18/08/2008

In the recent case of Public Trustee v Smith [2008] NSWSC 397, Dr Ward left Ms. Smith the right to reside in her house in Randwick and, ultimately ownership of it to Ms. Smith in her Will so long as Ms. Smith tended for Dr. Ward’s cats. Her other Randwick property was to be put to a fund from which the expenses of the upkeep of the cats could be met.
These unusual wishes were undermined by at least two difficulties. Firstly the house that was to be given to Ms. Smith was not owned by Dr. Ward at her death but by the trustee of a family trust under Dr. Ward&rsquos control. Secondly the beneficiaries of the trust were named as Dr. Ward&rsquos family, but due to misunderstanding that occasionally occurs with discretionary trust deeds that name beneficiaries in a schedule for the convenience of their preparation, the schedule named Dr. Ward&rsquos family as beneficiaries but erroneously excluded Dr. Ward herself from being a beneficiary.
 
The Supreme Court of NSW was able, with difficulty, to construe the trust as including Dr. Ward as a beneficiary and only then because of the palpable nature of the error by the firm that prepared the trust deed from which the court could infer that Dr. Ward, while living, was always intended to be a beneficiary.
 
However since Dr. Ward had died she, or more particularly, her estate was no longer a beneficiary under the trust and so the court found that the Public Trustee, as trustee of the family trust, could not put the property to Dr. Ward’s estate to fulfil the gift to Ms. Smith.  Still the possibility remained open that the Public Trustee and the appointor of the trust could resettle the trust so that the gift could be made after the rights of the other beneficiaries of the trust had been considered.
 
To make sure intended gifts of real estate in a Will take effect it is helpful if the Will maker verifies that they own or will come to own the real estate they propose to give.  A title search costs money and may seem to be a waste of money if the Will maker is almost certain, perhaps like Dr. Ward, that he or she is the registered proprietor.  We suggest checking a recent rate certificate as a cost effective way of verifying who owns the real estate as the recorded ratepayer should match up with the proprietor on title in nearly all cases.  It is also advisable for a Will maker or his or her accountant to verify that all intended immediate family members are beneficiaries of his or her family trust.
 
If you would like more information, please do not hesitate to contact Townsends Business & Corporate Lawyers on (02) 8296 6222