It’s commonly thought that once you’ve set out what gifts you want to make in your Will then those gifts will take effect when you die. Unfortunately this isn’t always the case and there are a number of practical and legal considerations that can have an impact on whether or not a gift will fail.
In this article we look at some of the reasons why gifts in a Will can fail – some of these may be obvious, but others may not.
No Longer Owning the Gift
If you’ve given a specific item away in your Will then you must still own that item at the time of your death if the gift is to take effect. For example, Sue makes a Will which states ‘I give my engagement ring to my daughter Samantha’. If at the time of the Sue’s death she no longer owns it, then the gift of the ring to Samantha will fail because it doesn’t form part of Sue’s Estate.
This is called the Rule of Ademption and it can occur where the item is given away or sold during the Testator’s lifetime. It can even happen if an asset being gifted changes in description after the Will is made. An example of this would be where the gift in the Will is described as “the proceeds of a bank account numbered XXXXXX”. If that bank merges or is taken over and the money is re-allocated to a new account number as a result, then the gift is no longer accurately described in the Will and the gift could fail.
Proprietary Estoppel is a rule in law that that can make a gift in a Will fail if a person can successfully claim, that the item being gifted in the Will to someone else, had already been promised to them during the lifetime of the Testator (the person who has made a Will or given a legacy).
For example, Steve is a farmer and runs a farming business. His son Anthony has worked on the farm all his life and been paid a very low wage because Steve has always said that he’ll leave the farm to Anthony when he dies. Steve dies but his Will leaves the farm as a gift to his third wife Tanya.
In England and Wales, the principle of Proprietary Estoppel steps in here to establish fairness and prevent the unjust outcome of Anthony failing to receive what he was promised by his father. In order for this rule to apply and for the gift to Tanya to fail, Anthony would need to prove that he had received assurances from Steve that he would inherit the farm, that he relied on those assurances, and that he acted to his detriment in the expectation of inheriting the farm – i.e. he worked for low wages.
Satisfaction is another rule in law which provides for the failure of a gift in a Will if it can be shown that the gift has already been satisfied in some other way. In certain situations the law may presume that the gift has been satisfied already. Examples include:
- The deceased’s Will leaves a legacy to someone to whom he/she owes money. If the amount of the legacy is equal to or exceeds the debt, then the law presumes that the deceased only wanted the legacy to repay the debt owed. Without this presumption, the creditor would receive repayment of the money as a debt from the deceased’s Estate as well as the legacy.
- If the terms of a Will leaves two or more legacies for the same amount of money to the same person, then the law presumes that only one legacy was intended so the other one fails. For example, Tom dies leaving a Will which makes two separate gifts of £10,000 to Steve. Here the law presumes that Tom only wanted to give one gift so it would result in Steve receiving £10,000 in total and not £20,000.
- If a person makes a substantial gift during their lifetime to someone who they’ve already named as a beneficiary in their Will, then the law presumes that the lifetime gift was made in satisfaction of the gift made in the Will. This is important to know, particularly as it’s becoming frequently more common for parents to write a Will leaving everything equally between their children, and then some years later make a significant gift to only one child. In this instance the law steps in, again to establish fairness, and presumes that the lifetime gift was in partial satisfaction of the share of the Estate he/she would have otherwise inherited under the Will. Therefore the gift made to that child in the Will could fail.
With each of these examples it’s important to note that these rules are based on the law making an initial presumption that the deceased would not have wanted the gift to take effect in a particular way. Presumptions can always be rebutted through evidence so it’s important that your wishes and decisions are properly recorded in your Will.
The Doctrine of Election
Doctrine of Election is another common law rule which has developed over time through case law. It’s rather unusual and can be very complicated to apply. Certainly, the full extent of this rule is well beyond the scope of this article however, at the very least, it’s interesting to know about.
It’s easiest to understand with an example:
Steve dies leaving a Will that makes a gift of an item to Edward. However, the item being gifted by Steve is not actually owned by him, it’s owned by Thomas. If Thomas benefits from other assets from Steve then the law could require Thomas to elect whether:
- He wants to take the other assets but transfer his ownership of the item to Edward; or
- He wants to take the other assets, not transfer the item to Edward but instead financially compensate Edward for his loss of the value of the item out of the other assets he received from Steve. The compensation would be calculated on the value of the gift at the date of Steve’s death and not at the date of the election.
The purpose of the doctrine is to step in to prevent an unfair situation arising where Thomas gets to keep the item he already owns, as well as benefiting from Steve’s other assets, whilst Edward is left with nothing at all.
The law can be complex and it’s always sensible to take the right advice when making a Will.