Death-bed gifting dispute

HOWARD is terminally ill and in the final days of his life, he decides to give his friend Sarah, a gift as she had been by his side during the last twelve months.

Howard hands Sarah his debit card, tells her his PIN number and says, “I want you to spend the money and enjoy yourself.”

He also gives her his house keys and says, “Thank you for spending so much time with me here in my house, I want you to live here and enjoy the view.”

When Howard dies, the executor of his will seeks to recover the proceeds of Howard’s bank account from Sarah and take possession of the house for distribution to the beneficiaries named in Howard’s will.

Court action ensues.

In determining whether the ‘inter vivos’ gifts to Sarah were valid, the Court had to decide whether Howard possessed the necessary intention to part with the assets, whether he had the capacity to make these decisions, whether he understood what he was giving and the implications of his decision.

In relation to the bank account, the Court considers the available evidence and ultimately rules in Sarah’s favour, declaring the gift valid on the basis that Howard demonstrated a clear intention that he wanted Sarah to have the funds.

However, in relation to the gift of the house, even though the Court determined that it was Howard’s intention to gift the house to Sarah, under New South Wales law, real estate can only be transferred by way of a written instrument.

The Court therefore ordered that the gift was invalid and that the house formed part of Howard’s estate.

If Howard had incorporated the gifts into a deed, or updated his will to include the house, expensive Court proceedings would have been avoided.

Prior to making gifts in contemplation of death it is important to seek legal advice.

Thank you to Anthony Fogarty for his assistance with this column.

If YOU would like a particular issue addressed, please email me at manny@tblaw.net.au or call me on (02) 66 487 487.