What happens if an asset gifted in your Will has been sold

I was recently asked what happens if you’ve given a specific item away in your Will but it has been sold or given away during your lifetime. Similarly if an asset being gifted changes in description after the Will is made. An example of this would be where the gift in the Will is described as “the proceeds of a bank account numbered A13659X”. If that bank merges or is taken over and the money is re-allocated to a new account number as a result, then the gift is no longer accurately described in the Will and could fail because it no longer forms part of your Estate.

This is called the Rule of Ademption and it can occur where the item is given away or sold during the Testator’s lifetime

The word “ademption” derives from the Latin noun ademptio, meaning “a taking away”.

The concept of ademptio was adopted from the Roman law of succession, where an inter vivos gift to a beneficiary, giving to the beneficiary the value of a thing otherwise to be gifted by will, could operate as a gift in substitution for the legacy

An inter vivos gift is a gratuitous transfer of property to another person while you are alive, as you no longer own that property when you die the property is unaffected by intestacy or your will.

To qualify as an inter vivos gift the transfer must meet the following:

  1. Intent — The donor must intend to make a gratuitous transfer.
  2. Delivery — The property must be delivered to the donee.
  3. Acceptance — The donee must accept the property.

There are many situations in which a valid legacy might “adeem”:

The most commonly encountered form of ademption. Is when a gift of specific property prospectively made by a will fails, (because it has been destroyed or transferred out of the ownership of the will-maker) and is said to have been “adeemed”, if that property no longer exists at the time, upon his or her death, the will becomes effective

A parent, with an obligation to provide for another person, makes a will containing a gift to that person, but later in their lifetime of the donor makes a substantial gift to the donee, the gift inter vivos is taken to be a satisfaction pro tanto of the gift prospectively made in the will. The operative principle is sometimes spoken of as “the doctrine of the satisfaction of a legacy by a portion” or, more properly, “the ademption of a legacy by a portion”: In this situation the testamentary gift is said to have been “adeemed”, in whole or part, by the inter vivos gift. Both gifts must be in the nature of a “portion” If a will prospectively provides a gift for a particular purpose and the will-maker subsequently makes an inter vivos gift for the samepurpose, the testamentary gift is “adeemed” even though the will-maker does not stand in loco parentis to the beneficiary of the testamentary gift: an “ademption of a legacy given for a particular purpose”.

An “express ademption” occurs where a will-maker executes a will containing a gift (to be effected when, on the death of the will-maker, the will becomes operative) and subsequently makes an inter vivos gift with the express intention (known to the donee at the time of acceptance of the inter vivos gift) that the inter vivos gift should adeem the testamentary gift pro tanto.

There are exceptions to the rule of ademption including:Where the gift has been removed by fraud or by a tortuous act unknown to the testator as recognised in Earl of Shaftsbury –v- Countess of Shaftsbury [1716] 23 ER 1089. The Earl of Shaftsbury made a will giving all his household goods and furniture in his leased house at Ryegate to his wife. The Earl went to sea and appointed his steward who negotiated a surrender of the lease and removed the goods to another house. He wrote an account to the Earl who approved it. It was held that the bequest adeemed and did not pass to the Countess but said that had the goods been by Fraud or by a tortious act the result would have been otherwise.

Where an agent disposed of the gift the subject of the bequest outside of the terms of the agency and without the knowledge of the testator as in Basan –v- Brandon [1836] 59 ER 68  An agent disposed of the property the subject of a bequest outside the terms of his authority and without the knowledge of the testator, it was held that the gift had not adeemed and could be traced into the reinvestment.

Where the gift is still in the estate in substance although changed in name and form as in Oakes –v-Oakes [1852] 68 ER 68 ademption is bought about by the voluntary act of a Will maker in relation to the property in such a way that it is no longer “substantially the same thing”

As I have posted before your Will is a planning document that should be updated regularly in order to reflect your current life circumstances.

 

 

 

 

 

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