A verbal gift made by a person in anticipation of death is known as a donatio mortis causa (“gift in contemplation of death”). The reasons for making such gifts vary, but may include that the person making the gift (the donor) has not made a will, the donor may wish to reward or benefit someone who has provided recent assistance, or the donor may not have had the opportunity to update their will.
However, such gifts will frequently be the subject of careful scrutiny as they carry a substantial risk for both the intended recipient of the gift and the legal personal representative of the donor’s estate. An oft-cited reason for such scrutiny is as follows:
“Cases of this kind demand the strictest scrutiny. So many opportunities, and such strong temptations, present themselves to unscrupulous persons to pretend these deathbed donations, that there is always danger of having an entirely fabricated case set up. And, without any imputation of fraudulent contrivance, it is so easy to mistake the meaning of persons languishing in a mortal illness, and by a slight change of words, to convert their expressions of intended benefit into an actual gift of property… ”
The fundamental risk associated with a donatio mortis causa is whether the gift will be held to be a valid legal gift.
There are three essential elements of a donatio mortis causa. In Public Trustee v Bussell (1993) 30 NSWLR 11, those elements were specified as being:
- The gift must be made in contemplation of the donor’s death, although not necessarily expectation of death;
- There must be delivery of the subject matter of the gift to the donee or a transfer of the means or part of the means of getting at the property, or, as has been said, the essential indicia of title; and
- The gift must be conditional upon it taking effect on the death of the donor, being revocable until that event occurs.
Generally, the first and third elements outlined above are ordinarily relatively straightforward to establish. However, factors to bear in mind in respect of those elements include that:
- In order to support a donatio mortis causa, there must be more than a general contemplation of death or recognition of the inevitability of death. The mere fact that a donor is elderly is not sufficient. Something more specific such as extreme age or an existing illness is required, although it need not amount to an expectation of immediate death.
- The operation of a valid donatio mortis causa is conditional upon the death of the donor; and only then will the gift become absolute. Accordingly, the gift may be revoked by the donor at any time before dying (whether that is by way of a recovery from illness or by giving express notice of revocation to the intended recipient).
The second element of a valid donatio mortis causa referred to above, namely the delivery of the subject matter of the gift, is the element which appears to be subject to the most careful analysis in the reported cases. What constitutes delivery will depend upon the circumstances of each case and could be the subject of an entirely separate article. However, by way of example, the following acts have been held by the courts to satisfy the act of delivery:
- The delivery of a bank passport or term deposit card constitutes delivery of an essential indicium of title to the money in the bank account to which the passbook or term deposit relates,
- The delivery of a share certificate can be an effective gift mortis causa, as such a document has been found to be an essential document for the purposes of shares being transferred, and
- The delivery of keys to a vehicle with the requisite intention may also be adequate.
Notably, in Australia, the doctrine of donatio mortis causa does not extend to land.
Ultimately, it is important to note that there is potentially significant risk and costs associated with court proceedings if the donor’s legal personal representative is compelled to defend a claim that a gift made in contemplation of death is a valid legal gift. This is particularly the case if the gift was made only in the presence of the donor and the intended recipient, as the question of whether the gift is valid will largely turn on the credibility of one person’s evidence and an analysis of surrounding circumstances.
It is for this reason, among others, that careful and proactive estate planning is important prior to death becoming imminent.
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