Avoid the temptation to make a lot of specific gifts in your Will.
Gifts of sums of an amount of cash is common and usually does not present a lot of problems but gifts of money in a particular bank account can fail.
Specific gifts can fail for the following reasons:
Ademption happens when property given under a will is no longer in the testator’s estate at the time of the testator's death. Such a gift is considered adeemed, and the gift fails. For example, if a will gives the testator's car to a specific beneficiary, but the testator does not own a car at the time of death, the gift would be adeemed and that beneficiary receives no gift at all.
Ademption can occur to gifts of personal assets (watches, jewellery, the money in a particular bank account) as well as gifts of real estate.
Gifts of cash amounts (eg the sum of $10,000) are never adeemed. If the cash in the testator's estate is not sufficient to satisfy the gift, then other assets in the residuary estate will need to be sold to raise the necessary cash.
Think about it. Ademption - a word you have never heard of. If there is actually a word that exists to describe such a situation just how often does it occur? Too often unfortunately.
It is always better to make a gift of an amount of cash unless the subject matter of the gift has value beyond the obvious market value or is a family heirloom.
A beneficiary must outlive the testator to be able to benefit under a Will. A legacy is said to have lapsed and becomes part of residue if the beneficiary dies before the testator.
Where the gift is a share of residue, the share of any predeceasing beneficiary will pass under the intestacy rules unless the Will goes on to say what is to happen to that predeceasing beneficiary’s share.
Besides ademption and lapsing, specific gifts can also fail where a testator cannot legally make that gift.
If a property is held as a joint tenant by the testator with another person, any gift by the testator of that property will fail as the surviving joint tenant is entitled to the testator’s share and the testator is not able to make such a gift.
Gifts of real estate in another country may also fail.
A common example would be a gift of a testator’s property in Australia being ineffective because of Australia’s foreign investment laws.
Australia bars foreigners from owning Australian real estate except in limited circumstances. Inheritance under a Will is not one of those permitted circumstances.