Ademption (NSW)

The word ademption comes from the Latin for “taking away”. Ademption is a principle in succession law that applies when a specific gift mentioned in a will cannot be fulfilled because the item no longer exists in the testator’s estate at the time of their death. In those circumstances, there is a legal presumption that the testator changed their mind about giving the gift to the beneficiary. In New South Wales, both the Succession Act 2006 and other laws (including common law precedent) informs the application of the ademption doctrine. This article defines the concept of ademption, its application in New South Wales, and recent developments and issues in its interpretation and practice.

The concept of ademption

To understand ademption, it is essential to distinguish between the three types of bequests in a will.

Specific bequests

These gifts identify a particular asset. For example, “I leave my property at 64 Beach Road, Bondi, to my daughter”.

General bequests

These gifts are not tied to a specific asset and are payable from the general estate. For instance, “I leave $10,000 to my niece”.

Demonstrative bequests

These gifts specify a fund or source for payment but are not tied to a particular asset. For example, “I leave $5,000 from my savings account at Westpac to my nephew”.

Ademption primarily affects specific bequests because these gifts are inherently reliant on the existence of a specified asset. If the property forming the subject of the specific bequest is no longer part of the deceased estate, the gift is considered “adeemed”, and the intended beneficiary receives nothing unless a statutory or equitable exception applies. In complex cases, it is left up to the courts to interpret the testator’s intent. The Supreme Court has, on occasion, addressed cases of ademption by assuming that the testator intended a gift to be general instead of specific, allowing the beneficiary to receive cash or assets of an equal value to the adeemed gift.

Rationale for ademption

The principle of ademption is rooted in practicality. If the specified property is no longer part of the estate, it cannot be transferred to the beneficiary, so the law assumes that the testator intended to revoke the gift, even if they did not update their will to reflect this change. However, there are other possible scenarios that could lead to a specific asset no longer being in an estate at the time of the testator’s death. For instance, a testator might have left their family home to their child, only for someone acting on their behalf to sell the property to pay for their stay in an aged care facility. In that case, the specific bequest is adeemed and the child cannot receive their bequest. This could obviously lead to outcomes that were inconsistent with the wishes of the testator.

Avoiding ademption

The first step in avoiding ademption is for testators to think carefully about the terms of their will. In many cases, solicitors will advise a testator to simply avoid making specific bequests. For instance, it is usually not advisable to leave a specific piece of real estate to someone, given the potential for the property to be sold at some stage. If specific bequests are made, it will be necessary to update the will if the item is sold or lost, which will involve time and expense. Without regular revision, a will containing specific bequests can quickly become out of date.

To avoid this difficulty, solicitors often advise testators to draft their will in terms of leaving a certain percentage of their total estate to each beneficiary. However, in some cases a specific bequest is necessary to achieve the desired outcome of the testator. A family heirloom, for instance, will usually be left to a specific individual if the intention is to keep the item in the family. When a testator makes specific bequests, they should incorporate residuary clauses to ensure that beneficiaries receive some portion of the estate if specific gifts fail. For example, “I leave my diamond ring to X, but if I no longer own this ring, X shall receive an equivalent value from my residuary estate”. A testamentary trust can also provide flexibility and protect specific gifts from ademption by allowing trustees to manage and substitute assets as necessary.

Statutory framework

In NSW, the Succession Act 2006 has several provisions that are relevant to ademption, especially when the specified asset was sold or disposed of by someone acting on behalf of the testator, such as an enduring guardian or an attorney under a power of attorney.

Under Section 22 of the Powers of Attorney Act 2003, if an attorney disposes of property that is the subject of a specific bequest in the will, the beneficiary is entitled to the proceeds of the sale or any property acquired in substitution for the disposed asset. This exception ensures that the testator’s intentions are upheld despite the attorney’s actions. For instance, if a testator’s will leaves “my car” to a beneficiary, but the attorney sells the car before the testator’s death, the beneficiary may claim the proceeds of the sale under this provision. There are similar provisions under the Guardianship Act 1987 to address situations when a guardian disposes of a testator’s property.

The Supreme Court has rectified cases of ademption when a gift is no longer in the deceased estate because of someone’s misconduct. In Reilly v Reilly [2017] the court found for the plaintiff when a bequest from his father was in danger of failing. The plaintiff was set to inherit a sizable farming property in his father’s will, but the testator’s spouse gave the property to her other children using her husband’s power of attorney. The court determined that the spouse had acted beyond the scope of her authority, and in breach of her fiduciary duty to the deceased. The court ordered that the deceased estate recover title to the property.

While ademption provides a practical framework for dealing with specific gifts that no longer exist, it can lead to unintended consequences if the testator’s will is not carefully crafted or regularly updated. Amongst other issues, the rise of digital assets (such as cryptocurrencies) poses new challenges for ademption. Courts and legislators may need to develop specific rules to address these assets. Contact Go To Court Lawyers on 1300 636 846 for any legal advice on wills and estate matters.