When drafting your Will and organising your affairs after your death, it is essential to consider whom you would like to benefit from your estate. 

Most people already know their primary beneficiaries (for instance: Husband/wife, then children), however many neglect to consider whom they would like to benefit in the event that their primary beneficiaries are predeceasing them or “dying before attaining a vested interest”. 

Many people may not acknowledge the importance of naming more than one beneficiary, and may even consider the phrase “dies before attaining a vested interest” to be a largely unimportant, throwaway line.

However, the recent decisions in ‘In the Estate of Koppie [2019] ACTSC 106 and Serwin v Dolso [2020] NSWSC 370′ emphasise the importance of naming alternate beneficiaries. 

Children of Beneficiaries Inheriting the Share their Parent Otherwise Would

In the Estate of Koppie dealt with a clause bequeathing the rest and residue of the deceased’s estate to her “children as shall survive me and attain the age of eighteen (18) years and if more than one in equal shares as tenants in common”. The deceased had four children, one of whom predeceased her, and the Court was left to consider, in the absence of any clause stating otherwise, whether the deceased child’s children (i.e. grandchildren) were to inherit the share their parent would have otherwise inherited. 

The Court considered the operation and effect of Section 31(1) of the Wills Act 1968 (ACT). Section 31(1) states that if a testator gifts property in their Will to a beneficiary who is their child, and the beneficiary dies in their lifetime but is survived by children of their own (being the testator’s grandchild or grandchildren), and the grandchild survives the testator by 30 days unless a contrary intention appears in the Will, the grandchild is to benefit as though they were the original beneficiary.

The Court considered a possible contrary intention in the Will, and therefore the exclusion of the testator’s grandchildren as beneficiaries, in the words “to such of my children as shall survive me and attain the age of eighteen years”. It was found, however, that this was a general requirement and not evidence of a contrary intention.

Furthermore, the Court reviewed “and if more than one as equal share as tenants in common” for evidence of possible contrary intention, but found that it was not evidence of contrary intention either, and actually confirmed the operation of Section 31. 

The testator’s grandchildren were therefore found to be entitled to their deceased parent’s share under the Will due to the operation of the Wills Act 1968 (ACT). Legal proceedings could have been avoided, however, if this had simply been appropriately drafted in the Will. 

When a Named Beneficiary Dies Before Attaining a “Vested Interest”

Serwin v Dolso contemplated the circumstances where a beneficiary dies while the testator’s estate is still in the administration phase. 

In this case, the testator left the rest and residue of his estate to his brother, and in the event that his brother predeceased him or died before attaining a vested interest, the rest and residue of his estate were to go to his niece. The testator died on 27 June 2014, probate was granted on 21 October 2014, and the brother who was to benefit died on 18 November 2014. 

The Court found that the phrase “dies before attaining a vested interest” means dies “before the estate is fully administered and available to be distributed”. The term “died before attaining a vested interest” therefore means that the beneficiary is not to be treated as having a vested interest simply because they survived the testator.

So the niece was entitled to the residue of the testator’s estate as a beneficiary in place of the testator’s brother.

In summary, planning for how you would like your estate to be administered, and particularly whom you would like to benefit from your estate after your death is incredibly important. It is vital that you consider all future possibilities, and think about whom you would like to benefit from your estate as alternate or secondary beneficiaries if your original beneficiaries are not able to benefit.

Making sure your Will is drafted properly, can prevent drawn-out litigation over your estate in the future, and ensure that your estate is administered smoothly and according to your wishes.

 

**Assisted by; Caroline Reilly**

 

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