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Gifts & Transfers: Overview

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Gifts & Transfers: Overview

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  • 3 methods of gratuitously benefiting (voluntary settlement) another: outright gift / transfer to Ts (express trust) / declaration of self as T (express trust) (Milroy v Lord)
  • outright gift: donor transfers property to donee (absolute ownership & control of property) / valid transfer: perfect gift
  • express trust: settlor transfers property to T (legal title & management) / beneficiary (equitable interest & enjoyment of benefit) / valid transfer: constituting trust
  • inheritance tax: on death assets over nil rate band (£325,000) subject 40% / lifetime gifts potentially exempt transfers (PETs): donor survives 7 yrs no tax / lifetime trust 20% if settlor survives 7 yrs

Validity of gifts

  • perfect gift if donor put thing out of his control / cannot be revoked by donor (Standing v Bowring)
  • imperfect gift: purported gift which fails / can be revoked / fail due to incorrect method transfer (Richards v Delbridge)
  • general rule: intended recipient of imperfect gift no recourse / except: if contract & donee provided consideration (unlikely as gift usually gratuitous benefit) / equity will not assist a volunteer (intended donee provided no consideration for purported gift)
  • formalities required differ: lifetime gift or on death/ nature of property / donor's interest
  • types property: legal interest in land / legal interest in chattels (choses in possession): tangible moveable assets / choses in action (intangible assets) rights enforced through court action not physical possession / equitable interests: beneficiary under trust / expectancy: something person expects to own in future
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Gifts & Transfers: Overview

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Lifetime gifts / inter vivos / 4 conditions for a valid gift

  • 1. donor's mental capacity: must understand nature of transaction & implications / higher gift value higher degree of understanding (Re Beaney)
  • 2. intention of transferor at time of transfer / word or conduct / court can determine
  • 3. certainty: subject matter & objects
  • 4. correct transfer: if donee knows of gift must accept / method depends on type of property & if donor owns legal title or equitable interest / every effort test: if donor takes all required steps equity regard gift perfect even if legal title not yet passed

Transfers of legal title: Choses in action

  • company shares: Companies Act 2006: s.770 named shareholder in Register of Members has legal title to shares / s.771 companies must keep Register of Members
  • share certificate: possession evidence of ownership / registration constitutes legal ownership
  • method to transfer shares: transferor signs stock transfer form (s.1 Stock Transfer Act 1963) / & gives stock transfer form & share certificate to transferee / transferee sends documents to company to be registered (legal title passes once transferee is registered) / transferor can send on transferee's behalf
  • if company member of CREST system: shareholders recorded electronically on instructions of shareholder & no need to sign stock transfer form
  • 2 month delay in registering transferred shares / donor died / court implied constructive trust: donor T for donee in period before registration / transfer created equitable proprietary interest even though legal title not passed / donor made every effort & relying on third party to finalise (Re Rose)
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Gifts & Transfers: Overview

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Transfers of legal title: Choses in action

  • transfer of intended gift (not legally effective until registration) can be validated by imposition of trust / if donee controls all necessary to constitute title without further assistance from donor / equity not needed ( Mascall v Mascall )
  • Re Rose & Mascall v Mascall inconsistent: intended gift cannot become effective via trust imposed by a court / if gift by one method fails court cannot substitute different method Milroy v Lord
  • not correct transfer not followed / but unconscionable allow retraction / if donor done all required ( Pennington v Waine )
  • proprietary estoppel exception to rule that equity will not assist a volunteer (Curtis v Pulbrook)
  • cheques payable in favour of transferor: negotiable instrument / title transferred by payee (transferor) signing back of cheque in favour of transferee (endorsing the cheque) / modern cheques prevent transfer
  • cheques payable in favour of transferee: revocable mandate to donor's bank / pay amount to donee on presentation (to donee's bank) / can be revoked if before presented donor: stops or dies (no application of Re Rose)
  • debt owed to transferor: assignment of debt / in writing & notice given to debtor (s.136 Law of Property Act 1925)

Transfers of legal title: Land

  • all transfers of land or interests in land must be in writing (s.52 Law of Property Act 1925)
  • registered land: prescribed form (Land Registry form TR1) / signed as deed by transferor / completion of legal title: transferee registered as proprietor
  • once transferee / control to enable complete title by registration / donor not revoke (Mascall v Mascall)

Transfers of legal title: choses in possession

  • chattels: title passed by physical delivery / can be by deed (Jaffa v Taylor Gallery)
  • intention to give & effective delivery of subject matter of gift (Thomas v Times Book Company)
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Gifts & Transfers: Overview

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Transfers of title when donor owns an equitable interest

  • trust property: legal & equitable interests separate / title (trustee) / equitable (beneficiary) / equitable interest: proprietary interest / piece of property in own right
  • if equitable interest transferred separately from legal title: must be in writing & signed by person disposing or authorised agent / or by will (s.53(1)(c) LPA 1925)
  • T hold property on trust for B / transfer equitable interest B can assign (in writing) equitable interest directly to C / B can direct T to hold property on trust for C
  • s.53(1)(c) LPA 1925 applies to dispositions of subsisting equitable interests / not creation of new equitable interest (legal owner declares a trust)
  • H transferred assets to Ts to hold on trust for G / later H transferred shares to T to hold on bare trust for himself / to avoid stamp duty (payable on written transfer of equitable interest to G) H orally told T to hold shares on trust for G / was oral instructions disposition of an equitable interest or trust subsisting at time of disposition? / oral instruction was disposition within s.53(1)(c) / full equitable interest in shares diverted from B's ownership into beneficial ownership of G / disposition ineffective: as not in writing Grey v IRC
  • s.53(1)(c) LPA 1925 only relevant when: dealings with equitable estate divorced from legal estate / if B of bare trust directs T to transfer legal estate to third party (with intention third party take equitable interest too) / s.53(1)(c) not apply / transfer of legal title also effects transfer of equitable interest Vandervell v IRC
  • distinction: Grey v IRC (transfer of equitable interest only) & Vandervell v IRC (transfer of legal title carries equitable interest & trust is extinguished) / s.53(1)(c): applies in Grey v IRC situations but not in circumstances of Vandervell v IRC
  • expectancies: not proprietary interest (hope of future ownership - legacy under will of living person) / transfer ineffective / pragmatic: cannot transfer something not own / can enter binding contract to transfer future property
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Gifts & Transfers: Overview

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  • Wills Act 1837 s.9: valid will / written / signed by testator in joint presence 2 witnesses / witnesses sign in testator's presence / codicils: alter will must comply
  • until death B has mere expectancy / devise: realty / legacy or bequest: personalty / specific : asset distinguished from assets of same kind / pecuniary legacies: money / residuary: what remains (after taxes, debts & other specific legacies) / testamentary trust

Failure of gifts

  • ademption: specific gifts fail if T no longer possesses specified property / lapse: gifts fail if B dies before T subject to some exceptions / lapsed specific or pecuniary gifts fall into residuary estate & passes under intestacy rules / gifts to witnesses invalid
  • Wills Act 1837 s.15: if witnessed by B or B's husband, wife or civil partner / will valid / gift to witness fails / will wholly revoked by T before death: marriage or civil partnership of T / destruction of will with intent to revoke / making new will dealing with same property / individual gifts revoked by codicil

Intestacy rules

  • intestacy rules apply if: no will (to whole estate) / no residuary gift (to residuary estate) / residuary gift failed or revoked (to residuary estate) / all deceased's estate passes to PRs to pay debts & tax (& distribute valid gifts if any valid will exists) / remainder shared between deceased relatives in accordance with formula / Bs on intestacy statutory next of kin

Personal Representatives

  • when administration of estate complete / PRs cease to hold subject matter of trust as PRs / PRs assent (transfer using appropriate method) trust property to Ts appointed by deceased / if trust property land assent must be written
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Gifts & Transfers: Overview

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Exceptions to rule equity will not assist a volunteer

  • general rule: donee no benefit from imperfect gift / limited situations / court assist purported donee / even if transferor failed transfer legal title

Strong v Bird rule

  • death donor gift becomes perfect & donee priority claim to property over Bs of will / 4 conditions / 1 imperfect as formalities not followed / 2 immediate gift must be intended / future promise insufficient Re Freeland / 3 intention unchanged until donor's death / if donor deals with property as own implied change Re Gonin / 4 donor dies & donee appointed as PR / legal title to property now vested in donee / gift is perfect

Donatio mortis causa (DMCs)

  • DMC valid if: gift made in contemplation (not necessarily expectation) of death / delivery to donee of subject matter of gift / gift reverts to donor should he recover (conditional on death)
  • contemplation : some risk to donor / justifies donor contemplating comparatively early death / death from different cause than expected immaterial Wilkes v Allington / original risk has passed so DMC failed Thomson v Mechan
  • delivery: donor must have parted with dominion over property (no longer have practical power to alter subject-matter of the gift) / making perfect gift conditional on death / or if imperfect donor passed means to control it
  • chattels : physical delivery or deed of gift / sufficient: handing over key to access jewellery box Re Lillingston / car keys not log book Woodard v Woodard
  • choses in action (intangible property) / sufficient if donor delivered document of title to donee or given donee dominion over document / essential indicia or evidence of title Birch v Treasury Solicitor
  • unregistered land : donee given keys to box containing deeds constitute passing with dominion Sen v Headley
  • conditional: may be implied from deceased statements / prior to death gift can be revoked
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