Andrew O'Donnell, Edney Ryan Legal

‘Ademption’ is a legal term that describes what happens when something that is left as a gift in a Will is no longer owned by the Will-maker at the time of their death. Consider these examples of how this can occur.

Example 1: The gifted property has been sold, for example the family home has been sold to fund aged care.

Example 2: The gifted property has been stolen, lost or destroyed, for example in fire when an insurance payout would result.

Example 3: The gifted property has changed from how it was described in the Will, for example, the Will refers to shares in a particular company and that company has been taken over by another company.

If the gift is specific and the gifted property is not in the estate, the gift fails and the beneficiary receives nothing and cannot receive the cash equivalent of the gifted property.

A specific gift is a gift of property described in the Will in a way that separates it from other assets, for example “my diamond ring”.

The most common problem with ademption is when the intent of the Willmaker is compromised. For example Mr Wilson owns his home and an investment property. In his Will he leaves his home to his daughter and the investment property to his son. He gifts the remainder of his Estate to his grandchildren. Prior to his death he sells his home to fund the bond for an aged care facility. He does not subsequently update his Will. After he dies, his son receives the investment property. He no longer has the family home, therefore the gift to his daughter is adeemed and she receives nothing. The aged care bond refund forms the remainder of his Estate which is distributed to his grandchildren.

Careful drafting of the Will can avoid this problem. Rather than gifting specific property to each child, he could have shared the value of his entire Estate between his beneficiaries, or he could have stated that his daughter be entitled to the proceeds of the sale of his family home.

The situation becomes more complicated when a substitute decision maker becomes involved, for example when a family member with Enduring Power of Attorney must make decisions about property on the Will-maker’s behalf before their death. A carefully drafted Will should protect all parties from unintended consequences.

For assistance with Wills and Estate Planning, please contact Angela Boyd or myself on (02) 9908 9888 for information specific to your circumstances.