A self-written Will is seldom drafted account for future possible changes to the testator’s asset mix. Problems can arise when a testator drafts their own Will and fails to regularly update it. A self-written Will can quickly become out of date without regular review. For example, the testator may obtain new assets that are not included in the will, or they may no longer possess bequeathed assets listed in the Will. When a specific gift mentioned in a will is no longer in the deceased estate, there is an ademption, and the named beneficiary misses out. However, statute and common law offers some relief from the rules of ademption. This article defines ademption and gives examples of how it can impact the administration of a deceased estate in New South Wales.
What Is Ademption?
The word ademption comes from the Latin meaning “taking away”. When a specific gift left in a testator’s Will is no longer available when they die, then that asset is adeemed and the beneficiary cannot inherit. If a specific gift is no longer in the testator’s estate, the legal assumption is that the testator intended the beneficiary to receive nothing in replacement. An ademption can therefore lead to unfair and unexpected outcomes.
An asset may be unavailable because it was sold, destroyed or lost between the time that the testator made the Will and when they passed away. If, for example, after a testator bequeaths their home at a particular address to their child, it is sold to pay for their accommodation in an aged care facility, the devise of their home is adeemed and the gift fails.
Litigating Ademption
The Supreme Court of New South Wales has developed solutions to the problem of ademption. On occasion, the Court presumes that the testator intended a gift to be general rather than specific, and the beneficiary is allocated an asset of equal value to the unavailable gift. Additionally, if the gift is substantially the same as identified in the Will, having only changed in name and form, the Court is likely to save the gift. For example, if the gift was funds held in a specified bank account, but the testator later moved the same funds to another bank account.
In Guardian v Bensley & Ors [2012], the Supreme Court of NSW considered the Will of a deceased person with an apparently adeemed specific gift. The Will left a specified property to a beneficiary, but the trustee sold the property and purchased an accommodation bond for the testator. The sale proceeds were available in the estate, and the Court was asked to determine whether the property was adeemed. The Court found that the proceeds of the sale constituted a substantial change of the gift and therefore there was no rectification of the failed gift.
No Ademption due to lack of authority or wrongdoing
If the testator was unaware that a specific asset was no longer in his or her possession because of someone else’s wrongdoing, then the Court will rectify the adeemed gift. In Reilly v Reilly [2017], the plaintiff received a specific gift in his father’s Will of a large family farming property. However, the testator’s spouse, acting with her husband’s power of attorney, gave the property to her other children. The Court found the transfer from the deceased estate property to be a fraud on the power because the spouse acted beyond the scope of her authority and in breach of her fiduciary duty to the deceased. The Court found that there was no material foundation for ademption because the deceased estate could recover title to the property.
Avoiding Ademption
A testator can avoid ademption by properly drafting and regularly updating their will. Rules to follow when drafting a specific gift to a beneficiary include:
- where a bequest is for a particular property, the Will should state that the beneficiary should receive the sale proceeds of that specific property or any property that was bought in substitution;
- if a testator is unable to update their Will to reflect the sale or loss of an asset because they have lost testamentary capacity, an appropriate person can apply for a statutory will to ensure that a specific gift does not lapse due to ademption; and
- leaving a percentage of the residuary estate as a gift is safer than leaving specific assets.
The approach in NSW
Courts generally try to avoid an ademption, as it is unjust for a beneficiary to be disadvantaged due to a technicality. But New South Wales courts have taken a more cautious approach to such rectification than other Australian courts. In RL v NSW Trustee and Guardian [2012] a financial manager sold a specific gift from a protected person’s will under the authority of the NSW Trustee and Guardian Act 2009. The Supreme Court of NSW rejected the conclusions of the Queensland Supreme Court in the case of Re Viertel [1996], finding that a beneficiary should only be able to claim the value of the adeemed asset in limited circumstances. The Court found that ademption should only be rectified if a sale of the asset was affected without the testator’s authority, or if the asset did not substantially change.
Contact us if you need to contest the unfair provisions of a Will, amend your Will to prevent ademption, or apply for a statutory Will for a loved one.
