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Hey! Where’s My Gift?

Written by on Mar 9, 2009| Posted in: Probate Litigation

Ademption: Specific Gifts Not Owned At Time of Will Execution Do Not Adeem

Ademption is a probate concept wherein a determination is made as to the disposition of property gifted under a person’s will, but not in existence (or not in the person’s probate estate) when the person dies.
For specific property, the general rule is that the property is adeemed, and the gift fails. For example, if a person gifts a piece of jewelry to a specific person, but the jewelry was not owned by the person at the time of her death, the gift would be adeemed and the person would receive no gift at all. However, a general gift, usually cash gifts, is never adeemed. If there is not enough money in the probate estate to satisfy the gift, then other assets in the residuary estate are liquidated or sold to raise the money necessary to satisfy the gift.

There are a lot of disputes in this area of probate litigation and there is a lot of gray area with this issue. The Florida Probate Code provides that in cases of ademption, any unpaid proceeds of specific devises are to be paid to the devisee regardless of the testator’s intent. Thus, when the statutory provision applies, the testator’s intent is irrelevant. See Fla.Stat. ยง732.606. The Florida scheme leans toward the treatment provided by the Uniform Probate Code, and other states, which find that when property subject to a specific devise is placed under contract of sale before the decedent’s death, the proceeds of the sale will pass to the specific devisee.

An interesting case was published recently which explored the policies underlying the different treatments by courts to this sensitive probate litigation issue. The court in In re Estate of Frank, 189 P.3d 834 (Wash.Ct.App.2008) involved Kenneth and Catherine Frank, husband and wife, who helped found a charitable 501(c) (3) foundation (“the Foundation”). Kenneth and Catherine conveyed a large portion of their land interest in an area known as Cranberry Lake to the Foundation. Thereafter, Kenneth and Catherine executed substantially identical wills. Article VIII of each will acknowledged their creation of the Foundation. In addition, article VII, section 2 provided:

All of my interest in Section 28, Township 21 North, Range 3 West, commonly known as Cranberry Lake, I give to my wife, provided she survives me by a period of thirty (30) days. In the event that she fails to survive me, or survives me and disclaims, my interest in this property shall be distributed to the Frank Family Foundation referenced in Article VIII below. Kenneth and Catherine properly executed several codicils which made substantial changes to the wills, including provisions affecting distribution of other items of real property, but none of the codicils affected distribution of Cranberry Lake.
Then the IRS started asking questions, and things went downhill fast for the foundation. Consequently, the couple and their son brought a negligence action against the foundation and the various attorneys and accountants involved in its creation and operation.

After the death of Kenneth and then Catherine a few weeks later, their son probated their respective wills in probate court. The Foundation filed petitions in both Kenneth’s and Catherine’s probates seeking an order declaring that if Kenneth’s and Catherine’s estates ever acquired any interest in Cranberry Lake, the personal representative would have to distribute the property to the Foundation under the specific devise set forth in article VII, section 2 of the wills. The Foundation and the professional defendants asked the court to dismiss the negligence action, arguing that even if the probate estates recovered the real property, it would pass under the wills to the foundation.

The case worked its way through the judicial process, and the Washington Court of Appeals opined that ademption applies only to property owned by a testator at the time the will is written:

“Here, Kenneth and Catherine executed their wills leaving Cranberry Lake to the Foundation nearly 18 months after they conveyed their entire interest in the property to the Foundation. They executed three subsequent codicils, none of which modified the Cranberry Lake bequest in article VII, section 2 of the wills. The legal conclusion we draw from these events is that Kenneth and Catherine intended to ensure that any remaining interest in Cranberry Lake that they did not transfer to the Foundation by inter vivos deed would pass to the Foundation under their wills. Our conclusion is further supported by the majority view, adopted in Washington, that ademption applies when the facts destroying a devise occur after a testator executes his will.”

This case illustrates the difficult decisions probate courts must make when determining whether a testamentary gift adeems when it isn’t in existence at the time of death. Consulting a probate attorney experienced in these issues is critical for a determination of a person’s inheritance rights under the particular facts and circumstances of each individual case.

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