The distribution of property in accordance with a decedent’s will or trust can be a straightforward matter, or it can prove to be a trying event for the family. But, what if, for example, a parent dies and specifies in a will that a particular family member is to get a particular item of property and it doesn’t exist at the time of death? When that happens, the legal doctrine of ademption is invoked. That’s what this case involves.
Ademption is a legal rule used to determine what happens when property bequested under a will is no longer in the testator’s estate when the testator dies. In general, for devises of specific items of property, called specific gifts, the property is adeemed, and the gift fails. For example, if a parent leaves a tractor to a specific person, but the parent didn’t own the tractor at the time of death, then the gift is said to have been adeemed and the beneficiary would receive no gift at all. Some gifts, however, are never adeemed. An example would be a gift of cash. If there is not enough cash in the testator’s estate to satisfy the gift, then other assets in the residuary estate are sold to raise the necessary cash. Some gifts are in a gray area, where the testator’s specific intent must be determined. Also, ademption may be waived if the property leaves the estate after the testator has been declared incompetent and a guardian has been appointed. This case involved a variation on that point.
Here, the decedent’s stepdaughter deeded a tract of real estate to step-mom and her husband (the stepdaughter’s father). They had a duplex built on the property. The husband died in 1976 and step-mom (the decedent in this case), became the sole owner of the duplex. In 1981, she executed a will which left half of her interest in the duplex to the stepdaughter. The other half was to go to her son. In 1986, step-mom entered a nursing home and later a retirement home. In the meantime, she executed a durable power of attorney which named her daughter as her agent. Since it was a durable power, the daughter had the authority to act on mom’s behalf as soon as it was executed and the daughter could continue to act even if her mother later became incapacitated. In other words, the daughter’s power continued until mom died.
The daughter began methodically selling mom’s assets to fund her care, and did so until the only asset left was the duplex. When the income from the duplex was not enough to fund mom’s care, the daughter listed the duplex for sale. After mom died, the stepdaughter claimed that she was entitled half of the proceeds of sale of the duplex. The trial court denied the stepdaughter’s claim, reasoning that the power of attorney remained in effect until mom died and that mom’s intent was to sell assets to fund her nursing home care. The gift of the duplex was adeemed. The Court of Appeals affirmed.
On further review, the Supreme Court noted that Iowa had not strictly applied the rule of ademption of specific bequests since the 1960s. Instead, the Court noted that the rule in Iowa was one of not applying ademption when the decedent was incompetent at the time the specifically bequested property was sold. But, the rule had been developed and applied in the context of a guardianship, not an agent acting under a power of attorney. That was a new issue in Iowa, although other state courts have addressed the issue with mixed results. The Court decided to follow the Kansas approach and held that ademption had not occurred with respect to the duplex because the evidence in the case showed that the decedent had only a general knowledge that assets may have to be sold at some time in the future to fund her care. She did not have specific knowledge of the need to sell the duplex. As such, the sale was involuntary to the decedent and ademption did not occur. She had no chance to change her will once she knew that the duplex was no longer part of her estate.
The remedy was that the stepdaughter was entitled to one-half of the proceeds of sale to the extent they hadn’t been expended for the decedent’s care. In re Estate of Anton,731 N.W.2d 19 (Iowa Sup. Ct. 2007).