McGee v. McGee
1980 R.I. LEXIS 1476, 122 R.I. 837, 413 A.2d 72 (1980)
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Rule of Law:
Under the 'in specie' or 'identity' theory of ademption, if property that is the subject of a specific legacy is not found in the testator's estate at the time of death, the legacy is adeemed, regardless of the testator's intent.
Facts:
- Claire E. McGee executed a will that, in Clause Eleventh, bequeathed $20,000 to her friend, Fedelma Hurd.
- Clause Twelfth of the will bequeathed all of McGee's Texaco stock and 'all of my monies standing in my name on deposit in any banking institution' to her grandchildren.
- At the time the will was executed, McGee maintained a substantial sum of money in savings accounts at People's Savings Bank.
- Approximately five weeks before her death, McGee's son, Richard, acting under a power of attorney, withdrew about $50,000 from her savings accounts.
- Richard used nearly $30,000 of the withdrawn funds to purchase U.S. Treasury 'flower bonds' in his mother's name to reduce potential estate tax liability.
- Richard later informed his mother of the bond purchase, and she ratified the action.
- At the time of Claire E. McGee's death, the funds were no longer in her bank accounts but were held as bonds, and the estate lacked sufficient assets to satisfy both the bequest to Hurd and the original value of the bank accounts for the grandchildren.
Procedural Posture:
- Richard J. McGee, as administrator of his mother's estate, filed a complaint for declaratory judgment in the Superior Court (trial court).
- The complaint sought instructions on how to distribute estate assets between a general legacy to Fedelma Hurd and a specific legacy to the testatrix's grandchildren.
- The trial justice found the legacy to the grandchildren was specific but, seeking to effectuate the testatrix's intent, held that the funds could be traced to the bonds and the legacy was not adeemed.
- Consequently, the trial justice ruled that the grandchildren's legacy should be satisfied first, causing the bequest to Fedelma Hurd to fail due to insufficient assets.
- Fedelma Hurd, as the losing party, appealed the judgment of the Superior Court to the Rhode Island Supreme Court.
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Issue:
Does the withdrawal of funds from a testator's bank accounts and their subsequent use to purchase U.S. Treasury bonds by the testator's authorized agent cause the ademption of a specific legacy of 'all monies standing in my name on deposit in any banking institution'?
Opinions:
Majority - Weisberger, J.
Yes, the withdrawal of funds from the testator's bank accounts and their use to purchase U.S. Treasury bonds adeemed the specific legacy to the grandchildren. The court determined that the bequest of 'all of my monies standing in my name on deposit in any banking institution' was a specific legacy because it designated a particular and identifiable source for the funds. Adhering to the modern 'in specie' test for ademption, the court's inquiry is limited to two questions: whether the gift is specific, and if so, whether the specifically bequeathed property exists in the estate at the time of the testator's death. The testator's intent is irrelevant. Here, the money on deposit did not exist at the time of death; it had been converted into U.S. Treasury bonds. The court held this was a substantial change in the character of the asset, not a merely formal change like moving money between different banks. Because the specific item bequeathed—money on deposit—was no longer in the estate, the legacy was adeemed.
Analysis:
This decision solidifies the jurisdiction's adherence to the 'in specie' or identity theory of ademption, which prioritizes simplicity and predictability over a subjective, case-by-case inquiry into the testator's intent. It establishes that a change in the form of an asset from cash in a bank account to a government bond is a substantial change that results in ademption, not a mere formal change that would preserve the gift. This case serves as a strong caution for estate planners, highlighting the need to draft will provisions that account for potential changes in the form of assets, for instance by including language such as 'or the proceeds thereof' if the testator intends for the value of an asset to pass to the beneficiary regardless of its form at the time of death.
