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Friday, July 16, 2021

If the gift you are left in a will no longer exists, you are out of luck

What happens if you are left a gift in a will, but when the testator passes away, the gift is no longer in the estate? Are you out of luck? Do you get something else instead? Do you get money instead? These questions come up frequently and can create a lot of confusion.

When the gift named in the will no longer exists, the legal name for the situation is ademption. The gift is said to have adeemed

As a general rule, the beneficiary who would have received the gift does not receive anything. There is usually no substitution made or money paid instead. 

This topic was discussed recently in the new case of Best v. Hendry in the Court of Appeal for Newfoundland and Labrador. In this case, Pearl Penney made a will in 1981. In it, she left her house and contents to her niece, Marie Hendry, and the residue of the estate to another niece, Cathy Best. The executor of the will was Ms. Penney's lawyer. Years later, Ms. Penney developed dementia and moved into a care facility. At that time, her house was sold and the money put into the bank.

After Ms. Penney's death, the two nieces met with the lawyer/executor and they discussed what to do now that the house was no longer in the estate. At the executor's suggestion, the nieces agreed that the one receiving the residue (Ms. Best) would pay a sum of money (about a quarter of what the house sold for) to the other niece (Ms. Hendry). 

However, she never did pay it. Eventually Ms. Hendry took the matter to court and claimed the full sale proceeds of the house. There was enough money in the estate to pay this, but the question for the court was whether she was entitled to receive it.

The matter was decided by the court and then went to the court of appeal. The end result was that the court said Ms. Hendry was not entitled to receive anything from the estate. The house and contents had adeemed and Ms. Penney could not give what she did not have. The will didn't say that she was supposed to get anything else, such as money. 

There was a lot more going on in this case than I have mentioned here (the students in my bar course this fall will hear more about it). One of the other issues was whether the executor had done the right thing by suggesting and allowing the agreement between the parties. This was further complicated by the fact that the executor was a lawyer, and was in fact the lawyer who had prepared the will and had an opinion on what the testator had intended to do in her will. The Court of Appeal accepted that the executor acted honestly and with good intentions, but still found him liable for his conduct with respect to the estate.

In any event, this case does help clarify that when an item is left to you in a will (even a big item like a house) and that item no longer exists when the testator dies, you are not going to inherit it or a replacement for it.


2 comments:

  1. The seeds of this problem were planted when the client was making her Will. The lawyer needed to have her consider all variables- and the beneficiaries here should have seen the grand design which was something of significant value for each niece.

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    Replies
    1. Yes, the client should have been asked about a situation in which she might no longer own the house. I can tell you from experience though that in response to that sort of question, plenty of clients will just say "that won't happen". They simply cannot envision their situation being any different. But as you say, it needs to be discussed and then it needs to be included clearly in the will.

      As for the beneficiaries seeing the grand design, that isn't up to them, legally. The executor is supposed to do what the will says, regardless of whether the beneficiaries see the grand design or not. In this case though, the beneficiaries did come to an agreement and if the one with the money had paid the other one as agreed, this case would not have seen the light of day.

      Lynne

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