A Failure Ademption

A specific gift will fail by ademption if the subject matter of the gift does not form part of the testator’s estate at death. General gifts cannot fail for ademption as the executors should raise such funds to make the gift if the subject matter is not part of the estate. Similarly, demonstrative gifts cannot fail by ademption. If the specified fund does not exist or if there are not enough assets in the fund to make such a gift, the remaining will be treated as a general gift. A general rule of ademption is that if the subject matter of a gift changes name or form, it does not cause the gift to adeem, however if the substance changes it does. Gifts of shares are useful to illustrate this rule. If the Will includes a gift of a shares in a particular company but between attestation and the testator’s death the company changes its name or reconstructs how its shares are organised these changes will not cause the gift to adeem, as the shares held at death are identical in all but name and form to those held at the time of the Will. Alternatively, the company could instead be acquired by another company between the attestation and death and the testator be issued with shares in the acquiring company as compensation. At death, the testator would own shares in a completely different company, causing the gift to adeem as the substance of the gift is no longer the same. There are a number of common methods that are used to avoid ademption. Gifts will often be worded to be less specific, for example a gift may be worded to refer to all monies from ‘all bank and building society accounts’ at death rather than money from a specific bank account. If a gift is of money from a specific bank account and such bank account is closed between attestation and death, there is a risk that the gift could adeem. However, a gift of money from all bank accounts would only fail if there are none at all in the estate at death. If the testator moves address between the attestation and death, it could cause any gift of the previous property to fail. To combat this the following can be included. ‘or if such property does not form part of my estate then instead such interest in the property which I owned and last used as my principal residence before my death’

This allows any property used as main residence to instead be gifted. Abatement would then only occur if there is no property in the estate which is used as the main residence. Property & Affairs Lasting Powers of Attorney can create some conflicts with abatement. Attorneys are not entitled to have access to the donor’s Will under the terms of an LPA. There is therefore a risk that an attorney may sell or dispose of property that was the subject matter of a specific gift, causing that gift to adeem when the testator dies. There is unfortunately very little that can be done to avoid this scenario. There have been a small number of cases where it has been held that moving money to a separate savings account did not cause the gift of the old savings account to fail, but these cases are limited to their own specific facts and were made after considerable hesitation.

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