Types of Gifts In Your Will – What You Need to Know
What do you mean, there’s different types of gifts I can leave in my Will? Warning: this blog might get a bit dense. I’m not talking about leaving money or leaving your stuff. I’m talking about the way you leave it to your loved ones in your Will. Hopefully this will give you some food for thought, and gives you the option to do something a bit more creative than just saying they can work it out themselves.
A specific legacy is relatively simple – you are giving your beneficiary something specific, that you already own. Giving a gift like this severs the gift from the rest of the estate – so the gift gets preference before the payment of debts, which should come from the residue.
An example would be “I give to X all my shares in the National Australia Bank Ltd company” or “I give to X my oil painting of the Australian high country”, or “I give to X all my jewellery”.
The gift is specific, you own it, and it goes to someone specific. It is possible that the subject matter could increase from the date of your Will to the date you die, as in the gift of shares (you may have more shares when you die). Likewise, it is possible that you don’t own the subject matter when you die, for example you may have sold all your shares.
If you no longer own the specific subject matter when you die, the gift is adeemed and the beneficiary does not get anything in its place.
A general legacy is usually money – a pecuniary legacy – but they can also relate to specific items. A general legacy is payable out of the residue of the estate, and if it relates to a specific subject matter, you usually don’t own it at the time of writing your Will or dying.
An example would be “I give to X 500 shares in the National Australia Bank Ltd company” or “I give to X $50,000″.
In both these examples, the funds need to come from the residue of your estate, before your residuary beneficiaries get their share. The cash would be taken from the top of the residue, usually before the payment of debt.
The shares in this example are not owned by you, either when you sign your Will, or when you die. It is a general legacy because it does not refer to “my” shares. You are creating an obligation on your executor to buy 500 shares out of the residue of your estate for the beneficiary.
Note that a beneficiary may elect to take the cash instead of the 500 shares!
This form of gift is a mixture between a specific and a general legacy. It is a general legacy, usually money, from a specific place. However, you would need to specify in your Will that if the specified fund was not sufficient, whether you didn’t want it paid from residue. If the fund is insufficient, then the remainder will automatically be paid from residue, unless you say otherwise.
An example would be “I give X $50,000 from my funds invested with MLC”.
This form of gift is a way of isolated a legacy from eating into what you are leaving for your residuary beneficiaries, so long as you specify that the shortfall is not to be made up from the residue. For example, if the MLC fund did not have $50,000 in it when you died, and you’d used most of those funds for your retirement, then the balance would come out of the residue of your estate before debts were paid and distribution of your residue when to your residuary beneficiaries.
The residue is everything left over in your estate that is not otherwise dealt with in your Will. It includes the funds and property left over after the payment of debts, administration and funeral expenses, and all the other legacies you leave (specific, general and demonstrative).
You can leave your residuary to a specific person or named persons, or you can leave your residue to a class of people, such as “my children”. It can be equally divided, or you can split it into unequal parts and leave it how you want to.
Residuary gifts of real property (real estate) and personal property should all be dealt with together, and you should try to avoid dealing with the separately. If you have a specific piece of real estate or other property that you want to go to someone specifically, or a group of people specifically, then you should deal with it as a specific gift.