Ademption Results from Attorney-in-Fact’s Sale of Specifically Bequeathed Asset
April 30, 2015
In Matter of Conklin, 2015 NY Slip Op 25094 (Sur Ct, Nassau County 2015), a contested accounting proceeding, the Nassau County Surrogate’s Court addressed, among other things, whether specifically bequeathed property sold by an attorney-in-fact prior to the decedent’s death, adeemed. My article entitled Ademption and the Power of Attorney, published in the Fall 2009 New York State Bar Association Trusts & Estates Law Section Newsletter, contains a thorough discussion of the ademption doctrine in the context of conveyances by attorneys-in-fact. While the article predated revisions to the General Obligations Law intended to curb abuses of power by attorneys-in-fact, this recent decision demonstrates that the law has not evolved significantly on the subject despite such changes.
As explained in my article,
Ademption is the ‘extinction or withholding of some legacy in consequence of some act of the testator which, though not directly a revocation of the bequest, is considered in law as equivalent thereto, or indicative of an intention to revoke.’ A bequest adeems when property that had been specifically devised no longer exists at the time of the testator’s death. (Jaclene D’Agostino, Ademption and the Power of Attorney, NYSBA Trusts & Estates Section Newsletter, at p.7, Vol. 42 [Fall 2009]).
In Conklin, one of the decedent’s two attorneys-in-fact, Lori Conklin (“Lori”) sold his cooperative apartment while he was residing in a nursing or rehabilitation facility. The decedent’s will had specifically devised the apartment to his two children and first wife, with a direction that it be sold after his death and the proceeds divided among the three of them. But a sale prior to death meant that the proceeds would become part of the decedent’s residuary estate, of which Lori’s mother and co-agent, Joan Conklin (“Joan”), was the sole beneficiary.
The attorney who prepared the power of attorney testified at the hearing. He explained that Lori initially contacted him regarding preparing a power of attorney and doing Medicaid planning for the decedent. Lori and Joan had several meetings with the attorney on the subject– none of which included the decedent. The attorney advised them that the decedent should execute a new power of attorney because the old one (under which Lori and Joan had both been appointed) did not contain a major gifts rider. He further advised that the decedent’s apartment should be sold for purposes of Medicaid planning, and the proceeds thereof be deposited into an account in the decedent’s name.
The decedent executed the new power of attorney on March 24, 2010, at the nursing or rehabilitation facility where he resided. It named Lori and Joan as co-agents, and contained a major gifts rider, authorizing the agents to make gifts to themselves or others in any amount (see GOL §5-1514). The attorney met the decedent for the first time on that date, when he supervised the execution of the document. He testified that at that meeting, he discussed with the decedent his recommendation that the apartment be sold.
The attorneys-in-fact subsequently sold the apartment. On the date of the closing, the attorney contacted the decedent to ensure that he was still alive. The agents then deposited the $125,500 proceeds from the sale into an account in the decedent’s name. The decedent died approximately two weeks thereafter.
The proceeds benefitted Joan, as the residuary beneficiary of the estate. Mere days after the decedent’s death, Lori used her power of attorney to close the decedent’s account (a fact that raises its own issues), and utilized the proceeds to pay off Joan’s home equity loan.
Despite the fact that Joan ultimately benefitted from the sale, the court rejected the contention that there had been a breach of fiduciary duty by the attorneys-in-fact in selling the apartment and thus, that the proceeds of the sale should be returned to specific devisees. The court explained the general rule that if a specifically bequeathed item is sold, given away, lost or destroyed during a decedent’s lifetime, then the bequest generally fails, or adeems. “Moreover, ‘it matters not whether [the sale] came to pass because of an intentional or voluntary act of the testator’” (Matter of Conklin, supra at *5 [quoting Matter of Wright, 7 NY2d 365, 367 ). In addition, “once the devise is found to be adeemed, the court is not permitted to substitute something else for it. This includes tracing the proceeds from the sale of the real property” (Matter of Conklin, supra at *6 [relying on Labella v Goodman,198 AD2d 332 [2d Dept 1993]; see also Matter of Wallace, 86 Misc 2d 175, 180 [Sur Ct, Cattaraugus County 1976] [opining proceeds of a sale of specifically bequeathed property “do not constitute the legacy bequeathed,” and thus, “the general rule of ademption applies and the legacy fails”]).
Given counsel’s advice to sell the apartment, and his contacting the decedent on the date of the closing, the court concluded that there had been no breach of fiduciary duty by the attorneys-in-fact, and thus, the foregoing general rules applied to this situation. Consequently, the specific devisees of the apartment were not entitled to the proceeds of the sale. The bequest had adeemed. Although this result might seem less than equitable on its face, it is in accordance with the laws of New York.