What would you say if you found out that the property you were to be given under a Will had been disposed of before the willmaker’s death and that, as a result, nothing was left for you? Not impressed?
This occurs with surprising regularity. It occurs under the principle of ademption, when specific property transferred under a Will (which could be real estate or other items) is no longer owned by the willmaker at date of death.
For example, if a will states ‘I give my property known as 52 Julia Drive, Ruddsville to my nephew Tony Turnbull’ and, at the willmaker’s death this property has been disposed of, the gift to Tony will fail and he will get nothing.
It can be seen that ademption can lead to unexpected outcomes.
It will often operate where a beneficiary is to receive a willmaker’s home, but this home has already been sold so that the willmaker can purchase an accommodation bond for an aged care facility. Again, this gift will probably fail. The rule will often operate where a Power of Attorney sells particular assets before the willmaker dies.
Exceptions to ademption
The rule can often produce unfair outcomes. As a result there are a number of exceptions that have developed to the general ademption principle. These include:
- Where property is no longer owned by the willmaker due to a third party’s wrongful act that the willmaker is unaware of
- Where the property in question has changed in form but not in substance. An example of this would be where a beneficiary were given shares in ‘company A’ and the name of the company were subsequently changed to ‘company B’.
Ademption also poses particular difficulties for those holding Powers of Attorney.
Consider this scenario. What if:
- an attorney held a share of the residuary estate in their principal’s Will,
- there was a specific gift of real estate to another beneficiary of the Will
- and the willmaker required an asset to be sold so that an accommodation bond for an aged care facility could be purchased?
If the asset were sold the other beneficiary would miss out. Further, when the estate received a refund of the accommodation bond after the willmaker’s death that money would form part of the residuary estate of the deceased: the attorney would directly benefit from their actions by receiving a share of a larger residuary estate than would have existed had the specific asset not been sold. It would be advisable for the attorney to seek the advice of VCAT in such a situation.
The importance of careful drafting of a Will
Apart from the exceptions, careful drafting of Wills can avoid ademption.
We recommend avoiding specific gifts in Wills where possible, drafting using words that may avoid ademption (e.g. ‘I give to Hector my antique clock or, if sold, its sale proceeds…’) or making a gift of money instead.