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Sunday, July 14, 2013

The law of gifts in contemplation of death

The Law in Contemplation of death;donatio mortis causa- by Kate Kiama There exists several ways in which a person can pass of their property to another, in life an in death. This may include through a will whether made orally or in writing, through the survivorship rules where parties hold property either as joint owners or the last tenant in common, or through nomination and by means of death bed gifts. This section will attempt to address the latter on the laws of gifts in contemplation of death. Donationes mortis causa are lifetime gifts, but take effect only when the donor dies. The gift is therefore conditional on death. A donatio moritis causa has been described as a singular form of a gift, it may be said to be of an amphibious nature , being a gift which is neither an inter-vivos nor a gift made by will .They are sometimes inaccurately called ‘death-bed-gifts’ and are rarely encountered in practice and are subject to special rules. The explanation for the recognition of these types of gifts is found in the decision of Hedges versus Hedges (1708)- “Where a man lies in extremity or being surprised with sickness, and not having an opportunity to make a will, but lest he should die before he could make it, he gives with his own hands his goods to a friends about him; this if he dies shall operate as a legacy.” In order to make the gift valid, it must be made so as to take complete effect on the donor’s death as was established in Re: Beaumount (1902) .It is paramount to note that a donatio, like any other testamentary gift is also liable to inheritance tax. A valid donatio mortis causa must fulfill four conditions: i. The gift must be made in contemplation of the donor’s death. Re Craven’s Estate 1837.The donor must reasonably believe that his death is in the near future and he is not merely thinking about death or suicide and that further the gift must be unconditional. ii. The gift is conditional on death. This is to the effect that the donor may change his mind before death and that he can claim the gift if he lives. The statutory survivorship rules also applies and as such the donee must survive the donor. iii. The donor must actually transfer, or arrange to transfer the gift to the donee. It is sufficient to hand to the donee the means by which ownership can be determined. The donee taking possession of the keys to a car will be evidence of the transfer of ownership. It was previously thought that there can be no valid gift of land by means of a death-bed-gift. In the case of Sen versus Headley 1991 an elderly man who had no heirs died intestate. Three days before his death, he handed Mrs. Sen his house keys saying “the house is yours and the deeds are in the steel box”. The court surprisingly held that there existed a valid gift as all the elements of a donatio mortis causa had been complied with. The question of what are the appropriate documents needed to effectuate a transfer or that must be delivered to the transferee is to be answered by applying the test propounded by the Court of Appeal in Birch versus Treasury Solicitor (1951) namely that the real test is whether the instrument amounts to a transfer as being an essential indica or evidence of title, possession and production of which will reasonably entitle the possessor to the money or property purported to be given. iv. The gift must be capable of forming a donationes mortis causa before transfer . For instance it would be imagined that in case of land, it should be free from encumbrances. In Re: Beaumount , it was held that cheques and promissory notes are not capable of forming death bed gifts. This is because a man’s own cheque or promissory note is not property when given by the donor to the donee because a cheque for instance is a revocable order to the banker to make payments in favor of the person whom the cheque is drawn up for; and a promissory note is merely a gratuitous promise. In the case of Moore versus Moore (1874 ) it was held that railway stocks and building society shares are also not proper subject matters of a donatio. If the deceased attempted to give a gift as a donatio mortis causa but it was ineffective, the personal representative and executors of the estate are not compelled to rectify the defect; but the gift can be saved if the donee obtains title to the assets in some other way. Strong versus Bird (1874) is to the effect that donatio mortis causa fall within the exception to the maxim that equity will not assist a volunteer. For instance where the title to a chooses in action does not pass by mere delivery of any documents, and where there has been no formal transfer of the legal title, for the purposes of a donatio mortis causa, delivery of the appropriate document may be regarded as equivalent to a transfer and equity will perfect the imperfect gift. Occasionally statutes may also perfect an imperfect gift. The Laws relating to death bed wishes are to some extent unfair as they do not apply if the donor dies in a way that he had not previously contemplated. Rationally will makers also acknowledged the fact that they might die and will die; it is a bit strange that the form of your death is of such paramount importance for the donation mortis causa to be valid. It would be desirable if persons could make their donatios in the presence of others including non-beneficiaries for the purposes of witnessing the same yet the law treats this as not a strict formality in making a valid and effective donation mortis causa.

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