By Sally Davies
Care should be exercised when including a specific gift of real estate in a Will, with particular attention paid to what should happen to the bequest in the event that the property is sold and the proceeds of sale used to fund alternative accommodation.
In the recent case The Trustee Company Ltd v Zdilar & Others  QSC, the will maker, Mrs Ashton, bequeathed her Esma Street home “or any substitute property” to her grandchildren. The residue of her estate went equally to her great grandchildren.
In 2007, Mrs Ashton sold her home and used the proceeds for the ingoing contribution at a nearby retirement village. The entry into the village was in the form of a 99 year lease, under which she had a right to reside in a unit and also to use the common property and facilities of the village.
Upon Mrs Ashton’s death, the executors sought guidance from the Court as to whether the refunded contribution constituted “substitute house property” under the Will. This would then determine whether the refunded contribution passed to the grandchildren under the bequest, or the great grandchildren as part of the residue of the estate.
The Court considered the proper meaning of the words ‘own’ and ‘substitute’, and found that they suggested ownership in the sense of something over which Mrs Ashton had full control. Hence a ‘substitute property’ was actually a reference to any property in which she had similar rights to her previous property. In light of this, the Court held that the contribution fee at the village was not a ‘substitute property’ under the terms of the will, as her rights in relation to the unit under the lease were very different to her rights as the owner of her property at Esma Street.
The refund from the village thus formed part of the residue of Mrs Ashton’s estate and was distributed to her great-grandchildren.
If you wish to include a specific bequest of real estate in your Will, you should expressly consider that you may not always be able to live independently. Your Will should then specifically address what is to happen to the proceeds from the sale of your house should they be used to fund alternative accommodation.
Sally Davies is a Solicitor at Mullane & Lindsay, and practises extensively in commercial Law, Property Law and Wills & Estate Planning. If you require any assistance in this area please contact Sally Davies to arrange a consultation or contact our Newcastle office.