Tag: Personal Property
When speaking of the gifts left in a Will, people often hear the terms “legacy”, “bequest” and (less frequently) “devise” thrown around interchangeably. But what specifically do these terms refer to?
A “bequest”, which can be used interchangeably with “legacy”, refers to testamentary gifts of personal property. While both terms are used, the Succession Law Reform Act uses the term “bequest” in referring to these types of gifts. There are three types of bequests: general bequests, specific bequests, and demonstrative bequests.
General bequests refer to gifts that are to be provided out of the estate generally. It does not refer to any particular thing. Thus a gift of “$10,000.00 to my friend F” is a general bequest. The money is to be raised from any of the general assets of the testator.
Specific bequests refer to gifts of particular property or which are to be funded by particular assets. For example, gifts of “my car” or “the cash held in bank account X” are both specific bequests as they refer to particular property which the recipient is to receive. Where the asset is no longer in the possession of the testator at the time of death, the gift will fail.
A demonstrative bequest is a hybrid between general and specific bequests where a gift of money is left with the intention that it is to be funded primarily out of certain assets. But where the assets are insufficient to meet the gift, the gift is to then be funded out of the general estate. A gift of “$10,000.00 to be paid first from the proceeds of sale of my car” would be a demonstrative bequest.
Unlike a “bequest”, a “devise” refers to a testamentary gift of real property. Society and the law have long distinguished between real property and personal property. This can be seen, for example, in the traditional availability of specific performance as a remedy for breaches of contracts involving real property. In such situations, real property was accepted as something unique enough to require specific performance, rather than mere monetary damages.
The primacy of real property over personal property can equally be seen in estates law in situations where there are insufficient assets in the estate to satisfy all debts, bequests, and devises. In such a situation, the principles of abatement provide the following order of abatement: general bequests, demonstrative bequests, specific bequests, and finally devises.
To learn more about the principle of abatement, see this recent blog.
With the continuing distinction between real property and personal property, the difference between devises and bequests remains important. Which brings us back to the title of this blog; Can you bequeath your home to a stranger in Ontario? Nope, that would be a devise.
Thanks for reading!
This week on Hull on Estates, Natalia Angelini and Umair Abdul Qadir discuss Marcia Green’s paper, entitled “Dealing with Personal Property: The Pesky and the Practical”, which was presented at the Law Society of Upper Canada’s The Six-Minute Estates Lawyer conference on May 3, 2016.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
The division of one’s personal property, which may include, jewellery, art, books, furniture, tools and clothing, can often become a significant source of tension and conflict amongst those who collectively stand to inherit such items from the estate.
The sentimental value that is often attached to such items, coupled with the loss of a loved one, can result in emotions running high at the time when important allocation decisions must be made. As such, it is almost inevitable that disagreements will arise.
When such disagreements arise it is important to consult the deceased’s Will. Through the estate planning process individuals often consider and make provision for specific items of personal property within the terms of their Will. A Will may, for example, make a specific bequest of a disputed item. In some instances, the deceased may have gone one step further and referenced an attached memorandum within his or her will. Such a memorandum may contain an itemized list of various items of the deceased’s personal property and outline precisely whom the deceased has directed to receive each item.
It is extremely rare, however, for all items of personal property to be included within the Will or an attached memorandum. Any items not expressly listed will generally fall to the residue of the estate, and as such, must ultimately be divided amongst the beneficiaries of the estate. It is quite common in this regard for the deceased, through the terms of his or her Will, to direct the beneficiaries to “divide any remaining items of personal property equally amongst themselves, as they agree”. Disagreements often arise as a result of the ambiguity created by such wording and where the beneficiaries cannot agree amongst themselves as to the best way to allocate the items.
While there are many options open to executors and beneficiaries, including drawing straws, picking numbers out of a hat or tossing a coin, these options can result in individuals missing out on specific items that they valued above all others purely due to chance. A fair alternative, that allows beneficiaries to walk away with the majority of the items they want and seems to have good results, is to hold an “auction”.
In order to conduct such an action, all items must first be appraised. The total of the appraised value should then be divided by the number of beneficiaries. Each beneficiary can then be provided with a sum equivalent to their share of the appraised value, which he or she will then use to bid on the items. For example, if the appraised value of all items was $10,000.00 and there were two beneficiaries, each beneficiary would receive $5,000.00 to bid on items. A list of all items and their appraised value should be presented to each beneficiary in advance of the auction. On the auction day, each item should be presented one by one before all the beneficiaries. Each beneficiary is given equal opportunity to bid on the items, and the highest bidder will go home with the item. Therefore, if a beneficiary values one item over others, he or she can choose to spend the majority of his or her auction dollars on that item. Any unused auction dollars are returned to the estate. Any remaining items that are not sold at auction can then be divided amongst the parties as they agree, and if they cannot agree they may be listed for sale and the profits split between the beneficiaries. Finally, the value of the items successfully obtained at the auction should be deducted from each beneficiary’s share of the overall estate prior to the final distribution in order to ensure a fair distribution.
For example, lets say there are two beneficiaries to an estate, Jack and Jill. Jack and Jill stand to inherit from the estate equally (50/50) and the Will directs them to divide all items of personal property as they agree. A dispute subsequently arises with respect to specific items of the deceased’s personal property. The total value appraised value of the deceased’s personal property is $10,000.00. Both Jack and Jill would be provided with $5,000.00 to bid with at the auction. Jill bids on items totaling $2,000.00, Jack bids on items totaling $3,000.00. If the total estate value was worth $100,000.00, Jack’s share of the estate would be $50,000.00, and Jill’s share would be $50,000.00. After deducting the value of the items they received at the auction Jack would receive $47,000.00 ($50,000 – $3,000) and Jill would receive $48,000.00 ($50,000 – $2,000).
By using this method each beneficiary has a certain amount of control over the items he or she receives and has the opportunity to actively select the items he or she values most.
Thank you for reading,