Ademption & Equitable Conversion

The testator executed a will devising a home to Beneficiary.  Later, the testator entered into a contract to sell the home to Purchasers.  The testator died before the closing.  The trial court held that the devise adeemed and that Purchasers were entitled to specific performance of the contract.  The appellate court affirmed.

The court explained that once the testator executed the contract to sell the home, equitable conversion occurred.  In other words, in equity, the testator no longer owned real property (the home) but instead owned personal property (the contract right to the proceeds of the sale because the sale contract was specifically enforceable).  At the time of the testator’s death, he no longer owned the home and consequently the devise adeemed.

Moral:  Each testator who makes a specific gift of real property must be warned that the gift is likely to fail if he or she enters into a contract to sell the land even if the sale is not completed at the time of death.

Note:  Many states have anti-ademption statutes which would give the beneficiaries in this type of case the sale proceeds.