Many of us strive to leave assets such as the family home, an investment property or shares to those we love in our will, but have you ever thought about what will happen to a gift in your will if it is sold before you die?
Despite the best intentions of the will maker it is not uncommon for an asset to be sold after they lose capacity, for example an attorney, validly appointed under a power of attorney may be required to sell the family home in order to pay for a nursing home bond where the owner has lost capacity is no longer able to reside at home.
This sale of an asset can affect the gift in your will if that gift was a specific asset, for example Rose makes the following gift in her will to her sons Bill and Ben:
- my son Bill my house at 123 High Street Mytown
- the rest of my estate to my son Ben.
What happens if Ben as attorney sells the house to fund Rose’s nursing home bond?
Potentially the gift to Bill would fail and Ben would receive all of the estate because of the doctrine of ademption. The doctrine operates on the assumption that if the property cannot be found the gift cannot take effect. Put simply, the gift fails because it no longer belongs in Rose’s estate at her death.
Fortunately legislation and the courts provide some relief from ademption, in this example if the power of attorney was drafted in accordance with the Powers of Attorney Act 2003 (NSW) Bill would likely receive a gift from the estate that was of similar value to that of the house which was sold.
However if Rose sold the property when she had capacity and she didn’t change her will to reflect the sale of the house, then the gift would potentially fail and Bill may have to resort to the Courts to argue that he should have received something under Rose’s will.
The takeaway point is, if you want to leave a specific gift in your will you should think about the likelihood of it being sold, if it is very likely then perhaps gifts should be based on percentages of your estate rather than specific gifts.