Abatement and Ademption Flashcards
Abatement
-Occurs when there is not enough money in an estate to fulfill all the gifts/ promises made in a will
Ademption
When a specific gift given to someone in a will no longer forms part of the estate
Courts will do anything they can
To avoid ademption
What do the courts base their decision on?
Testators intention
They operation only
In absence of a contrary intention on the face of the will (ex: specific schedules for abatement written in)
If they don’t express contrary intention
Common law applies
When estate insolvent
Testators debts must be paid. Insolvent=insufficient funds to pay all debts, creditors entitled according to their priority (general creditors last pro rata)
When solvent but insufficient to make all gifts
assets go to pay debts first and then go in order of abatement
Abatement order
First to go: residue (personal and real property) Next: general legacies Next: Demonstrative legacies Next: special gifts of personalty Last: Specific gifts of realty
Gifts eaten up on what basis
Pro rata
Pro rata
Each takes equal hit in their category
Lindsey v Waldbrook
Facts: Not enough money to satisfy all gifts. All looked the same but one had additional instruction saying to be invested for education of grandson
Ratio: Only clear language that demonstrates a clear intention will avoid pro rata schedule of abatement (not enough yours is slightly different)
Determining type of gift
-Testators themselves can say what kind of gift it is
General Legacy
- Gift payable out of the general assets of an estate
- Legacy= gift of money/ direction to use money to buy something specific (like a gift card)
- Directs them to go buy it and if they can’t give money equivalent
- General assets= residue BUT not a residual gift (specific amount)
- No attributed source- source is residue
Ademption of General legacy
They do not adeem because they are not anything specific
Re Miller
Facts: Each minister and orange lodge member one share to Ontario Brewing Co- not possible to get the stocks
Ratio: considered general legacies. Whether he owns the thing he is giving is not determinative of general/specific what matters is what you write. Wording: specific- “my” “that I currently own”. Bank account, more specific the account is described the more specific gift.
If classified as specific
- Not scared of ademption: instruction to buy it or cash value
- Scared of abatement: after residue its first to go
Demonstrative gifts
- Golden goose (best of both worlds)
- Gifts that have an attributed source to be paid primarily out of a certain asset
- Ex: cottage to be sold and proceed to kids
Specific gifts
Either specific property or if it is money they are to be paid specifically out of a certain source and only that source
Consequences of classification as demonstrative gift
- If no longer exists it does not deem it becomes a super general legacy (satisfied out of residue)
- Still protected quite a bit from abatement
- If both abatement and ademption it will be satisfied before general and residue
Why is demonstrative special?
Because if source doesn’t have enough they don’t deem they can dip into residue
Re Webster
Facts: testator left 3000 pounds to be paid to son out of the share of my capital and loans in the business of Webster. His partnership was worth much less than 3000 pounds.
Ratio: not good case to follow found demo even though looked like specific . If clear testator wanted gift to be given regardless of funding.
Celentano Estate v Ross
Facts: left 2 gifts to the shriners to be paid in US funds taken from her US bank accounts
Ratio: not general because there is a clearly identified source. Testator gave no indication that gift was to fail upon insufficiency of funds so not specific. Absent clear language to show its specific it will be deemed demonstrative.
Specific gifts
-Gifts of identifiable property
-Object testatore has described with distinction and specifically to distinguish it from all other assets in estate
-Doesn’t matter if they didn’t own it at time of will so long as it was owned at some point before death
-Only gifts subject to ademption (if no longer in estate)
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Colbertson v Colbertson
Facts: legacies bequeathed out of a very specific fund (farmland) if not enough to cover amount each person take in apportionate share. Sold before death and put into general bank account
Ratio: if you not only specified the source but say only from that source, specific. Specific because specific source and limiting language. Cannot dip into co-mingled funds.
Residuary gift
- Gift of residue (different from general cause basically just says “the rest of my estate”)
- Any gift that fails lapses into the residue and residual gifts don’t adeem
Exceptions to Ademption
(1) Date from which the will speaks
(2) Tracing
(3) Subsequent conveyance of portion
Date from which will speaks
- Common law= speak at time will was made (what was owned then)- a lot of foolery here
- Most provinces have reversed this: now speaks from date of testators death
Court to interpret gifts in a will as referring to property owned by testator at the date of his death
Contrary intention to date the will speaks (NB Wills Act)
Case law says contrary intention is (1) express contrary intention (2) if an object is so specifically described in a will that it “cannot be added or taken away from so as to retain its form”
Ex of express contrary intention for date will speaks
Leave daughter house I live in now if I move she gets no house
Re Rutherford
Facts: left “house and premises on Martin St” to wife and kids but after writing will he purchased more land around the house.
Ratio: If a gift is capable of growing or being added to like land/a house then it won’t qualify as an interpretation of so specific that change would make it not retain its form. Just saying house and premise not specific enough
Example of so specific that “cannot be added or taken away from so as to retain its form”
To daughter 1973 Camero- hard to grow/ expand
Re Bird
Facts: testator owned lot 57 and had house 14 Mitchell Ave in will to her son, after will written city condemned and rebuilt to 14 and 16 Mitchell Ave
Ratio: Contrary intention on the face of the will- she meant to give lot 57 only reason its two is because city made her
How does date at which the will speaks apply to people?
Common law rule: at the time of the will. SO if you marry and write a will and then re-marry it goes to your first husband.
-21(2) only applies to property not people
Use of temporal words
To avoid the general, T must describe the property by referring to it as the property of a certain description she owns at the date of the will. Using the words “now” or “then” can be held to be contrary intention. Can be contrary intention to date the will speaks
Re Forbes
Facts: Conveyance of property where I now reside in the town of Wiarton. After writing this he bought a new one and inter vivid gifted one from will to her
Ratio: when looking at contrary intention cannot look at surrounding circumstances just the face of the will (can’t look at inter vivos gift). Used temporal language to describe gift, took this as him meaning it to be read at the date of the will. No new house for her.
Tracing
- Doctrine of CL which saves gifts from adeeming if can be traced to location where they have been kept separate and apart from other funds
- Specifically deals with gifts of money from proceeds of sales
- If, for ex proceeds of sale of cottage when alive, put in bank account and not co-mingled may be able to trace
2 caveats to tracing
(1) In NB there is a provision that deals with this-
(2) Decisions made by people with powers of attorney
NB provision that deals with tracing
allows for tracing proceeds of sale even if co-mingled. If money exists you are entitled. ONLY to proceeds of sale not to specific money in specific account.
Decisions made by people with power of attorney with tracing
2 kinds of POA (finance and care). Have to sell house to pay for moms care. NB Informed persons act allows for tracing of property sold/ re-invested by POA acting in good faith
Subsequent conveyance of portion
If testator sold a gift that he left to someone in a will or contracted to something or had a right to property that doesn’t exist at time of death- whatever rights left from property is gifted to the person
Best example: insurance proceeds
DeMombro
Facts: house/ contents to 2 people. Sold house but sale not complete when she died. Who gets funds?
Ratio: goes to 2 people bequeathed the house.
Insurance proceeds
Subsequent conveyance of property applies to this- have a right to these
Re Hunter
Facts: testators house destroyed in fire and testator died in it.
Ratio: CL says adeem and insurance to residue but because of statute insurance proceeds go to person who was left the house
Re Clements Estate
Facts: testator died in fire and house destroyed
Ratio: died from smoke inhalation so it vested and then burned, insurance to beneficiary of house. Good case to use if in jurisdiction that doesn’t have legislation for this.
Equitable conversion
- Deals with disputes between two parties one of which had inter vivos dealings with testator and one in a will
- Conversion means that the court will find that even if a particular gift still is in the physical possession of an estate at the time of death, if it has been the subject of a contract or a gift (inter vivos) anything that is an agreement that can be legally enforced against the estate then it will be presumed to be converted (adeem)
- Has to be a legally enforceable contract
Ex of equitable conversion
you are left antique car in will, in middle of deal to sell car and he dies before deal done. Who gets it?
