In a recent case, the Court of Appeal of Newfoundland and Labrador explained and clarified the doctrine of ademption in estate law.
Niece Sells Testator’s Home
In 1981, the testator executed a will in which she named her two nieces as beneficiaries. In the will, she bequeathed her home and its contents to the first niece and the residue of the estate to the second niece. She named a lawyer as the estate executor.
In 2007, the testator was diagnosed with dementia and moved into a care home. The second niece was granted letters of guardianship in 2008. Later that year, both nieces prepared the home for sale and the second niece sold the testator’s home.
The testator died in 2011.
Testator’s Will Cannot be Properly Executed Following Sale of Home
When the executor of the estate met with the nieces, he explained that because the home bequeathed in the will was no longer part of the testator’s estate as it had been sold, the first niece would inherit nothing from the estate. The estate was composed entirely of cash being held in a bank account and the testator’s will did not provide for the distribution of cash to the first niece. Thus, the second niece would inherit everything.
At the time, the nieces agreed that after the second niece received the money from the estate residue, she would pay the first niece a certain amount representing about a quarter of the worth of the sold home.
However, the second niece never paid the first niece.
Thus, the first niece went to court seeking the full amount obtained through the sale of the home.
Lower Court Rules Against First Niece
At trial, the judge dismissed the first niece’s claims.
The judge did not find a sufficient factual basis for the first niece’s breach of contract claim and refused to let her amend her pleadings to particularize her contractual claim.
In her reasons, the judge also considered whether the law of ademption applied to the first niece’s suit, but determined that it did not.
The first niece appealed.
What is the Law of Ademption?
The trial judge considered, but ultimately did not apply, the law of ademption in the niece’s case, which would have fully denied her right to file a separate claim or accept distribution of the estate from the executor.
Had the trial judge applied the law of ademption, the first niece would have had no chance of receiving any part of the estate or filing a new claim. In fact, the law of ademption provides that if property which is the subject of a specific bequest in a will does not exist in a testator’s estate at the time of the testator’s death, the bequest adeems, or fails, and the intended beneficiary receives nothing in respect of that bequest.
Court of Appeal Clarifies the Law of Ademption
As part of its analysis, the court considered whether the trial judge had erred in not applying the law of ademption to the case. The court began by setting out purpose and effect of the law of ademption:
“The doctrine of ademption is well-established, and its application prevents the difficulty involved in substituting other assets within an estate in order to remedy the beneficial loss of an adeemed gift. Substituting gifts of property within an estate invariably contradicts the ordinary and plain meaning of the words in a will by altering the testator’s wishes respecting the specific gift which has adeemed as well as the testator’s wishes respecting other gifts. Application of the doctrine enables the rest of the estate to remain intact for distribution according to the terms of the will as instructed by the testator.
The difficulty of substituting other estate assets for specific gifts of property in a will is described as the “second and more compelling reason” for ademption. The reasoning is that it cannot be inferred that the testator would have wanted the named beneficiary to have received some other chattel or a cash sum in lieu thereof if the specific gift is not owned by the testator at death unless the will itself contains words indicating some such intention.
Ademption provides certainty in the law of wills. It goes hand in hand with the principle of interpreting a will within its four corners, and is in accordance with the “golden rule [of giving] effect to the testator’s intention as ascertained from the language which the testator has used”.”
Ultimately, the court ruled that the trial judge had erred in failing to apply the doctrine of ademption to the specific bequest contained in the testator’s will. It therefore ruled that the law of ademption applied and, since the testator’s home no longer existed, the first niece would not be entitled to any part of the estate.
[Note: the appeal was allowed on separate grounds.]
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