What is Ademption?

Ademption occurs when a gift in a will is no longer in the will maker’s estate when they die.

 

 

Dawn Bensley died in July 2011. In her last will, made in September 2009, Dawn gave her main residence to her niece, Glynis. The residue of Dawn’s estate was to be divided between, her nieces Glynis and Claire, and her brother, Patrick.

In March 1998 Dawn appointed the Public Trustee as her power of attorney. The power of attorney was registered in order that her attorney could deal with her land.

In March 2010 Dawn was diagnosed as having severe dementia, and was offered a permanent placement in an Aged Care Home.

The Public Trustee decided to sell Dawn’s Hornsby property. Part of the proceeds of sale was used to pay an accommodation bond at the Aged Care Home.

Following Dawn’s death, the bond was partly refunded and deposited by the executor into the estate account.

The executor sought the courts declaration as to whether the gift of Dawns main residence had been adeemed because Dawn did not own that property at her death, or whether Glynis would inherit the traceable proceeds of sale of that property.

The Court decided that as it was not an asset of the estate when Dawn died, the gift of her main residence failed by ademption. The proceeds of sale of the property were to be dealt with as part of the residue of the estate.

There are some exemptions to ademption:

Where a gift equal to a percent of the value of an asset (that has been sold) is held to be an amount of money of that value rather than a share of the asset

 if property has changed ‘in name and form only’ and is substantially the same thing: for example,  money held in a particular bank account has been moved to another bank account

where a will maker ceases to own the property as a result of a wrongful act of a third party, unknown to the will maker.

Although there have been some discussion of amending  Succession Laws  to provide an exemption to the ademption rule where the gifted property is sold or otherwise disposed of by a substitute decision maker.

A properly drafted will can limit difficulties that an attorney or executor may experience in situations such as the one above, it would be unwise to include in a will the main residence if there are no other assets that could fund an accommodation bond and upkeep of the will maker for the remainder of their life.

In a similar situation a will maker could instead consider making a gift of a percentage of their residuary estate, or state that a beneficiary be gifted a particular property, the proceeds of sale of a particular property or any property bought in substitution.