Inheriting What’s Not There

February 10, 2013

Wills are an important tool to ensure that your property and possessions are distributed in accordance with your wishes after you pass away. But what happens when an asset specifically left to a particular person has already been disposed of by someone acting pursuant to an Enduring Power of Attorney?

When a person disposes of property or possessions during his or her lifetime and the property has been specifically bequeathed to someone, this is called “ademption”. Ademption usually results in the gift or bequest “lapsing”, mainly on the common-sense principle that as the person no longer owned the item at the time of their death, there is nothing to be bequeathed.

If the owner disposes of the asset it is logical that the onus is on them to update his or her Will as necessary. However, where a person (the “Attorney”) acting for the owner pursuant to an Enduring Power of Attorney sells an asset and the owner lacks capacity to update their will, the principle of ademption need not apply.

In Simpson v Cunning, 2011, the Victorian Supreme Court did not follow the usual rule of ademption and decided that where an Attorney sold an asset when the Will-maker lacked capacity to update their Will, the intended beneficiary of the asset is entitled to receive from the deceased’s estate the monetary equivalent of the asset they would have received.

An Attorney can be faced with having to sell the Will-maker’s main assets during their lifetime to meet costs and expenses while being oblivious to the contents of the Will, creating the possibility for future complications and probate disputes. This is why the Victorian Civil and Administrative Tribunal (“VCAT”) has the power to order the opening (reading) of a legally incapacitated person’s Will during that person’s lifetime, to determine their wishes, if any, regarding the assets of the estate.

Attorneys can avoid unnecessary problems by being informed of the contents of the owner’s Will and understanding their intentions regarding the disposition of their assets.

If you need guidance in the execution of your duties as an Attorney or Guardian, please contact Martin Reilly on 9870 9870.

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