personal property and devises are gifts of
real property.
• Legacies can be general, specific
(bequests), demonstrative or residuary.
• Residuary legacies are the gift of the
residue of the testator’s estate.
General Legacies
• A general legacy is a gift off personal property
from the testator’s estate but no particular part of
the estate is marked as being intended to satisfy
the legacy.
• The most common example is a gift of money
(pecuniary legacy).
• A gift of a particular piece of property can in
some cases be a general legacy, in which case
the executors may have to buy property of that
description if the testator did not own it at the
time of death.
Specific Legacies
• Specific Legacies or bequests are gifts of
an identified piece of the testator's
personal estate.
• The property must be identifiable so that it
can separated from the general.
• Can include money in a specified bank
account (which can also be passed on
through nominating the account with the
bank).
Demonstrative legacies
• Demonstrative legacies are general gifts of a set
amount which the testator indicates should be
paid from a certain source.
• This includes set amounts to be obtained from
the sale of particular assets.
• If the fund is not large enough then the balance
is to be paid out of the general estate.
• However if it appears that the testator intended
the fund to be the only source of the legacy then
any shortfall will not be made up out of the
general estate.
Legacies examples
1. “the sum of $20,000 to my wife” – a
general legacy.
2. “the sum of $20,000 on fixed deposit in
my account at the ANZ bank to my wife”
– a specific legacy.
3. “the sum of $20,000, to be paid out of the
moneys in my account at the ANZ bank”
– a demonstrative legacy.
Abatement
• If the total assets in the estate after the payment
of debts and expenses (which must be paid first)
are insufficient to pay all the gifts in the will then
the gifts will abate.
• The class of legacy is important because it
determines in which order the various gifts will
abate.
• Gifts in the same class abate rateably (ie in the
same proportion as all gifts in that class)
Order of abatement
1.
2.
3.
•
Residuary Legacies
General Legacies
Specific Legacies
Demonstrative legacies are treated as
specific legacies in so far as the specific
sum exists. The remainder abates with
the general legacies.
Abatement example
• A makes the following gift in his will:
– “200,000 to my daughter B, to be paid out of the
moneys in my BNZ account”
– “$500,000 to my wife C”
– “the residue of my estate to my son D.”
• A’s assets upon his death (after paying all debts)
were:
– A house worth $200,000
– $100,000 in the BNZ account
– Other assets worth $200,000.
Abatement Example
• The proceeds form the sale of the house are
added to the other assets, making a total pool of
$400,000.
• There will be no residue so the son’s residuary
legacy abates entirely.
• The demonstrative legacy to the daughter
means that the $100,000 in the account will go
to her. This leaves $400,000 to pay the
remaining legacies totaling $600,000.
• This shortfall of one third means the gifts to the
wife and the remaining $100,000 are both
reduced by one third.
Abatement Example – final result
• The daughter B receives $100,000 in the
account plus two-thirds of the remainder of
$100,000, a total of $166,666.66.
• The wife C receives two-thirds of
$500,000, a total of $333,333.33.
• The son D receives nothing (but could
bring a Family Protection Act claim).
Devises
• Gifts of land are called devises.
• A general devise is a gift of all the land
owned by the testator.
• A specific devise is a gift of a specific
piece of land
• A residuary devise is a gift of all the land
not otherwise disposed of by specific
devises.
Ademption
• If the testator does not own the property referred
to in a specific legacy or devise then the specific
gift will adeem.
• The beneficiary of the adeemed gift is not
entitled to any substitution for the ‘missing’
property.
• Care should be taken when drafting the will to try
and minimise the possibility of this occurring.
One solution is to refer to the testator’s principal
residential property rather than a named piece of
land when drafting specific devises.
Lapse
• If the beneficiary dies before the testator the gift
may lapse. Normally the heirs of the beneficiary
receive nothing.
• However gifts to the testator’s children receive
special protection, so that the grandchildren may
take their parent’s share.
• If the gift is to several people in succession
(such as to a life tenant and a remainderman)
then the death of an earlier person in the chain
does not mean the later members’ gifts lapse.
Conditional Gifts
• There are two types of conditional gifts:
– Conditions Precedent – where the gift does
not occur until the condition is met (eg. “to B
on her becoming married”)
– Conditions Subsequent – where the interest
gifted comes to an end if the condition is not
fulfilled (eg. “to B as long as she does not
remarry”).
• If the condition is not fulfilled then the gift
falls into the residue.
Disclaimer
• It is open for the beneficiary to refuse to
accept the gift.
• When a gift is disclaimed it falls into the
residue (or the pool to pay general
legacies if these have abated).
• Examples may be leasehold property on
unattractive terms or company shares that
have a liability for calls still outstanding.
Gifts subject to a charge
• Since 1 February 2002:
• Charges existing at the date of death pass
with the property, so beneficiaries take the
property subject to the charge.
• However any charge over personal
chattels passed to the surviving spouse
can be paid out of the estate.
Personal chattels
• ``Personal chattels'', in relation to any person
who has died, means all vehicles, boats, and
aircraft and their accessories, garden effects,
horses, stable furniture and effects, domestic
animals, plate, plated articles, linen, china,
glass, books, pictures, prints, furniture, jewellery,
articles of household or personal use or
ornament, musical and scientific instruments and
apparatus, wines, liquors, and consumable
stores,
• which immediately before his death were owned by him
or in which immediately before his death he had an
interest as [debtor under a security interest as defined in
the Personal Property Securities Act 1999], or as
purchaser under a hire purchase agreement within the
meaning of the [Hire Purchase Act 1971, or under an
agreement that would have been such a hire purchase
agreement had it been made at retail]; but does not
include any chattels used exclusively or principally at the
death of [the deceased] for business purposes or money
or securities for money:
Section 34
34.
Charges on property of deceased to be paid primarily out of the
property charged—
(1) Where a person dies possessed of, or entitled to, or under a general
power of appointment by his will disposes of, an interest in property,
or where an interest in property passes by survivorship on the death
of a person, and at the time of his death the interest is charged with
the payment of money, whether by way of mortgage, charge, or
otherwise, and the deceased has not by will, deed, or other
document signified a contrary or other intention, the interest so
charged shall, as between the different persons claiming through the
deceased, be primarily liable for payment of all amounts charged
thereon; and every part of the said interest, according to its value,
shall bear a proportionate part of the amounts charged on the whole
thereof:
.
[(1A)However, subsection (1) does not apply
to an interest in any personal chattels if a
person dies possessed of or entitled to the
interest and it passes under the will or on
the intestacy of the person to the person's
husband or wife, or to a surviving de facto
partner of the person.]
(2) Such a contrary or other intention shall not
be deemed to be signified—
(a) By a general direction for payment of debts or of all
the debts of the testator out of his personal estate, or
his residuary real and personal estate, or his
residuary real estate, or his residuary personal estate;
or
(b) By a charge of debts upon any such estate—
unless that intention is further signified by words
expressly or by necessary implication referring
to all or some part of the charge on the interest
in property.
(3) Nothing in this section shall affect the
right of a person entitled to the payment
with which the interest in property is
charged to obtain payment or satisfaction
thereof out of the other assets of the
estate or otherwise.
Timing of gifts
• The executor has a year form the time of
the testator’s death to organise the estate.
• If the gifts remain unpaid after the year is
up then the beneficiaries are entitled to
interest from that point on.
• The will may provide that interest is
payable from the time of the testator's
death.
Per Capita and Per Stirpes
• Per Capita divisions are simple divisions by
head count. Each of the beneficiaries receives
an equal share in the gift.
• Per Stirpes divisions divide the gift by family and
share it equally between the member of each
family.
• So for example if the testator had two children, A
& Z, and A had one child B while Z had 4, V,W,X
and Y then under a per stripes division B would
receive four times what each of B’s children
would get whereas under a per capita division
each grandchild would share equally.
Satisfaction by Advancement
• Gifts during the testator’s lifetime to a particular
beneficiary are presumed as being an
advancement of that beneficiary’s share in the
estate.
• If this has occurred, the gift is taken into account
and that beneficiary’s is reduced.
• This process is called Hotchpot.
• If the gift occurred before the will was written it
will be presumed that the testator did not intend
the beneficiary to be disadvantaged.
Hotchpot example
• A in her will leaves $500,000 to X, Y and Z to
share equally.
• After the will was signed A gave $100,000 to X.
• On A’s death the $100,000 is brought into
Hotchpot and the total pool is notionally set at
$600,000 with each child to receive $200,000.
As X has already received $100,000 she will
only receive another $100,000 with Y and Z
receiving $200,000 each.
Donatio Mortis Causa
•
Conditional gifts of personal property made in
contemplation of death.
• Three requirements:
1. The gift was made when the donor was in
contemplation of death;
2. There must have been actual or constructive
delivery of the property gifted;
3. The gift must be made under circumstances
showing that it is to take effect only if the donor
in fact dies thereafter.