New Ademption Laws
What is ademption?
Ademption is a very old concept that has developed over centuries of English inheritance law, and been brought to Australia. It occurs when a specific gift is left to someone in the deceased’s Will, and that specific gift is no longer owned by the deceased when they died. So because the gift isn’t owned by the deceased, if cannot be given to the beneficiary, and is hence adeemed.
An example would be that a holiday house be left to a particular child; say Mary leaves her Ocean Grove holiday house to her son Peter. If Mary sells that holiday house whilst she’s still alive, then it cannot be given to Peter under the Will after she dies. Peter is not entitled to any compensation for that holiday house having been sold – the gift is adeemed, and it’s too bad for Peter.
The logic behind the rule of ademption developed because people used to be very good at keeping their Wills up to date. The thought process was that if Mary left her Ocean Grove house to Peter, but then sold it, she would have had sufficient time to re-do her Will and leave Peter something else, if she had wanted to. Because she didn’t re-do her Will, presumably she didn’t want Peter to get anything more than anyone else, or perhaps she had already given him some money whilst she was alive, and hence Peter is not entitled to be compensated for that gift having been adeemed.
There was one main exemption to the rule of ademption, and that was if the deceased didn’t have time to re-do their Will, then they didn’t intend the gift to be adeemed, and therefore the person who should have had the gift would be compensated. Hence, if Mary had entered into a contract to sell the Ocean Grove holiday house, but then had a stroke – they house was sold, but then she died without having done a new Will, then arguably Peter would be able to get the proceeds from the sale of Ocean Grove rather than the gift being adeemed.
Consequences of living longer
As the medical industry has advanced, so has our average life expectancy. This has clearly brought on other medical consequence that were not often common, such as dementia in particular.
In the above example, in some States, it was questionable whether the ademption exception would have applied. If Mary developed dementia, and the Ocean Grove holiday house had to be sold under a power of attorney, to afford for her to go into aged care, in some States in Australia Peter would still have received the proceeds of the sale on Mary’s death, but in others he wouldn’t have.
In Victoria, if Mary’s power of attorney had gone to VCAT and obtained an Administration Order for the sale of the Ocean Grove property, then the gift to Peter would have been preserved. After Mary died, he would have received the amount from the sale of Ocean Grove that was used as a bond for the nursing home for Mary’s care. However, if Mary’s power of attorney had not gone to VCAT and merely sold the property under the power of attorney (which they legally can), then the exception to ademption would not have applied, and Peter would have received nothing extra.
These scenarios are so different from how the rule of ademption developed over centuries, that our modern laws have not kept up, and have taken a while to resolve the issue. Ademption should only have technically applied where Mary sold Ocean Grove, and had time to re-do her Will (hence her having lost capacity due to a stroke or dementia took her change to re-do her Will away from her, and hence the exception should have applied).
How the changes fix the ademption exception
The new changes to the law in Victoria, commencing 1 November 2017, have fixed this! So the true meaning of the rule of ademption can be applied still. Now, if someone under a power of attorney sells an asset that is specifically given away to someone else under a Will, then the exception will apply and they will get the proceeds of that sale. So Peter’s inheritance is safe if a power of attorney now sells Ocean Grove, if Mary has lost mental capacity.