Rather than recycle trite topics like: “What is a Will”, “Why Testamentary Trusts are awesome”, “How do I protect my assets from my disliked son/daughter-in-law” etc etc, this article covers the lesser-known yet still important areas of ‘portions and ademption’ ⚖️ i.e. lifetime gifting (which is different again to the ‘presumption of advancement’ and actual, written loans) and how such may also impact proper estate planning 👇.
Source of law
The primary, modern Australian case on the law of portions and ademption is Reynolds v Bonnici [2017] NSWSC 828. Reynolds references heavily the earlier English case Re Cameron (deceased) [1999] Ch 386 which re-enlivened the old concept of ‘portions’, as per Lindsay J in Re Cameron:
“Despite the long use of the term ‘portion’ in the law, the word, as Jarman on Wills, 8th ed (1951), vol 2, p1138 states, ‘is not a term of art. But it seems to be something which is given by the parent to establish the child in life or to make what is called provision for him’.”
What is a ‘portion’?
“A “portion” is generally spoken of as a gift intended by a Will-maker/donor to establish a beneficiary/donee in life or to make substantial provision for him or her”: Re Cameron.
This then leads on to associated and inextricably linked principles of equity, including:
o “the equitable doctrine of ademption”;
o “the doctrine of satisfaction of legacies by subsequent gifts (or portions)”; and
o “the presumption (or rule) against double portions”.
What is ‘ademption’?
The word ‘ademption’ derives from the Latin noun ‘ademptio’, meaning “a taking away”. At its most basic, ademption occurs when property (either personal or real estate) gifted under a Will is no longer in the Will-maker’s estate when they die. The gift so failed is said to have ‘adeemed’.
Equitable doctrines
The equitable doctrines of ‘ademption’ and ‘satisfaction’ share similar features. For many purposes, the rules relating to the ademption of portions and the rules relating to the satisfaction of portions are the same; both are fruits of the equitable principle that the law leans against double portions and seeks equality among children of a will-maker.
Examples of ademption
In Reynolds, Lindsay J[1] noted that in NSW there are at least four situations in which a valid legacy might otherwise ‘adeem’:
1. A gift of specific property prospectively made by a Will fails, and is said to have been ‘adeemed’, if (because it has been destroyed or transferred out of the ownership of the Will-maker) that property no longer exists in the will-maker at the time, upon his or her death, the Will becomes effective.
This is the classic, most commonly encountered form of ademption.
2. When someone such as a parent, with an obligation to provide for another person, makes a will containing a gift to that person, but later in the lifetime of the donor makes a substantial gift to the donee, the gift inter vivos[2] is taken to be a satisfaction pro tanto[3] of the gift prospectively made in the Will.
In this situation the testamentary gift is said to have been ‘adeemed’, in whole or part, by the inter vivos gift.
Both gifts must be in the nature of a ‘portion’. The operative principle is sometimes spoken of as “the doctrine of the satisfaction of a legacy by a portion” or, more properly, “the ademption of a legacy by a portion”.
3. If a Will prospectively provides a gift for a particular purpose and the will-maker subsequently makes an inter vivos gift for the same purpose, the testamentary gift is ‘adeemed’ even though the Will-maker does not stand in loco parentis[4] to the beneficiary of the testamentary gift.
This principle is often spoken of in the same breath as an “ademption of a legacy by a portion”, but might more accurately be labelled an “ademption of a legacy given for a particular purpose”.
4. An ‘express ademption’ occurs where a Will-maker executes a will containing a gift (to be effected when, on the death of the Will-maker, the will becomes operative) and subsequently makes an inter vivos gift with the express intention (known to the donee at the time of acceptance of the inter vivos gift) that the inter vivos gift should adeem the testamentary gift pro tanto.
The first type of ademption (1) is generally treated as distinct from the remaining three (2) to (4).
The ‘First Type’ of Ademption
The first type of ademption involves an alteration of the Will-maker’s estate: property taken away from the estate.
· In this version of ademption, the Will-maker’s intention is irrelevant. Its provenance may ultimately be found in the law of probate; but it is overlaid with rules of equity dealing with cases in which a Will-maker has not before death completely divested themself of the specific property the subject of a testamentary gift.
· A basic characteristic of a specific testamentary disposition is that it fails by ademption if the subject matter of the disposition cannot be found amongst estate assets at the time of the will-maker’s death.
· An ademption will not occur in exceptional cases where, for example, disposal of property is attended by fraud or a want of authority.
The ‘Other Three Types’ of Ademption
In contrast, the intention of the Will-maker is critical to the other three types of ademption. They are reflective of:
(a) a tendency in equity to lean against “double portions”; and
(b) in the context of provision made for children of the Will-maker, favour given to the maxim “equality is equity”.
These other three types of ademption share a common denominator in an inconsistency between a testamentary gift and an inter vivos gift, characterised as anticipatory of the testamentary gift, in circumstances in which the Will-maker is found to have intended that the donee receive only one gift.
A convenient elaboration of the “doctrine of ademption” can be found in Murray CJ’s judgment from In Re Everett; Executor Trustee and Agency Company of South Australia Limited v Everett [1917] SALR 52 at 65–66:
“Ademption depends on the intention of the donor. In some cases the intention is presumed. In others it must be expressed. In the former it need not have been specifically brought to the notice of the donee; in the latter it is essential that it should have been.
An intention to adeem is presumed in only two classes of cases:
1. where a father[5] or person in loco parentis gives a legacy to a child of his own or to a person towards whom he stands in loco parentis, and subsequently makes a gift or advance of substantially the same quality as the legacy to the same child or person during his lifetime; and
2. where a person gives a legacy for a particular purpose and subsequently makes a gift or advance to the legatee for the same purpose.
In these cases it is presumed that the donor did not intend that both benefits should be taken, but meant the gift to be in satisfaction of the legacy either wholly or pro tanto according as the amount of the gift is equal to or less than the amount of the legacy. The presumption, however, may be rebutted by evidence shewing that the donor intended both gift and legacy to have effect, and this in its turn may be met by evidence in confirmation of the presumption.
Where the circumstances are not such as to raise a presumption, the intention that the gift should be taken in satisfaction of the legacy must, as I have said, have been brought to the knowledge of the donee at the time of the gift, so that in effect the gift is made on the condition that the legacy should not be claimed.”
Therefore, in the absence of a presumption or where one does not wish that presumption to be rebutted, it is not just the donor’s intention that is important, but that such intention is brought to the knowledge of the donee of the gift at the time the inter vivos gift is made.
The “Rule Against Double Portions” and the “Presumption of an Intention to Adeem”
There is an affinity between the two classes of case, explained by Murray C from In Re Everett J, that give rise to an application of the “rule against double portions” and a “presumption of an intention to adeem”:
1. the classic case of provision made, by way of a portion, for the maintenance or advancement in life of a child in respect of whom a Will-maker has, or has assumed, the obligations of a person in loco parentis; and
2. the case of a Will-maker who intends to confer a gift for a particular purpose (which, to emphasise the point, might be a provision for maintenance or advancement in life).
Both types of case are governed by a purpose of one description or another, express or implied.
In these classes of case, the law looks to see if there is such an identity between a gift by Will and a subsequent inter vivos disposition to support an inference that the inter vivos gift was made in anticipation, and fulfilment, of the testamentary gift.
A presumption against double portions is not available otherwise than in the context of a legacy for a child (or a person similarly placed) or for a particular purpose.
As noted, where a presumption against double portions is not available, the donor must be proven to have had an intention to adeem, and the donee must have had knowledge of that intention, at the time of the inter vivos gift said to have effected an ademption.
Note that there is no warrant for extending the principles governing an ademption generally to dispositions of property between, say, spouses or de facto partners (as was the case in Reynolds) by a presumptive preparedness to characterise any such disposition as one made for the maintenance or advancement in life of a spouse or of a child of the parties’ relationship.
Per Lindsay J in Reynolds: “On the facts of a particular case, a presumption against double portions might operate as between a married couple or de facto partners; but it would require special circumstances not found in the present proceedings: a child-like dependency of the donee on the donor or a purposive legacy duly particularised.”
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DISCLAIMER: This article is provided for general information purposes only. It does not constitute specific legal advice or opinion. Although our aim is to provide you with as accurate information as possible, you should not act or rely upon the information in this article without seeking the advice of an experienced lawyer who specialises in the particular area of law relevant to your inquiry. Please do not to hesitate to contact Balfour Meagher to make further inquiries or to make an appointment to discuss the specifics of your situation with one of our very experienced and senior legal team members.
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[1] There are two ‘Lindsay Js’ here – one who heard the NSW case of Reynolds in 2017, and the other who heard the English case Re Cameron in 1999. While sharing the same surname, they are in fact different people. The Hon Justice Geoff Lindsay (Reynolds) http://www.austlii.edu.au/au/journals/NSWBarAssocNews/2012/26.pdf and the Hon Sir John Edmund Frederic Lindsay (Re Cameron): https://www.topfoto.co.uk/asset/490288/.
[2] inter vivos = during life: between living persons.
[3] pro tanto = “for so much”; “only to that extent”.
[4] in loco parentis = “in the place of a parent”: one who assumes liability for providing for a minor in the way a parent would do.
[5] Re Cameron established that the rule applies to gifts made by mothers as well as fathers. Re Cameron also confirmed the rule applies where gifts are made by an attorney on behalf of a person who has lost capacity; and that the gift does not have to be directly to the child of the donor; it can be paid to someone else on behalf of the child so long as it benefits the child (in Re Cameron money was used to pay the school fees of a grandchild of the donor).