Thankfully, there are legal workarounds to ademption called anti-ademption rules. These rules can be found under the
Succession Law Reform Act (SLRA) and the Substitute Decisions Act, 1992 (SDA) .
Here’s how the rules work under section 20(1) and (2) of the SLRA:
13.2 Understanding Anti-Ademption Rules
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Lesson 1 – Preparing a Will
Section 20(1): What happens to property in your will after you make changes to it
Say you own a house and write in your will that you're leaving it to someone. Maybe later you
decide to rent out part of it, renovate it, or make some other changes. Good news - these
changes won't mess up your will. Whatever interest/ control you still have over that property
when you die, that's what passes through your will.
Section 20(2): When your property turns into something else
Sometimes the property you mentioned in your will changes into something different before
you die. The law says the person who was supposed to get your property gets whatever it
turned into instead.
Here's what this means based on section 20(2)(a) - (d):
If you made a deal involving the
property but haven't finished it yet
Let’s say you signed an agreement of purchase and sale to sell your house,
which you gifted to your daughter, Michelle, in your will, but hadn’t closed the
sale yet before you died. Michelle, as beneficiary of the gift, would get the
rights from that agreement.
Then your beneficiary gets the rights
from that deal.
Section 20(2)(a)
Let’s say the government needs your property (i.e., expropriate your
property) to develop a transit line and offers you $400,000. Michelle would
get the $400,000 compensation.
Let’s say you sell your house but hold a $600,000 mortgage from the buyer
→ Michelle gets the right to collect those mortgage payments
Let’s say your house burns down and the insurance company owes you
money for the house.
If something happened to the
property (specifically a loss or
damage to the property)
Then your beneficiary gets the
insurance money for the loss or
damage to the property, whether
the loss or damage occurred before
or after the making of the will.
Section 20(2)(b)
Section 20(2)(c)
If the government needs your
property and will pay you for it
Then your beneficiary gets the
compensation
Section 20(2)(d)
If you sold the property but you're
collecting mortgage payments on it
Then your beneficiary gets those
payments.
Let’s say that Dave wrote in his will that he’d like his friend, William, to have his comic book
collection. Months later, Dave passes away. But just before he died, Dave signed a deal to sell his
comic book collection to a comic book shop for $50K, which would have been paid out to him two
weeks after the date of his death.
Does this mean William is out of luck?
Nope, thanks to section 20(2)(a) of the SLRA! Here’s what would happen: William would be entitled to the $50K
that would have been paid out to Dave.
Example
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Lesson 1 – Preparing a Will
Michelle would get the insurance money.
If an item that was meant to be gifted to a beneficiary was being managed by a guardian (or someone else with legal
authority because the testator was incapable of managing it) and the guardian sold that item, then the beneficiary would
get cash equal to the value of the item (without interest) from the residual estate.
13.2.1 Anti-Ademption Rule under the Substitute Decisions Act, 1992 (SDA)
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Meet Barbara, who wrote her will and specifically left:
Everything else (the "residue" - let's say $200,000 in savings) to be split between her other
two children, Mike and Sarah.
Her cottage (worth $600,000) to her daughter Emma;
Her antique car collection (worth $400,000) to her son James; and
Example
The Substitute Decisions Act, 1992, is a statute that governs substitute decision-makers (e.g. a guardian or attorney for
property), who are appointed to make decisions on behalf of a person who is unable to make important decisions.
Section 36 of the SDA has anti-ademption provisions that protect beneficiaries if a guardian disposes of property that is
the subject of a specific gift.
Here’s how it works:
Later, Barbara developed severe Alzheimer's. Her power of attorney, Tim, had to:
Sell the cottage for $600,000 to pay for her care; and
Sell the car collection for $400,000 for additional medical expenses.
When Barbara passes away, here's how it works:
Section 36(1) says Emma and James don't lose their gifts just because the property was sold. They
have a right to the money from those sales:
Emma is entitled to $600,000 (cottage sale proceeds)
James is entitled to $400,000 (car collection sale proceeds)
But here's where Section 36(2) becomes important. The residue (remember, $200,000) isn't
enough to pay both Emma and James their full amounts ($1,000,000 total needed).
So they share the $200,000 residue proportionally:
Emma gets 60% ($120,000) because her gift was 60% of the total ($600,000/$1,000,000)
James gets 40% ($80,000) because his gift was 40% of the total ($400,000/$1,000,000)
Mike and Sarah get nothing because there's nothing left in the residue
Deciding what to do with the family home or cottage can be tough. Here's what you need to consider:
Trustee Selling Property: Unless your will says otherwise, the estate trustee will likely
have to sell the property and invest the money. That’s because an estate trustee has a
duty to convert non-income-producing assets, especially real estate properties, into
income-producing assets.
14.0 Dealing with Family Property
Minor Children: If you have minor children, think about whether the person making
decisions for them (i.e., the one with decision-making responsibility) should be able to
use the family home. You’ll also want to think about whether your minor children can sell
the house or ask the one with decision-making responsibility to leave the home once
they all become adults.
Gifting Multiple Children: If you're leaving the home to multiple children, you need to
decide how they'll share it. They can have equal shares (either as tenants-in-common or
joint tenants) or unequal shares (as tenants-in-common). If the will doesn’t say how the
home will be shared, then the children will have to share it as tenants-in-common.
If you choose joint tenancy, know that any child can break the joint
tenancy later on without needing consent from the other joint tenants. If
a joint tenancy is broken, then the owners’ ownership status will change
to tenants-in-common.
It could be helpful for the children to sign a co-tenancy agreement in
which they agree on how they can sell or transfer their share of the
property. You may decide to mention this agreement in your will as
either a suggestion or as a requirement for your children to sign before
getting the property.
A joint tenant can unilaterally break a joint tenancy
(otherwise known as, “sever a joint tenancy”) in two ways.
They can either:
Transfer their share to someone else; or
1.
Transfer it to themselves.
2.
Either option involves registering a new transfer using
Teraview. Once that transfer is registered, it automatically
breaks up the joint tenancy. After that, the property
owners don't hold the property as joint tenants anymore -
instead, they become what we call "tenants in common."
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Lesson 1 – Preparing a Will