Wills, Trusts and Estates – Part 4

Church Law and Tax 1989-05-01 Recent Developments Wills, Trusts, and Estates Richard R. Hammar, J.D.,

Church Law and Tax 1989-05-01 Recent Developments

Wills, Trusts, and Estates

Sometimes, disputes arise between churches and heirs regarding lawful ownership of estate assets. Such a dispute was resolved in a recent California appeals court decision. A decedent’s will left her most valuable asset (an 18-acre tract of land) to a relative, and left any “residue” of her estate (i.e., assets remaining after the payment of specific gifts, expenses, and taxes) to a religious organization. The decedent entered into a contract to sell the 18-acre tract a few weeks before her death, but the closing did not occur until three days after her death. The religious organization claimed that since the property was not in the decedent’s estate as of the date of her death, the gift of the property to the decedent’s relative failed (“adeemed”) and the relative had no claim to the sales proceeds. Rather, the religious organization was the rightful owner of the proceeds, since the sales proceeds were properly characterized as part of the residue of the decedent’s estate. The court rejected this argument, and awarded the sales proceeds to the relative. It acknowledged that as a general rule “if a will makes a gift of specific property and the property no longer exists at the testator’s death or is no longer part of the estate, the gift is said to be `adeemed’ (revoked). No monetary equivalent is substituted for the gift, with the result that the [gift in the will] is nullified.” However, because of the “harsh effects” of ademption, the “California courts have sought to avoid ademption whenever possible” by applying various exceptions. One such exception provides that a gift of specific property will not be adeemed “where there are unpaid sales proceeds.” Accordingly, though the property specifically given by the decedent’s will to a relative was no longer part of her estate at death, the unpaid proceeds from the sale of the property were payable to the relative rather than to the religious organization that was to receive the residue of the estate. Of course, this same principle can work to a church’s favor if (1) it is given a specific gift of property in a will, (2) the property has been sold prior to the decedent’s death, and (3) not all of the sales price had been paid. Estate of Worthy, 252 Cal. Rptr. 462 (Cal. 1988).

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