When devises are actually not part of the estate
Many unexpected things can happen in the period between the execution of a will and the actual death. For example, a decedent may devise the family house in Key West to her granddaughter. Several years after executing the will, the decedent gets into financial troubles and sells the Key West house. With other matters on her mind, the decedent never gets to adjust the will and passes away. Does the granddaughter still have a right to the house? Does she get money instead? Does she get any value at all?
The legal term describing a situation when a particular asset devised in the will is not part of the estate is ademption by extinction. The Florida statutes cover ademption in Section 732.606 for specific devises, and Section 732.605 for securities. Ademption is not uncommon; the decedent may have owned the asset and later sold it, or could have never owned it all. The situation would be different if the grandmother gave the granddaughter the Key West house as a gift before passing away. In that case, the granddaughter’s devise would have been satisfied during the grandmother’s lifetime. Accordingly, this legal concept is called ademption by satisfaction and is not discussed in this blog post.
Only specific devises, i.e. particular unique assets such as the Key West house or my Picasso print, are subject to ademption by extinction. On the contrary, demonstrative, general, and residuary devises are not subject to ademption because they do not involve particular unique assets.
So what happens when the asset is not in the estate? Section 732.606 provides rules covering some but not all of the possible scenarios. If the statute applies, the testator’s intent is irrelevant. Owen v. Wilson, 399 So. 2d 498 (Fla. 5th DCA 1981). If none of the provisions apply, then it is necessary to examine evidence shedding light as to the testator’s intent. While majority of states adheres to the rule that testator’s rule is irrelevant in such a scenario, Florida courts have embraced the contrary minority approach. In re Estate of Jones, 472 So. 2d 1299, 1301 (Fla. 2d DCA 1985). It is also important to remember that a testator can avoid ademption by extinction by providing an alternate devise in the event the specifically devised asset is not part of the estate.
Let us first look at the scenarios covered under Section 732.606. Subsection 732.606(1) discusses situations when an individual is incompetent to manage his or her financial matters and the court appoints a guardian to take care of the individual’s property. The guardian may for example decide to sell the particular asset to pay for medical expenses for the individual, or get insurance proceeds if the asset gets damaged, unaware of the devise in the will. In such case, the specific devisee is entitled to a general pecuniary devise in the amount of the net sale prince, condemnation award, or insurance proceeds. Fla. Stat. 732.606(1).
Interestingly, if the individual is later declared competent, the statute provides for a one-year period during which the testator has a chance to adjust the will so that it reflects that the particular asset is no longer a part of the estate. If the testator fails to act within 1 year, the devisee loses the entitlement to the general pecuniary devise.
Subsection 732.606(2) further specifies devisee’s rights. As opposed to Subsection 732.606(1), Subsection 732.606(2) refers to all testators, not just those for whome guardians had been appointed. Ott v. Ott, 418 So. 2d 460 (Fla. 4th DCA 1982). In that case, the devisee is entitled to any remaining specifically devised property. Fla. Stat. 732.606(2). Further, the devisee is entitled to (a) any unpaid purchase price and security interest from a buyer in case the testator sold the property before death; (b) any unpaid amount of a condemnation award; (c) any unpaid insurance proceeds; and (d) any property owned by the testator because the testator foreclosed on property covered by a specifically devised obligation or received property instead of foreclosure. Fla. Stat. 732.606(2).
For all the other situations not covered by the statute, we must examine the testator’s intent. The case of Hall v. Jones from the Second District Court of Appeals is particularly illustrative. In re Estate of Jones, 472 So. 2d 1299, 1301 (Fla. 2d DCA 1985). In that case, the testator’s will contained only eleven specific devises and one residuary devise. In one of the specific devises, the testator devised a former home in Virginia to one of his nieces. Before the execution of the will, however, the testator had sold this home and received a note and deed of trust to secure payment of $42,000. After the testator executed his will, the deed of trust note was prepaid in full to the testator. The testator placed the proceeds of the prepayment into a separated money market account. The testator subsequently died without having changed his will. At trial, the niece attempted to introduce testimony that the testator knew that she needed money because of her debilitating health. However, the trial court refused to consider evidence regarding the testator’s intent and held that the specific devise of the Virginia home to the niece adeemed.
The Second District Court of Appeal court reversed and remanded. It held that Florida courts embrace the minority theory which takes into consideration the testator’s intent. Therefore, it is proper to consider matters bearing on the testator’s intent that occur subsequent to the execution of the will. However, this is true only in cases when the statutory provisions do not apply. The appellate court concluded that the trial court should have considered all relevant evidence pertaining to the testator’s intent in determining issues of ademption.
A seasoned attorney can draft the will so as to include clauses to prevent (or allow) ademption by extinction. Contact the attorneys of Chepenik Trushin LLP, who are ready, willing, and able to assist with your estate planning, probate administration litigation needs.