5163LAW Study Guide - Final Guide: Testator, Inter Vivos, Hire Purchase
5163LAW Succession
2018 Final Exam Notes
Payment of Debts
Insolvent Estates
- If the estate is insolvent, the debts of the deceased are dealt with in accordance with the Bankruptcy
Act 1966 (Cth).
o The administration of the estate is taken out of the hands of the personal representatives
because in bankruptcy the assets vest in the trustee.
o If the bankrupt dies before they have been discharged from bankruptcy, then the proceedings
will continue as if they were alive.
o The minimum amount of debt the bankrupt is allowed to accrue before they become bankrupt
is $5000.
- If the minimum of $5000 has not been reached or a petition is not presented under the bankruptcy
laws, then sections 57 and 58 of the Succession Act 1981 (Qld) will apply.
o The sections prescribe a priority of payment of debts, where the funeral, testamentary and
administration expenses are paid first, then the debts in accordance with the bankruptcy
laws.
o Section 58 of the Succession Act 1981 (Qld) offers protection to PRs who, in ignorance of the
insolvency, pay certain creditors.
Solvent Estates
Section 59(1) details four classes of assets
- Class 1 assets are to be used to discharge debts first and then classes 2, 3 and 4 respectively.
A. Class 1 – Property designated by the testator for the payment of debts
- Any property, whether realty or personalty, designated by the testator to be used for the payment of
debts, will be used first.
o Property held on trust by a person, to pay the debts.
o Property charged with the payment of debts.
▪ If both, the properties will be charged ratably: s 59(2)
Example 1:
- I leave my block of land at 22 Acre Street, Wooloowin, on trust to my brother Jack, to pay all my
debts. If that property is sold and the debts are paid then anything left over goes to the residue
because that is left on trust.
Example 2:
- I leave all my shares in Telstra to my brother Jack, subject to the payment of my gambling debts with
Y. The value of the shares over and above the value of the debt will be Jack’s to keep.
B. Class 2 – The residuary estate
- This class is made up of property comprising the residuary estate of the deceased including property in
respect of which any residuary disposition operates as the execution of a general power of
appointment.
Section 55 Definition for div 2
- In this division residuary estate means:
o (a) property of the deceased that is not effectively disposed of by his or her will; and
o (b) property of the deceased not specifically devised or bequeathed but included (either by a
specific or general description) in a residuary disposition.
C. Class 3 – Property specifically devised or bequeathed
- Assets in class 3 include:
o Specific devises and legacies
o Specific property that has been disposed via a general power of appointment
o Specific property devised or bequeathed that has been charged with the payment of a legacy
Section 33B
- 30 day survivorship
(1) Where the beneficiary dies within 30 days after the deceased’s death, the will takes effect as
if the person had died immediately before the testator.
(2) Subsection (1) will not apply if a contrary intention appears in the will.
- If the gift is NOT residuary, then it will fall into the residuary of the estate.
Section 33N
- Disposition to issue of the testator does not lapse where the beneficiary dies before the testator,
provided the beneficiary leaves issue who are living at the testator’s death.
o The issue will receive the original beneficiary’s entitlement in place of the original beneficiary
as if the original beneficiary had died intestate leaving only issue surviving: s 33N(2)
o Subsection (2) does not apply where: (a) the original beneficiary did not fulfil a condition
imposed on the original beneficiary in the will; or (b) a contrary intention appears in the will:
s 33N(3)
Section 33G
(1) If a disposition of property by a will is fully or partly ineffective, the will takes effect as if the property
were part of the residuary estate of the testator.
Section 15
(1) A testator’s divorce or the annulment of a testator’s marriage revokes –
(a) A disposition to the testator’s former spouse made by a will in existence when the divorce or
annulment happens; and
(3) Subsection (1) does not apply if a contrary intention appears in the will.
(4) If a disposition, appointment or grant is revoked by this section, the will takes effect as if the former
spouse had died before the testator.
D. Class 4 – Donationes mortis causa
- A ‘gift on the occasion of death’
The Principle of Rateability
Section 59(2):
- Property within each class as aforesaid [the four classes] shall be applied in the discharge of debts
and, where applicable, the payment of pecuniary legacies rateably according to value; and where a
legacy is charged on a specific property the legacy and the property shall be applied rateably.
Document Summary
If the estate is insolvent, the debts of the deceased are dealt with in accordance with the bankruptcy. Act 1966 (cth): the administration of the estate is taken out of the hands of the personal representatives because in bankruptcy the assets vest in the trustee. If the bankrupt dies before they have been discharged from bankruptcy, then the proceedings will continue as if they were alive: the minimum amount of debt the bankrupt is allowed to accrue before they become bankrupt is . Class 1 assets are to be used to discharge debts first and then classes 2, 3 and 4 respectively. Class 1 property designated by the testator for the payment of debts. If both, the properties will be charged ratably: s 59(2) I leave my block of land at 22 acre street, wooloowin, on trust to my brother jack, to pay all my debts.
