Specifically gifted assets — who ultimately bears the burden of the expenses?

Case note: Irdi v Lang [2025] WASC 421

A recent decision of the Supreme Court of Western Australia has focussed attention on an important issue concerning expenses attached to assets specifically gifted in Wills.

The decision in Irdi v Lang [2025] WASC 421 concerned a Will in which real property was specifically gifted. More specifically, the Court was asked by the executor of the estate to determine who was ultimately responsible for the property outgoings incurred by the executor during the administration of the estate — the beneficiaries of the specific gift of the property, or the estate’s residuary beneficiaries.

The decision emphasises the need for will-makers and executors to obtain the necessary legal advice regarding this issue (ideally, at both the drafting phase for the Will itself and later in the administration phase).

The general position at law

At common law, the following principles apply to both the income earned and the expenses incurred in connection with an asset which is specifically gifted by a person’s Will, unless a contrary intention appears in the Will:

• Income earned after the date of death of the deceased on each specifically gifted property is to be given to the beneficiary of that particular gift¹; and
• The costs of the upkeep, care, and preservation of each specifically gifted property from the date of death until transfer to the entitled beneficiary are to be borne by that beneficiary².

In other words, the common law presumes that this is the will-maker’s intention unless there is some specific statement to the contrary in the Will.

Consequently, when administering a gift of real property, an executor should:

• Receive any income earned from the property (such as rent) separately.
• Pay outgoings associated with the property out of the estate’s funds.
• Adjust the specific legatee’s entitlements by reference to the income and expenditure attached to the specific property so that³:
  • expenses for the property incurred by the estate are reimbursed out of income derived from the property;
  • the specific legatee receives any surplus income after the reimbursement of expenses; and
  • if expenses exceed income, creating a shortfall to the estate, the specific legatee is required to reimburse the estate personally as a precondition to receiving the property.
• The costs of transferring the real property to the entitled beneficiary are payable by the beneficiary⁴.

The Court’s decision in Irdi v Lang

In Irdi v Lang, Mr Kovacic left a last Will which, among other things:

• gave any right, title, or interest held by him in any real property to his parents and his sisters, who survived him, and if more than one, then as tenants in common in equal shares; and
• gave the balance of his estate, after expenses, to his de facto partner.

Mr Kovacic was survived by his two sisters, and his partner. His estate consisted of the following assets:

• Real property located in Western Australia and Sweden, where he lived and died.
• A half interest in the family home in Sweden where Mr Kovacic, his partner and their daughter lived, which was encumbered by a mortgage.
• Approximately $600,000 in cash in Australia.
• Approximately 508,000 Swedish Krona.

After Mr Kovacic’s death, his property in Western Australia had been levied with water and sewerage charges, local council rates, and land tax, and his executor had incurred expenses for clearing firebreaks on the property as required by the local council. The total amount of all of these expenses amounted to $19,941.00.

The executor of Mr Kovacic’s estate sought the directions of the Court with respect to whether Mr Kovacic’s two sisters were responsible for the payment of the costs and expenses relating to the Western Australia property, or if such amounts were to be borne by the balance of the estate.

It was held that, on a proper construction of Mr Kovacic’s Will:

‘…the costs and expenses incurred to preserve and maintain the [Western Australia property] until it can be distributed to [Mr Kovacic’s sisters], including water rates, local government rates, land tax and firebreak maintenance fees, are payable by [Mr Kovacic’s sisters], and not from the residue of [his estate]’.⁵

Conclusions

The decision highlights the following:

• The need for will-drafting solicitors to enquire of their clients whether the default treatment of income and expenses accords with the will-maker’s intentions.
• The need for estate planning lawyers to both advise clients and ascertain whether they wish for the beneficiaries of any assets specifically gifted by their Wills to be burdened with the outgoings of that asset during the estate’s administration, or whether such amounts are to be borne by their residuary estate.
• The need for lawyers advising executors of deceased estates — and, by extension, the beneficiaries of any such specifically gifted assets — to understand and apply these principles of law when administering estates.

Contact us

Rigby Cooke Lawyers’ Wills, Trusts & Estates team is well placed to advise clients on estate planning and the administration of deceased estates, in order to navigate issues such as these.

For more information, or to discuss how we can assist you, please contact a member of our Wills, Trusts & Estates team.
<sub>References
1. O’Brien v McCormick [2005] NSWSC 619 (Campbell J) (‘O’Brien’), citing with approval Hasluck v Pedley (1874) 19 LR (Eq) 271; In Re Buckley’s Trusts 91883) 22 Ch D 583; In Re Marten: Shaw v Marten [1901] 1 Ch 370; In Re West; West v Roberts [1909] 2 Ch 180. Such passage was stated as being a ‘comprehensive modern statement of the general principle’ by Moore J In Markin v Animals Australia Federation & Anor [2020] VSC 113.
2. O’Brien, at [39].
3. Hall v Carney (No 3) [2020] SASC 177, [98], upheld on appeal in [2021] SASCA 37 at [130].
4. O’Brien, at [39].
5. Irdi at [76].</sub>