Chapter A. Changes in Property Or Entitlement

• Jurisdiction: Washington

A. CHANGES IN PROPERTY OR ENTITLEMENT

A.1. Classification of Gifts

For certain of the doctrines that follow, it will be necessary to consider the type of gift made in a will. There are four types or classifications for gifts in a will: specific, general, demonstrative, and residuary.¹ The court in Martin v. Barger² stated with approval the following general definitions:³

A specific legacy is a bequest of a specific article of the testator's estate, distinguished from all others of the same kind; as, for example, a particular horse, or piece of plate, or money in a certain purse or chest, a particular stock in the public funds, a particular bond or other instrument for the payment of money. Whether a legacy is specific depends wholly upon the language of the will. ...

The term "general" legacies comprises all those which are not either specific or demonstrative that is, those which are not gifts of some identical article or fund forming part of the testator's estate, nor gifts of a sum payable out of such an identified fund. They are, therefore, rather gifts of amounts than of things or pieces of property specially described and identified. ...

Demonstrative legacies are a peculiar kind which partake of the nature of both specific and general legacies, and combine the advantages of each. Demonstrative legacies are bequests of sums of money, or of quantity or amounts having a pecuniary value and measure, not in themselves specific, but made payable primarily out of a particular designated fund or piece of property belonging, or assumed to belong, to the testator.

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A gift often will be found to be demonstrative when that characterization will save it.⁴

In addition to the three classes of gifts quoted above, a fourth category, residuary gifts, is usually included, although it is itself a type of general gift. A residuary gift is one that covers the rest or remainder of the testator's property after all specific and general gifts, and after payment of debts, taxes, and expenses.⁵

Simple examples of the four categories set out above would be a specific gift of "my 1970 Cadillac," a general gift of "$1,000," a demonstrative gift of "$1,000, taken from my credit union account if available," and a residuary gift of "everything else I own."

The impact of these classifications will be felt most strongly in the application of the concept of ademption and in the order in which certain gifts will be paid or abated.⁶

A.2. Ademption

A.2.a. Ademption by Extinction

If an asset has been specifically given in the will of a testator and it is not in existence or owned by the testator at the time of death, it is said to have been adeemed, or more technically, adeemed by extinction. Only specific gifts can be so adeemed, because general and demonstrative gifts can be satisfied out of general assets of the estate and do not require the existence of any specific assets for their effectiveness. There is a presumption against specific gifts and in favor of general or demonstrative gifts unless a specific gift was clearly intended by the testator.⁷

In In re Doepke's Estates,⁸ the testator left to her son "the sum of $3000.00, being the amount of life insurance left by my husband to me, ...." The specific fund that represented the insurance proceeds had been depleted by the time of her death. If the gift had been specific, it would have been adeemed by extinction. Because the testator had left the "amount" of life insurance rather than the life insurance itself, however, the court determined that it was a general gift and therefore not adeemed.

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Under the common law the intention of the testator at the time the gift was adeemed is not relevant to the question of ademption. In other words, when the testator's actions operated to change the form of the asset specifically given, his or her intent (if indeed one existed) in regard to whether that change would constitute an ademption will not be considered.⁹ What is relevant, however, is what the testator intended to give at the time of making the gift. If the testator intended a gift of money, regardless of where it was held, then a change in bank account will not affect the gift. But if the testator intended a gift of the contents of a specific account and closed the account, there would very likely be an ademption. Use of words like "my 1925 Rolls-Royce" may lead, therefore, to a construction of a specific gift,¹⁰ which can then be adeemed by extinction. Without a specific reference such as the word "my," a gift of "a 1925 Rolls-Royce" could well be construed as general; and if the testator had at the time owned a 1925 Rolls-Royce but later sold it, the executor could be required to go out and purchase one to fulfill the general gift in the will.¹¹ (Of course, a gift of "my car" would usually apply to any car the testator owned at death, the will being ambulatory.)¹²

Other examples of ademption by extinction might involve a gift of specific real property that was sold prior to death, or of a specific automobile that was destroyed and rendered valueless prior to death. In each case the specific asset given was not owned or in existence at the time of death, and therefore the will could not operate to pass that asset.

The more difficult questions arise with assets that have been only partially disposed of or have been exchanged (voluntarily or involuntarily) for other assets. The Uniform Probate Code (U.P.C.)¹³ eliminates ademption by extinction in a number of areas in which it has traditionally operated. Under the code a specific legatee or devisee will be entitled to:

(1) any balance of the purchase price, together with any security agreement, owed by a purchaser at the testator's death by reason of sale of the property;

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(2) any amount of a condemnation award for the taking of the property unpaid at death;

(3) any proceeds unpaid at death on fire or casualty insurance on, or other recovery for injury to, the property;

(4) any property owned by the testator at death and acquired as a result of foreclosure, or obtained in lieu of foreclosure, of the security interest for a specifically devised obligation;

(5) any real property or tangible personal property owned by the testator at death that the testator acquired as a replacement for specifically devised real property or tangible personal property; and

(6) if not covered by paragraphs (1) through (5), a pecuniary devise equal to the value as of its date of disposition of other specifically devised property disposed of during the testator's lifetime, but only to the extent it is established that ademption would be inconsistent with the testator's manifested plan of distribution or that at the time the will was made, the date of disposition or otherwise, the testator did not intend ademption of the devise.

This approach allows the specific taker to trace the proceeds of certain assets and secure them, even if the specific asset given is no longer owned or in existence. It is presumably based on the assumption that in those cases, a testator would want the specific beneficiary to take the proceeds from the property specifically given. Washington has not adopted the Uniform Probate Code approach, nor, for that matter, any other comprehensive statute on ademption. There are no cases in Washington dealing with voluntary or involuntary conversion of the assets after the execution of the will. From the court's approach in other ademption cases, there is nothing to suggest it would deviate from the common-law approach in this area.¹⁴

There is no ademption when property devised by will is made subject to a contractual commitment after the will is executed but before the death of the testator. Under RCW 11.12.060, any "bond, covenant, or agreement made for a valuable consideration by a testator to convey any property, devised or bequeathed" in a prior will is not deemed a revocation of that devise or bequest.¹⁵ Instead the property passes to the named taker, subject to the same remedies against the taker as would have been available against the

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heirs or next of kin of the decedent had the property passed to them by intestate succession. In Washington Escrow Co. v. Blair,¹⁶ the testator had specifically devised a parcel of real property to a third party and had named his son as the taker of his residual estate. Shortly before his death, the testator contracted to sell the parcel that had been specifically given in the will. The sale was subject to certain financing conditions and the warranty deed, purchase money receipt, and escrow instructions were deposited with an escrow company. The testator died shortly thereafter, and following his death, the purchaser paid the balance of the purchase price and the escrow company recorded the deed for the purchaser. Both the devisee and the residual taker claimed the proceeds of the sale. The court held that the title to the property vested in the specific devisee at the testator's death. The sale was not a "completed transaction," because there were conditions remaining to be fulfilled at the time of death. Under the statute, an executory contract or agreement to sell when there is no conveyance prior to death does not operate as a revocation of the gift made in the will; but in effect the specific taker steps into the shoes of the decedent and undertakes all of the benefits and burdens under the contract.¹⁷ If, however, the purchaser had met all of the conditions in the agreement before the death of the seller, fulfilling all of the escrow instructions, and the deed had been delivered from escrow to the grantee (apparently also required by the court), then the property would have belonged to the purchaser at the time of death, and the gift in the will would have been adeemed. The proceeds of the sale then would have passed to the residual taker.

Ademption must occur after the testator...