Updates and background for this project (Digest)
8.1 To ensure that intestate estates are divided equitably some jurisdictions provide that, when the intestate benefits someone either before and/or upon death and that person is entitled to a share of the intestate estate, that benefit is taken into account in determining their entitlement. That is, the value of any benefit received is subtracted from the share that the recipient is entitled to under the rules of distribution on intestacy.
8.2 There are essentially two categories of provisions. First, those that deal with gifts made by the intestate during his or her lifetime. Secondly, in the case of partial intestacies, those where the intestate has made provision for someone in his or her will.
8.3 It should be noted that three Australian jurisdictions make no provision to account for benefits received on or before the death of an intestate.1 The absence of any such provisions in these jurisdictions has apparently not resulted in any substantial injustice. There is, therefore, a good case for simplifying the administration of intestate estates by not including such provisions in any uniform national legislation.
GIFTS GIVEN BEFORE DEATH
Statute of Distributions
8.4 The rules relating to the taking into account of benefits conferred on a person entitled on intestacy have their origins in the Statute of Distributions which provided that settlements and advancements conferred by the intestate upon his children in his lifetime were to be taken into account in determining their (or their issue’s) portion upon intestacy.2 The rule, which is sometimes referred to as “the doctrine of hotchpot”, was narrow in scope, applying only to children of the male intestate and applied only in cases of total intestacy.3
8.5 Essentially two types of benefits were envisaged:
- marriage settlements whereby property was settled upon children upon marriage; and
- advancements which were usually intended to set up children in their chosen profession or business.
The rule did not apply to casual payments or gifts made to children.4
8.6 The rule as established by the Statute of Distributions has been modified in some jurisdictions and abolished in New South Wales,5 Queensland,6 Western Australia,7 New Zealand and England.8 It has been observed that the parliaments of these jurisdictions “clearly considered the doctrine of hotchpot to be more productive of difficulty than justice”.9 There was certainly difficulty in defining “advancement” and uncertainty concerning the date of valuation of the benefits conferred.10
8.7 It has been argued that the abolition showed a “determination to remove anomalies, anachronisms, relics, remnants and vestiges of outmoded and outdated statutory and common law. No longer will there be problems of gifts inter vivos vying with devices and bequests”.11
Modern provisions
Qld...
ACT... s 49BA
NSW...
NT... s 68(3)-(4)
SA... s 72K
Tas... s 46(1)(c)
Vic... s 52(1)(f)(i)
WA...
NZ...
Eng...
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8.8 Five jurisdictions have provisions relating to gifts that an intestate has made to certain people in his or her lifetime.
8.9 Tasmania and Victoria both have provisions that are closest to the regime established by the Statute of Distributions. In Victoria the relevant provision applies where a child has any real or personal property, or any estate or interest therein, by settlement of the intestate, or was advanced by the intestate in his or her lifetime.12 In Tasmania the relevant provision applies only to advancements or marriage settlements to children of the intestate unless a contrary intention is expressed. The value of any such advancement or settlement is taken as at the date of the intestate’s death, rather than value at the date on which the advancement or settlement was made.13
8.10 The Australian Capital Territory, Northern Territory and South Australia have extended the application of their provisions by covering the giving of any money or property for the “benefit of” the recipient,14 unless a contrary intention can be found.15 However, each jurisdiction has placed a monetary limit on the value of such gifts, so that, in order to be taken into account, the gifts must be valued at more than $10,000 in the Australian Capital Territory and $1,000 in South Australia and the Northern Territory.16
8.11 The Australian Capital Territory, Northern Territory and South Australia have also limited the application of their provisions to gifts given no more than 5 years before the death of the intestate.17 The Law Reform Commission of Tasmania has explained the benefits of a time limit, before which gifts need not be brought to account:
Details of gifts may become sketchy over long periods of time; and the law should not place too much constructive interpretation on the treatment of relatives by an intestate during his lifetime. The law should not retrospectively determine how he should have treated his family during his lifetime, but rather how he most probably would have treated them had he made a will or had he made a will which effectively dealt with his entire estate.18
8.12 Each jurisdiction, however, varies considerably as to the people whose benefits must be taken into account. The Northern Territory limits the application of its provision to children of the intestate. South Australia extends it to any person entitled under the rules of intestacy, other than the surviving spouse or partner of the intestate.19 The Australian Capital Territory also extends it to any person entitled under the rules of intestacy, other than the surviving spouse or partner of the intestate but also extends the coverage of the provision to any gifts to an otherwise “unentitled” spouse or partner of a person who is entitled. An “unentitled partner” is a person who is not entitled to a share of the intestate estate and who was the partner of the entitled person in question at the time of the gift to the entitled person, and was either the spouse of the entitled person at the time of the gift; or had been their domestic partner continuously for two or more years at the time; or was a parent of a child of the entitled person, if the child was under eighteen at the time.20
8.13 The Law Reform Commission of Tasmania suggested that spouses should not have to account for gifts given to them by the intestate as there would be:
an untold number of substantial gifts given by one spouse to the other during their time together, and in many cases it might be difficult to determine what is a gift and what is the result of a combined contribution by both spouses.21
8.14 The Australian Capital Territory and Northern Territory provide that the valuation of the gifts must be made as at the date of death of the intestate.22 South Australia fixes the valuation at the date of gift.23
8.15 The requirement that any advancement be accounted for presumes that the intestate “…would have wished to bring about equality on the distribution of the intestate estate.”24 Given the equitable origins of the doctrine of hotchpot, Certoma has argued that, “[t]hese doctrines are based upon the principle that equity leans against double portions according to which a parent is presumed to intend to produce equality of benefit amongst his or her children.” Rather than being abolished, he suggests the doctrine should be extended to include testamentary gifts.25
8.16 General arguments against taking account of gifts made during the lifetime of the intestate include the difficulty of making investigations about such gifts and obtaining valuations.26 The rule could also be seen as defeating the intentions of the deceased.27
8.17 The benefits of abolishing the requirement that inter vivos gifts be accounted for may be understood by recognising that advancements to children, such as those given by way of marriage settlement, are not common in contemporary society. Merit, however, may still be identified in a requirement which, “does not interfere with planned inequality, but, in the case of issue at least, …rejects accidental inequality in favour of that degree of equality produced by hotchpot.”28
8.18 The Queensland Law Reform Commission’s arguments against the doctrine of hotchpot, as originally established, were based on the low frequency with which its provisions would be called into operation. The contemporary intestate, who will have given a gift upon the marriage or setting up for life of a child, will most likely die at a considerable age. Any gift made upon the marriage or setting up for life of a child will have been made many years before any of the time periods provided by the relevant statutes. If issue feel that an inequitable distribution has resulted, they may make a family provision claim.29 As noted above, however, some jurisdictions have overcome some of these concerns by extending the application of the provisions to cover benefits other than settlements for advancement or upon marriage. This may, however, have the effect of unnecessarily complicating the administration of estates where gifts to be taken into account will have to be ascertained and valued.
TESTAMENTARY GIFTS
Qld
ACT s 49D
NSW
NT s 70
SA s 72K
Tas s 44(4), s 47(a)
Vic s 53(a)
WA
NZ s 79
Eng
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8.19 Some jurisdictions specify classes of people who are generally required to account for any testamentary gifts they have received in the case of a partial intestacy. The result is that their entitlement under the intestacy will be reduced by the value of the testamentary gift.30
8.20 Four jurisdictions make provision for the situation where a spouse or partner of the intestate receives a benefit under the will.31 In three cases, if the value of the beneficial interest given to the intestate’s spouse or partner is less than the statutory legacy to which they are entitled in intestacy – the spouse or partner will be entitled to the statutory legacy less the amount of the beneficial interest. If the value of the beneficial interest given to the spouse or partner is greater than the statutory legacy to which they are entitled in intestacy – the spouse or partner will not be entitled to the statutory legacy.32 However, the spouse or partner will only have to account where the intestate is survived by particular relatives - issue in the Australian Capital Territory,33 or issue, parents, siblings or the issue of siblings in the Northern Territory.34 In Tasmania, however, it is simply stated that a testamentary gift to a spouse or partner shall be taken to have been given in or towards satisfaction of their share of the intestate estate. This will be the case unless a contrary intention was expressed in the will or appears from the circumstances of the case. Tasmania makes the point of stating that the statutory legacy will only take effect – if the husband or wife brings the gift into account at a valuation – as at the intestate’s death.
8.21 In the Northern Territory, if the intestate’s child acquires an interest under the intestate’s will and is also entitled to a share of the intestate’s estate, the testamentary benefit must be brought into account at a valuation as at the intestate’s death.35
8.22 South Australia provides that when a testamentary gift is given to a person who is also entitled to a share of the intestate estate, the gift must be taken to have been given in or towards satisfaction of the entitled person’s share of the intestate estate. This will be the case unless a contrary intention was expressed or appears from the circumstances of the case, or the value of the gift does not exceed $1,000.36
8.23 In Victoria, any real or personal property, or any estate or interest therein acquired by any issue of the intestate under his or her will, must be brought into account by the issue.37
8.24 The Queensland Law Reform Commission saw provisions requiring testamentary benefits to be brought into account as being “contrary to the intestacy theory”:
Proposals that a spouse or indeed any other beneficiary under an intestacy should bring other benefits into account run counter to the basic assumption of what intestacy rules are about. An administrator should not be saddled with having to take a general account of all the benefits which the deceased intentionally conferred, whether directly or indirectly, on the surviving spouse, so as to reduce the benefit to the spouse of intestacy rules. Moreover, it would be unprecedented to confer upon an administrator the investigatory powers which would be necessary to establish the facts and strike an account. Accordingly, the Commission recommends that a statutory beneficiary should not be required to account for any benefits received under any will made by the intestate or under any gift or entitlement received from the intestate during the intestate’s life-time, or payable on the intestate’s death.38
8.25 The Law Commission of England and Wales raised similar concerns about the requirement that testamentary gifts be accounted for, “[i]n particular, it can defeat the very object of the deceased in making the partial dispositions in the will. The rule is complicated and difficult for administrators to apply and its abolition would greatly simplify the administration of estates”.39
FOOTNOTES
1. Queensland, New South Wales and Western Australia.
2. 22 & 23 Charles II c 10 s 5.
3. See Queensland Law Reform Commission, Intestacy Rules (Report 42, 1993) at 59; I J Hardingham, M A Neave and H A J Ford, Wills and Intestacy in Australia and New Zealand. (2nd ed, Law Book Company, Sydney, 1989) at 432-440.
4. Queensland Law Reform Commission, Intestacy Rules (Report 42, 1993) at 59.
5. Wills, Probate and Administration (Amendment) Act 1977 (NSW).
6. Succession Acts Amendment Act 1968 (Qld).
7. Administration Act Amendment Act 1976 (WA) s 3, repealing Administration Act 1903 (WA) s 13(1) which imported hotchpot into the law of Western Australia: In re Cornwall (1910) 13 WAR 40. The abolition of hotchpot was recommended by the Law Reform Commission of Western Australian: Law Reform Commission of Western Australia, Report on Distribution on Intestacy (Project No 34, Part 1, 1973) at para 36-39.
8. Law Reform (Succession) Act 1995 (Eng).
9. I J Hardingham, M A Neave and H A J Ford, Wills and Intestacy in Australia and New Zealand. (2nd ed, Law Book Company, Sydney, 1989) at 440.
10. See I J Hardingham, M A Neave and H A J Ford, Wills and Intestacy in Australia and New Zealand. (2nd ed, Law Book Company, Sydney, 1989) at 440.
11. NSW, Parliamentary Debates (Hansard), Legislative Assembly, 25 October 1977, Wills, Probate and Administration (Amendment) Bill, Second Reading at 8998.
12. Administration and Probate Act 1958 (Vic) s 52(1)(f)(i).
13. Administration and Probate Act 1935 (Tas) s 46(1)(c).
14. The Northern Territory adds the old provisions - “to or for the benefit of his or her child, or settled any money or property for the benefit of his or her child, by way of advancement or on marriage of the child”: Administration and Probate Act 1969 (NT) s 68(3)(b).
15. Administration and Probate Act 1919 (SA) s 72K(1)(a); Administration and Probate Act 1929 (ACT) s 49BA(1); Administration and Probate Act 1969 (NT) s 68(3).
16. Administration and Probate Act 1919 (SA) s 72K(1)(d); Administration and Probate Act 1969 (NT) s 68(3)(d).
17. Administration and Probate Act 1919 (SA) s 72K(1)(a); Administration and Probate Act 1929 (ACT) s 49BA(1)(a); Administration and Probate Act 1969 (NT) s 68(3)(a).
18. Law Reform Commission of Tasmania, Report on Succession Rights on Intestacy (Report 43, 1985) at 18.
19. Administration and Probate Act 1919 (SA) s 72K(1)(a).
20. Administration and Probate Act 1929 (ACT) s 49BA(4).
21. Law Reform Commission of Tasmania, Report on Succession Rights on Intestacy (Report 43, 1985) at 17.
22. Administration and Probate Act 1969 (NT) s 68(4); Administration and Probate Act 1929 (ACT) s 49BA(2).
23. Administration and Probate Act 1919 (SA) s 72K(2).
24. I J Hardingham, M A Neave and H A J Ford, Wills and Intestacy in Australia and New Zealand (2nd ed, Law Book Company, Sydney, 1989) at 440.
25. G L Certoma, The Law of Succession in New South Wales (3rd ed, LBC Information Services, Sydney, 1997) at 40.
26. Queensland Law Reform Commission, Intestacy Rules (Report 42, 1993) at 60.
27. England and Wales, Law Commission, Family Law: Distribution on Intestacy (Report 187, 1989) at 12.
28. I J Hardingham, M A Neave and H A J Ford, Wills and Intestacy in Australia and New Zealand (2nd ed, Law Book Company, Sydney, 1989) at 441.
29. Queensland Law Reform Commission, Intestacy Rules (Report 42, 1993) at 60.
30. Administration and Probate Act 1929 (ACT) s 49D(3); Administration and Probate Act 1919 (SA) s 72K(1)(b); Administration and Probate Act 1935 (Tas) s 44(4), s 47(a); Administration and Probate Act 1958 (Vic) s 53(a); Administration and Probate Act 1969 (NT) s 70(3) and (4); and Administration Act 1969 (NZ) s 79(2).
31. Administration and Probate Act 1935 (Tas) s 44(4) and s 47(a); Administration and Probate Act 1929 (ACT) s 49D(1) and (3); Administration and Probate Act 1969 (NT) s 70(3) and (4); and Administration Act 1969 (NZ) s 79.
32. Administration and Probate Act 1929 (ACT) s 49D(3)(b); Administration and Probate Act 1969 (NT) s 70(3) and (4); and Administration Act 1969 (NZ) s 79(2)(b).
33. Administration and Probate Act 1929 (ACT) s 49D(3).
34. Administration and Probate Act 1969 (NT) s 70(3) and (4).
35. Administration and Probate Act 1969 (NT) s 70(6).
36. Administration and Probate Act 1919 (SA) s 72K(1).
37. Administration and Probate Act 1958 (Vic) s 53(a).
38. Queensland Law Reform Commission, Intestacy Rules (Report 42, 1993) at 53.
39. England and Wales, Law Commission, Family Law: Distribution on Intestacy (Report 187, 1989) at 14.
