1st Jul 2011

An issue that arises when gifting specific property by Will or Trust is whether the beneficiary is entitled to anything if the property is sold prior to the giftor’s death.  The doctrine of “ademption” provides that a bequest may only be satisfied with the specific property that is named.  This issue was recently addressed by the Supreme Court of Georgia.1

Harvey, the decedent, who was a resident of Georgia, had left his Florida condominium to his mistress, Anne, by way of his Will.  However, prior to his death, Harvey entered into a contract to sell the condominium.  He then died prior to the closing date.

Based on Georgia law, which provides that the law of the state in which the property is located shall apply, the court applied Florida’s law of testamentary bequests.

The court determined that a specific devisee (Anne) has the right to any remaining specifically devised property (the condominium) and any balance of the purchase price owing from a purchaser to the testator (Harvey) at death due to the sale of the property.  Since, in this case, a balance was owed to the decedent from the sale of his real property located in Florida, the proceeds from the sale were due to the specific devisee who would have otherwise inherited the real property under the decedent’s Will.  Therefore, Anne was entitled to the proceeds from the sale of the condominium.

In Illinois, courts have determined that the intentional sale of property that is bequeathed in his or her Will indicates an intent to revoke the bequest.  However, if the disposition of the property is unintentional (property is destroyed)2 or thesale is completed by someone other than the decedent (trustee or agent),3 then such intent to revoke the bequest does not exist and the recipient of the bequest would be entitled to proceeds from the sale.4

On the other hand, the Illinois Compiled Statutes provide that if the decedent entered into a contract to sell the property during his life but the sale was not complete prior to his or her death, as was the case in the fact pattern above, then the sale does not revoke the bequest and the property passes to individual who would have received the property under the Will.5  In other words, whether the sale of property was completed will determine who is entitled to the proceeds.

Based on the complexity of the issues surround a specific bequest, it is important that the giftor’s intent regarding such transfers be clearly stated and that Estate Planning documents be updated immediately following the sale or transfer of property that is bequeathed under a Will or Trust.  As is often the case, proper drafting is the difference between a clean transfer of assets and a lengthy, expensive battle between heirs.

1. Parker et al. v. Melican, 286 Ga. 185 (2011).
2. In re Estate of Kolbinger, 175 Ill. App. 3d 315, 324, 529 N.E.2d 823, 829 (1988).
3. Hobin v. O’Donnell, 115 Ill. App. 3d 940, 451 N.E.2d 30 (1983).
4. Bollman v. Pehlman, 352 Ill. App.3d 1203 (2004).
5. 755 ILCS 5/4-8.

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