Condo sale before testator’s death adeemed legacies

Where the bequests to certain beneficiaries were to be funded from the sale of the testator’s condominium, the sale of the condominium before the testator’s death adeemed the bequests. The Commissioner of Accounts erred by concluding otherwise. Her recommendation that the executor and a bonding company were liable for a $200,000 judgment is rejected.

Overview

Brook, an attorney, prepared a will for Hooe. Hooe lived in an assisted living facility. Her expenses exceeded her monthly income. Hooe gave Daphne Sawyer, her cousin, a power of attorney. Sawyer decided to sell Hooe’s condominium to generate more income. The net proceeds of the March 24, 2017, sale, more than $269,000, were placed in Hooe’s bank account.

When Sawyer sold the condominium, Hooe was incompetent. She died on Dec. 5, 2017. She was unmarried and had no children. Her living relatives were cousins. Brook was appointed Hooe’s executor. Brook distributed $130,000 to beneficiaries identified in Article 1 (B) of Hooe’s will and $100,000 to Mary Grymes Sawyer, the residuary beneficiary identified in Article 2 (C).

There were insufficient funds to pay bequests to beneficiaries named in Article 2 (B). Brook sought guidance from the Commissioner of Estates.

After a hearing, the commissioner issued her decision. The commissioner framed the issue as “‘whether the legacy of the sales proceeds from the [condominium] in Article 2(B)’ of the Will was deemed and whether the legacies to the Article 2 (B) beneficiaries thus failed or, alternatively, whether the Article 2(B) beneficiaries ‘are entitled to receive the monetary value of the legacies.’”

In the commissioner’s opinion, the Article 2 (B) legacies were “demonstrative bequests” that did not adeem. The commissioner determined that the Article 2 (B) beneficiaries were entitled to payment from the estate’s general assets ahead of both the residuary beneficiaries, and the Article 1 (B) legatees.

Because Brooks distributed the estate assets differently, the commissioner recommended that the $200,000 bond Brooks posted be forfeited and that Brooks and bonding company should be held liable for a judgment in that amount.

Brooks filed exceptions. The court took the matter under advisement and now issues its ruling.

Discussion

The primary issue is whether the Article 2 (B) legacy is a demonstrative legacy. After reviewing King’s Ex’rs v. Sheffey’s Adm’r, 35 Va. 614 (1837) and later authorities, “if land from which sums certain are to be paid is sold by the testator, the legacies are adeemed.”

Further, and contrary to the commissioner’s conclusion, “the fact that certain sums are to be paid from the sale of land does not convert the bequest from a specific bequest to a demonstrative bequest.” Moreover, “[t]here is nothing in the Will which requires that the Article 2 (B) bequests be paid from some other source if the sale of land did not generate sufficient funds to pay all of the Article 2 (B) bequests.”

The commissioner maintained that even if the Article 2 (B) bequest was not a demonstrative legacy, then Code § 64.2-415 (C) controls the distribution.

“Code § 64.2-415 (C)  provides in pertinent part: ‘Unless a contrary intention appears in a testator’s will … a bequest or devise of specific property shall … be deemed to be a bequest of a pecuniary amount if such specific property, during the life of the testator and while he is incapacitated, was sold by an agent acting within the authority of a durable power of attorney for the testator[.] …

“‘For purposes of this subsection, (i) the pecuniary amount shall be the net sale price … (ii) no adjudication of the testator’s incapacity before death is necessary, and (iii) the acts of an agent within the authority of a durable power of attorney are rebuttably presumed to be for an incapacitated testator.’ …

“Mr. Brook is correct that the substantive provision of  Code § 64.2-415 (C) does not apply as its initial language states ‘Unless a contrary intention appears in a testator’s will’ and there is a contrary intention that appears in the Will, i.e., that the Article 2 (B) beneficiaries were only to receive the ‘proceeds of the sale’ of the [condominium] if and when it was sold after the death of Ms. Hooe.

In sum, because [the] property was sold before the death of the testator, all the Article 2 (B) bequests were adeemed by operation of the language of the Will; as a result, the substantive language of Code § 64.2-415 (C) does not apply.”

Brook’s exceptions to the commissioner’s report are sustained. His distributions were correct. The legacy from the proceeds from the condominium sale was adeemed and legacies to the Article 2 (B) beneficiaries failed.

In Re: Estate of Hooe, Case No. FI 2018-323, Nov. 23, 2021 Fairfax Circuit Court (Gardiner) Deborah Murrell Wheihan for Roger S. Brook. VLW 021-8-126, 10 pp.