Ademption is a concept found under the law of wills. It occurs when a testator (i.e., an individual who creates a will) grants a particular piece of property to a person named in their will, but no longer owns that property at the time of their death. When this situation arises, the property is said to have been “adeemed.”

As for the person who was supposed to inherit the property, they will not be able to receive it because the property is not considered part of the testator’s estate anymore.

For example, suppose the will says, “my car is hereby bequeathed to my son.” If the testator does not own or have a car at the time of their death, then the beneficiary (e.g., here, the son) will not inherit a car. They also will not be entitled to receive other property as a substitute.

What If the Will Provides a General Gift?

It is important to note that ademption only applies to specific property gifts. In contrast, general gifts, such as a particular sum of money, typically are not subject to ademption.

For instance, suppose a will granted a certain amount of money to a beneficiary, but the estate does not have enough cash to enable it to meet the obligations of the will. The estate must then sell off any of its residual assets in order to raise as much of the bequeathed money as possible.

Once this is done, the beneficiary will be given whatever amount of money the estate received for selling off the residual assets.

What If an Estate Does Not Have Enough Money to Cover Both Debts and Gifts?

If an estate does not have enough money to cover the amount of both its debts and gifts, then the estate will be required to deduct from the gifts provided by the will. The money collected after reducing the gifts will be used to pay off any debts owed by the estate.

Estates typically deduct from gifts in the following order:

  • Residue gifts get deducted first. This type of gift distributes the remainder of an estate to the beneficiaries. For instance, “…And remainder of my estate goes to Harry.”
  • If residue gifts are unable to cover all of the estate debt, then any general gifts will be deducted next. For example, “I leave $7,000 to Mary.”
  • Specific gifts are the last gifts to be deducted. These gifts are only deducted if there is nothing left. For example: “I leave all chinaware to Beth.”

In addition, the order of deduction to pay off creditors may vary from state to state. In California, for instance, gifts to non-relatives are deducted first.

What Happens to General Gifts that Come from Specific Property?

If a situation arises in which the will provides a general gift that comes from a specific piece of property, the answer to how this gets accounted for will depend on the type of gift and the circumstances.

For example, if a will grants certain shares of stock to its beneficiaries and the estate no longer owns that stock by the time of the testator’s death, then how the gift was worded will become the main focus to find a solution.

In one scenario, if the will simply bequeaths “500 shares of stock in Microsoft,” and that stock is not owned by the estate, the estate may have two options. It can either buy the specified stocks and distribute it to the beneficiary, or it can give the cash value of the stock at the time of the testator’s death.

On the other hand, if the will leaves “my 500 shares of stock in Microsoft,” the situation becomes more complicated. In this case, it could be read as if the testator left a specific piece of property. If so, then the beneficiary would be entitled to nothing if the stock is not owned by the estate at the time of the testator’s death.

What If the Testator Did Not Intend to Lose the Property?

In some states, ademption will not apply if:

  • There is an accident or other incident beyond the testator’s control that causes the estate to lose the property; and
  • There is a high likelihood that the testator did not intend for it to be adeemed.

Notice that there are two parts to this process. The first part of this ademption exception may be triggered when the property is either destroyed upon the testator’s death or if the property was stolen.

For example, suppose the will says “my car is hereby bequeathed to my son.” In order to meet this first requirement, the testator would have had to have only one car prior to their death and that car must have been destroyed along with the testator (e.g., if the testator was involved in an accident).

The second part of the ademption exception is where it becomes a bit more complicated. In general, the second part will be fulfilled if the testator was unaware that the property was lost or stolen and they did not have time to change the will.

For instance, imagine that the testator’s car from the first example was stolen. If the thief killed the testator while stealing the car, then the testator would not have had time to amend their will. Thus, the son would be entitled to a new car.

However, if the car was stolen and the testator did not amend their will or buy a new car before their death years later, then the second requirement for the exception will not be met. Therefore, the son will not be entitled to a replacement car because the testator failed to fulfill the requirements of the ademption exception.

What Happens If I Inherit Real Property with a Mortgage?

If a beneficiary inherits real property that still has a mortgage attached to it, then they will inherit the mortgage as well. The same holds true when a person accepts a gift with an unpaid mortgage. Additionally, they will also be responsible for paying off the remainder of it.

If an individual wants to avoid having to pay the mortgage, then they may be able to disclaim that portion of the testator’s will.

Do I Need to Hire a Lawyer If I Cannot Find the Property I Inherited?

The law of ademption can be difficult to figure out because it is based on a series of assumptions (e.g., it may assume that the testator did not intend to gift property that is lost). The other reason as to why applying the law of ademption can be confusing is because its rules vary widely from state to state.

Thus, if you are a beneficiary seeking to recover a gift, or alternatively, a testator looking for a way to protect your beneficiaries, then you should contact a local estate lawyer for further legal assistance.