Absolute Gifts (WA)
A testator must make a number of choices when drawing up a will, from who should benefit and in what amount, to the form that the bequest should take. A testator bequeaths an absolute gift to their chosen beneficiary so that the recipient is able to enjoy the gift without delay or condition. The alternative is for a testator to leave their assets in trust or in the form of conditional bequest. This article explains the difference between absolute gifts and other types of testamentary provision in Western Australia, with illustration through a recent Supreme Court of Western Australia case study.
What is An Absolute Gift?
An absolute gift is the simplest form of testamentary bequest. In Western Australia, the executor of the deceased estate can simply hand over the absolute gift to the beneficiary after the six months limitation period. This is an appropriate choice when the beneficiary is a responsible adult capable of managing his or her own financial affairs.
Why Should A Testator Give An Absolute Gift?
There are clear advantages to leaving absolute gifts in a will. An absolute gift is an essential element of the inexpensive and easy to prepare “simple will”. An absolute gift should be easily comprehended (for instance, “I give to my granddaughter Florence my amethyst and diamond ring…”) so that a testator can be sure that the gift will pass to the beneficiary with little expense or inconvenience.
Should A Testator Hesitate To Give An Absolute Gift?
An absolute gift is not the right choice in every instance. A testator may think twice before giving a valuable asset outright to children or those who cannot manage their own financial affairs, such as those with a mental disability or substance abuse issues. An absolute gift also offers no asset protection for a beneficiary who is involved in family court or bankruptcy proceedings.
In these circumstances, it is advisable instead to leave an asset in a trustee-controlled trust, so that the ownership of the gift is kept separate from the beneficiary’s right to benefit. For instance, a testator might appoint a trustee in their will to retain legal ownership of a house, but give the beneficiary immediate access to the income generated from renting out the house. This gives a testator the comfort of knowing their beneficiary is provided for but not burdened with the responsibility of making financial decisions in relation to the asset.
Life Interest and Right to Occupy
Another option that might be preferable to an absolute gift in some circumstances is to bequeath a “right to occupy” or “life interest” to a beneficiary. This option may be suitable when, for instance, a testator wishes to provide for both their spouse and children from an earlier relationship. If a testator leaves their spouse a life interest in an asset, they can make provision for their children to receive the asset upon the death of the spouse.
With a life interest, the asset is held in trust for the benefit of the first recipient during his or her lifetime. The life tenant has a right of abode, and also receives any income that the asset produces during their lifetime. When the holder of the life interest passes away, the asset transfers to either a specified person or the testator’s nominated residual beneficiary.
By contrast, a right to occupy allows the recipient to reside in the home, but there are conditions attached to the provision: namely, the beneficiary cannot rent the property to another person and receive rental income from the asset. As with a life interest, when the occupant dies, the asset is passed to a nominated beneficiary.
In the case of Patricia Robyn McElroy (nee Nix) as Executor of the Last Will and Testament of the late Jean Valentine Nix (Dec) v Griffiths & Ors , the Supreme Court of Western Australia considered the issue of absolute gifts. The plaintiff, in this case, was the daughter of the deceased. The deceased’s will was a handwritten document dated 1997 that included a clause in relation to two rural properties owned by the deceased:
I appoint Patricia Robyn McElroy (Nee Nix) … to be the Exectrix and Trustee of this my Will, & beneficiary. I give, devise and bequeath My (sic) farming properties ‘Walkin’ ‘Walkout’ to be run as one unit from RMB 201 Boyup Brook 6244 during her life time.
The issue under consideration was whether these words constituted an absolute bequest to the plaintiff of the named properties or merely a life interest in the properties. Ambiguity arises as to whether the words “during her life time” give a life interest in the farming properties, or whether the wording indicates that the beneficiary should merely run the two properties as one entity during her lifetime.
The court found that, as there was no residuary beneficiary listed in the will, then the clause could not be intended to create a life interest, as no person was specified to inherit after the death of the original recipient. The court noted that, as a rule, the law favours an interpretation of the will that avoids intestacy, so ruling in favour of the plaintiff was preferable as it avoided the estate falling into intestacy following the daughter’s death.
The court also had regard to the will as a whole, and the subsequent words “in other words, I want the farm to be kept as a viable unit. My husband would have wanted this”. The court stated that it was also appropriate to look at the factual context in which the will was created, as this was in keeping with common law precedent. They took note of information on the historical management of the farms, as the deceased and her husband ran the neighbouring farms together as a single unit. The court decided ultimately that the deceased intended to give the beneficiary an absolute gift of the properties on the proviso that they were run as a single unit. This construction was found to be consistent with the testator’s “armchair facts”.
As this case demonstrates, using ambiguous language in a will can lead to misunderstandings and involve the estate in expensive litigation. Bequeathing an absolute gift is a straightforward way to pass on your assets, but it is crucial that an experienced solicitor draft these provisions to avoid ambiguity. The solicitors at Armstrong Legal can help you draw up a will properly, and our contested wills team can assist you if a loved one has left a confusing will. Please contact our friendly team on 1300 038 223 to discuss any legal issue.