Generic Gifts, Specific Gifts & Ademption

Yesterday we posted about ademption. Essentially when determining whether ademption has occurred the court asks two questions:

• Is the gift specific (rather than general)?

• If it is a specific gift, is the gifted property in the estate?

In response to the risk of unfair or unexpected outcomes when the rule is applied, the common law has developed various principles and exceptions to the rule.

Sybil Moylan made a Will leaving her husband, Les a sum of money calculated by reference to her principal place of residence on the date of her death.

Her children from a previous marriage, had sold her house under an Enduring Power of Attorney (EPA) gifting part of the proceeds of the sale to themselves. After Sybil died her children distributed her estate.

Sybil and Les commenced a relationship in 1973 and married in 1979. They lived in a house owned by Sybil. It had previously belonged to her father.

In October 1996, Sybil executed her will and the EPA.

In about 1999, Sybil began to suffer the effects of Alzheimer’s disease. Her condition gradually deteriorated.

In 2004 Les suffered a significant heart attack requiring him to remain in hospital for six months. When he was discharged from hospital, he was unable to care for himself, and stayed with his son.

At this time Sybil stayed with her daughter. However due to Sybil’s condition and her own family commitments, the daughter could not give Sybil the level of care required. She arranged for Sybil to be admitted to an Aged Care Facility in April 2005.

In the meantime, in early 2005, Sybil’s son and daughter formed the view that they did not have sufficient funds available to maintain her house, and to pay for her care. They decided to sell the home and received $845,116.94.

$600,000 was invested to meet the cost of the deceased’s care, and other expenses she might incur; both of her children shared the balance as gifts.

Sybil died in April 2008; In October 2008, probate of her will was granted to her children. In November 2008, over $500,000 was distributed to them.

Les sought a declaration as to his entitlement under the will. Sybil’s children as executors of her estate argued that the gift was no longer part of the estate and therefore it fails by ademption.

Les claimed that the gift made by Sybil in the will was not adeemed by the sale of her house. He asked the Court for an order that  her son and daughter account for moneys received from the sale of the house, and that Les is entitled to receive 15% of the net sale proceeds of the Wilston house, together with interest.

The Court decided the gift to Les was general rather than specific;  the gift was expressed to be “a legacy equal to 15% of the market value of the house property” therefore it was  an amount of money rather then a share in the house.

Les was awarded $195,369.65 being 15% of the net sale proceeds of the Wilston house, together with interest.