01/03/2017

Dad dies leaving among his assets a beautifully restored veteran Rolls Royce.

One of his kids just has to have this car.  Can the executor give it to them?

The property of a deceased person (“testator”) is distributed in accordance with their Will, if there is one, or in accordance with the relevant State or Territory’s intestacy rules if there is no Will or it is not valid.

If the testator’s Will sets out specific bequests of property to beneficiaries, other than cash, then there is an express power in the Will for the executor of the testator to make an in-specie distribution of the assets to the nominated beneficiaries. An in specie distribution means that the executor transfers the asset to the beneficiaries in its present form, instead of selling it and distributing the cash proceeds.

But what if assets are part of the residue of the estate (as opposed to being specific bequests) or the person died intestate? Is the executor or administrator still authorised to make in-specie distributions to beneficiaries?

In these circumstances there is no direction to the executor to distribute property in specie. The beneficiaries do not have an interest (whether at law or in equity) in a particular piece of property; they simply have a right to see the estate properly administered.

As such, while the executor has an obligation to ensure the estate is distributed in the proportions set out in the testator’s Will or the relevant intestacy rules, they have a discretion as to the manner in which these assets are distributed, including by way of in specie transfer. Beneficiaries may make a request to that effect but they cannot dictate how that discretion is to be exercised.  

Capital gains tax may be payable by the beneficiary if and when they later sell the asset. This future liability may be a relevant consideration when making an equal distribution to beneficiaries, given that the date of acquisition of the different assets by the deceased may be taken into account and may result in different CGT treatments for the recipients.

The in specie transfer of property will generally be subject to stamp duty.  However, an exemption or concession may be available, depending on the State or Territory in which the property is located or registered.  Stamp duty is payable by the beneficiary.

If you want to make sure a particular asset goes to a specific person, don’t leave it to chance.  Contact Townsends Business & Corporate Lawyers on (02) 8296 6222 to ensure your Will is drafted to reflect this.