Husband (H) and Wife (W) own main residence as tenants in common in equal shares.
They both make basic wills. They each leave their respective shares in the property (in those very basic terms with no provision for proceeds etc) to their respective children from previous relationships. Wife leaving it to two daughters and Husband to his one son. The residuary estate in both H and W wills divide everything equally between all three children.
W died first. H subsequently enters into care home and the house is sold. Half the proceeds of sale are paid to W’s two daughters and the H’s half is paid into his bank account. H subsequently dies.
W’s daughters now argue, that as the property was sold and the proceeds paid into H’s account during his lifetime, the proceeds now form part of the residuary estate - of which they are entitled to a third each. Son of H argues the alternative and that he should be entitled to the half share (whatever remains), before any residuary funds are divided three ways per the will.
Who is correct? Is there a trust created for the half share in the property?
On H’s death has not his specific gift of his interest in the main residence made under his will failed by ademption? The subject matter of the gift was an interest in the main residence and not an interest in the sale proceeds.
It therefore seems that the proceeds form part of residue and thus each child takes a 1/3rd interest.
I hope my analysis is wrong as it does not in my opinion produce the outcome H and W intended. Put simply, prima facie H wanted his 50% to go to his son and W wanted her property 50% to pass to her two daughters. They, I assume, didn’t think through what if the property was sold but, if they had, I’d assume they would simply say then divide the proceeds 50/.50.
I think the doctrine of ademption is the starting point and I think it is going to be difficult to overturn its operation in this instance.
I am unsure of the specifics of the disposal, as to whether it was made by H himself, by an attorney or a Deputy. Taken from Lexis:
Disposals under the Mental Capacity Act 2005: Paragraph 8 of Schedule 2 contains an exception to the doctrine of ademption. Where the property of a person lacking capacity (P) has been disposed of by a deputy or by the Court of Protection exercising its powers under MCA 2005, and under P’s Will or intestacy another person would have taken an interest in the property but for the disposal, and on P’s death any property belonging to P’s estate represents the property disposed of, the other person may take the benefit of any property that has been substituted for the property bequeathed.
Also from Lexis: “The doctrine has been held not to apply where the asset has been altered between the date of the Will and the date of death but the alteration was effected without the authority of the testator”.
These are the only arguments I can see that could be made to seek to disapply the doctrine.
It seems to me that H’s gift of his half share in his Will was probably specific and was adeemed by the sale. So H needed to change his will to give a legacy to the son equal to the half share of sale proceeds or make him sole residuary beneficiary. I think it unlikely that any constructive trust/proprietary estoppel would have arisen out of what H and W might have agreed when they made their wills. The proof would have to be there and I suspect that the actual eventuality was simply not foreseen by them or anybody else.
Were these wills professionally drafted by a person who might at least be argued to be at fault for not anticipating the problem? I would hope to have at least warned that after the first death the survivor would then be living in a house owned as to 50% by the child/children of the deceased and of how to safeguard the right to occupy. I would hope to have done that even if the children were all from the current relationship. Otherwise I would have wanted to be clearly instructed (in writing in terms) not to worry as the survivor would have unshakeable confidence in their children and their own relationships, actual or prospective.
If this was a DIY job cadit quaestio and caveat testator!