THE ART OF GIFTING YOUR ESTATE
A number of people when preparing their Will, have something precious that they would like to leave to a specific relative, friend or organisation. Whilst the item in question may not necessarily have considerable monetary value it can have sentimental value, which is priceless. Unless you give that item during your lifetime to the intended recipient that item can literally become one of the most expensive items of your estate as your beneficiaries dispute over who should get the item, resulting in considerable loss of value of your remaining estate. The item then becomes nothing more than a bad memory for all concerned; even the person who ends up with it. Further, it can easily result in the breakdown of your family.
There are ways to overcome this and ensure that the intended recipient receives the item. Which will preserve family relationships and ensure that your estate is not squandered on legal fees as people argue over the item in question.
Gift the item in question whilst you are still alive
If you make a lifetime gift of the item, referred to in legal parlance as an inter vivos gift. You give the item to the intended recipient whilst you still have capacity and make the gift clearly known to all your beneficiaries. There is a common theme in estate matters where one child or children have the day-to-day care of a parent and often a Power-of-Attorney in the event that the parent has lost capacity, that child or children by the time the parent has passed away have come into possession of much of the parent’s personal property, stating that the parent made a lift time gift of it. Thus, transparency is key.
The downside of a lifetime gift is that you are giving up your enjoyment of the item. Once you have gifted the item the recipient can do what they please with that item, and such action may be contrary to your wishes, such as selling the item. There are businesses that advertise specifically about acquiring jewellery that belonged to people’s ancestors for the purposes of raising cash for what they may want today.
Specific Gift in your Will
In the alternative, such that you can return the enjoyment of the item you can leave the item specifically detailed in your Will, in a list, or by codicil to go with your Will, to the intended recipient.
If using a list, which you refer to in your Will, this list must exist at the time of signing the Will and be specifically referred to in the Will.
If you intend to make a specific gift of in your Will, you need to ensure that the item in question is still part of your estate at the time of your death. This can apply to everything from a watch, to a car, through to a house. In short, you cannot gift in your Will what you do not own. Therefore, if you wish to make a gift of your watch, you should not necessarily state the make or model of watch that you are wearing when you make the Will, such as “I give my Make of Watch / model”. If you replace your watch prior to your death, the intended beneficiary of your watch does not get the replacement watch. The gift is said to have failed and the replacement watch forms part of your general estate, referred to as your residuary estate. In order to avoid this and ensure that the Intended beneficiary receives your watch or any such replacement, wording such as “I give such of my watches”, allows for you to replace your watch and/or buy further watches without the necessity of updating your Will each time.
On the larger scale, such as a house, as opposed to stating “I give 12 Acacia Avenue”, you would state “I give such interest in any real estate in which I am residing at the date of death”. This even has potential issues as you may have been in high intensive nursing care for a number of years prior to your death, such that you have no interest in any real estate at the time of your death. Again, this means that your intended recipient does not receive the gift that you are intending to leave to them.
Further, while a person’s home may be his or her castle; it could actually become a costly burden to a recipient. You may want your home to remain within the family forever, but your child or children may wish otherwise. If you make a specific gift of your home to your children then that house will actually need to be transferred to your children, and they shall become the owners of the property. Unless your children specifically retain the house they will sell it once it is transferred to them following the grant of probate. When they sell the house they will incur all the usual costs out of their own pocket in selling the house; including, where relevant, capital gains tax, we stress that whilst we cannot provide financial advice you should discuss such matters with your financial adviser.
If you do not make a specific gift of your house, the house can be sold as part of your estate and the proceeds from the sale can be divided between your children. It is not advisable to leave real estate assets to your children jointly as every child’s personal circumstances, intentions and requirements will differ, and this can lead to disputes with respect to the on going ownership of the property.
Whilst it is advisable to keep specific gifts to a minimum in your Will, when entering into a co-ownership agreement it would be prudent to include in your Will a gift with respect to the co-owned property so as to make it abundantly evident to the executor of your Will that the co-owned property is to pass via your Will. Such clause could be utilised if there were an issue to the incorrect mode of holding been recorded at the time when the property transferred to you and you are listed as Joint Tenants.
The purpose of this article is not to scare you into giving away all your precious items during your lifetime but to ensure that you can retain the pleasure of them and that they go to the intended recipients.
Should you wish to discuss any concerns that you may have with respect to specific gifts in your Will or should you need to give your Will a health check please contact us today for a free consultation.