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What ‘personal effects’ could mean in your Will

What’s in a word, or a phrase? Potentially, a Mercedes motor vehicle according to the New South Wales Supreme Court decision in Lowe v Lowe [2015] NSWSC 48.

It is not uncommon for a Will to state phrases like, ‘I give my personal effects to John, Bill and Ted in equal shares’.

However, when it comes to distributing the assets of an estate, and in the absence of the deceased to explain his or her real intentions, phrases such as ‘personal effects’ and ‘goods and chattels’ can be problematic.

Broad and indiscriminate terms can cause angst and conflict after the loss of a loved one. Such was the case in Lowe v Lowe.

The facts

The deceased died and probate was granted to the executors, his three children.

The estate was sizeable exceeding a value of $3 million and comprising real estate, cash, shares in public companies and a Mercedes C-Class motor vehicle valued at $60,000.

Clauses 8 and 9 of the Will read:

I give my household furniture and furnishings and personal effects, subject to clause 9, to my wife [the applicant].

I give any Lowe family heirlooms, photographs and personal papers to be distributed between my Executors as they see fit.

An application for family provision was made by the deceased’s widow (and second wife) who claimed (among other things) that upon construction of clause 8 of the Will, she was entitled to:

…the deceased’s motor vehicle, shares and moneys in bank accounts and on term deposit and the notes with Computershare Investor Services Pty Ltd and Link Market Services Limited.’

Consequently, the Court was charged with the task of determining which assets comprised the personal effects of the deceased.

The decision

The Court determined that the phrase ‘personal effects’ should be considered in the context of the Will itself including those words and phrases preceding and following the words in question.

Referring to precedent, the Court found that ‘personal effects’ comprised ‘something in the nature of effects which the testator was accustomed to use and enjoy personally’ or ‘having some personal connection with the testator’.

Additionally, the term ‘effects’ should include physical (tangible) items which would include a motor vehicle but not cash in bank accounts, shares or entitlements to money.

Consequently, the Court ruled that the applicant was entitled to the Mercedes motor vehicle but not any of the shares.

The Court’s approach

A Court will generally do all that it can to preserve the intentions of a testator. However, when determining the true meaning of an ambiguous provision or broad terms in a Will, the Court must revert to various principles of construction.

These principles are not binding and accordingly, there is an element of discretion involved. The Will however must be considered in its entirety (and not just the clause in doubt) when determining its construction to give purpose to the ambiguous part.

Hence, the Courts have used various interpretations in determining broad phrases. In similar cases to Lowe v Lowe, personal effects have included a 40-foot motor yacht and horse and buggy.

The issues with using broad descriptions

Lowe v Lowe illustrates the problems with using broad descriptions or single phrases to identify property or assets in a Will.

At a glance, the personal effects of a person may be considered to include those items immediately evident within a household – clothing, electrical appliances, furniture, ornaments and decorative pieces. However, on closer scrutiny there are several other items that might fall within such a definition.

A further issue is when the Will distributes a collection of items amongst various beneficiaries, such as a ‘jewellery collection’ between three daughters. This has the potential to cause conflict when it comes to distribution.

Will-makers should think outside the box when giving instructions for the preparation of their Will. It is recommended that an inventory be prepared including significant items and, in particular, heirlooms, antiques, artwork, memorabilia, valuable pieces, sentimental items and, of course, motor vehicles, boats and other leisure craft. These should be clearly identified and the intended beneficiary, independently named.

Beware the doctrine of ademption

Remember also, that the nature and value of your assets may change over time. A gift of a specific asset which is later disposed of may fail. This is called the doctrine of ademption – if the gift no longer exists then it does not form part of the estate and cannot be given. This may result in unintentional consequences, particularly if the item in question is of considerable value and the intended beneficiary misses out completely from inheriting under the Will.

Conclusion

Your Will should be regularly reviewed in consideration of changing financial and personal circumstances. Broad definitions should be refined to add clarity and to avoid ambiguous interpretations. A few simple words could mean the difference between a Mercedes Benz and your old tennis racquet.

If you or someone you know is looking at a franchise opportunity, please contact Ian Tait on 08 9422 8111 or email buslaw@taitlegal.com.au.