Lapsed Gift

What are Lapsed Gifts?

A lapsed gift is a testamentary gift that fails because the beneficiary dies before the testator or cannot receive the gift for some other reason. The primary causes of a lapsed gift include:

• Predecease of Beneficiary: The beneficiary dies before the testator.
• Disclaiming the Gift: The beneficiary legally refuses the gift.
• Uncertainty or Non-existence: The gift cannot be identified or does not exist at the time of the testator’s death.

Legal Framework

The legal principles governing lapsed gifts are rooted in both common law and statutory provisions. Understanding these principles is crucial for effective estate planning and administration.

Common Law Principles

No Substitution

Under common law, the gift typically lapses if a beneficiary predeceases the testator and no alternative provision is made in the will. This means the intended gift will not pass to the deceased beneficiary’s heirs or estate unless specifically stated otherwise in the will.

Residuary Clause

A residuary clause in a will can prevent a gift from lapsing by directing that any property not specifically bequeathed should go to a designated residuary beneficiary. In the absence of such a clause, lapsed gifts may fall into the residue of the estate and be distributed according to the rules of intestacy.

Statutory Provisions

The Wills Act 1837

The Wills Act of 1837 is a crucial piece of legislation governing wills and lapsed gifts in England and Wales. Section 25 of the Act stipulates that if a beneficiary predeceases the testator, the gift to that beneficiary generally lapses unless the will provides for an alternative beneficiary.

Anti-lapse Provisions

Certain statutory provisions, often called “anti-lapse” provisions, can prevent a gift from lapsing. For instance, if the deceased beneficiary is a direct descendant of the testator (e.g., a child or grandchild), the gift may pass to the beneficiary’s heirs, provided certain conditions are met.

Practical Implications for Executors and Beneficiaries

Impact on Estate Distribution

When a gift lapses, it can significantly impact the distribution of the estate. Executors must carefully assess the will and the applicable laws to determine the correct course of action. The lapsed gift may become part of the residuary estate or pass according to intestacy rules if no residuary clause exists.

Communication with Beneficiaries

Executors should communicate promptly and clearly with beneficiaries regarding any lapsed gifts. Beneficiaries need to understand the implications and how the lapsed gift affects their estate share. Transparent communication helps manage expectations and reduces the potential for disputes.

Case Studies and Examples

Lapsed Specific Bequest

Consider a will that includes a specific bequest of a property to the testator’s brother. If the brother predeceases the testator and no alternative provision is made in the will, the bequest lapses. The property would then fall into the residuary estate and be distributed according to the residuary clause, or if none exists, according to the rules of intestacy.

Anti-lapse Provision

A testator bequeaths £10,000 to her son, who predeceases her. Under the Wills Act 1837’s anti-lapse provision, the £10,000 may pass to the son’s children (the testator’s grandchildren) instead of lapsing, assuming no contrary intention is expressed in the will.

Strategies to Prevent Lapsed Gifts

Inclusion of Alternative Beneficiaries

One effective strategy to prevent lapsed gifts is to include alternative beneficiaries in the will. Testators can specify that if the primary beneficiary predeceases them, the gift should go to another named individual or a class of individuals.

Residuary Clauses

Including a comprehensive residuary clause in the will ensures that any property not specifically bequeathed, including lapsed gifts, is distributed according to the testator’s wishes. This clause helps prevent unintended consequences and reduces the likelihood of disputes among beneficiaries.

Conditional Gifts

Testators can make gifts conditional upon the beneficiary surviving them. For example, a will may state that a gift is valid only if the beneficiary is alive at the time of the testator’s death. This approach can help manage expectations and clarify the testator’s intentions.

Legal Advice and Drafting Wills

Professional Guidance

Drafting a will that anticipates the possibility of gifts lapsing requires careful legal expertise. Lawyers specialising in wills and probate can offer invaluable guidance to ensure that the will accurately reflects the testator’s intentions and complies with legal requirements.

Regular Reviews and Updates

Regularly reviewing and updating a will is essential to address changes in circumstances, such as the death of a beneficiary or changes in relationships. Keeping the will current helps prevent lapsed gifts and ensures the testator’s wishes are honoured.

Conclusion

It’s important to address lapsed gifts in estate planning and administration. It’s crucial for testators, executors, and beneficiaries to understand the legal principles, practical implications, and strategies to prevent lapsed gifts. At DLS Solicitors, we are dedicated to offering expert advice and support for all wills and probate matters. We aim to help our clients navigate these complexities with confidence.

If you have any questions or need assistance with drafting a will or managing an estate, feel free to contact us. Our experienced team is here to help you achieve peace of mind and ensure your wishes are respected and fulfilled.