Please could you advise on what happens when you and others are left a house in a will (to be sold), but the house was already sold by the person who made the will, and the will was never changed? What happens to the money left from the remainder of the sale? Should it have been divided among the family members who were named in the will as benefiting from the sale of the house, or would the fact that the house was already sold make this portion of the will invalid? (The house was sold by the deceased himself some months before he died).
Capital gains tax was left unpaid. Should this have been paid from the remainder of the sale, or should the wife of the deceased have inherited the proceeds and been exempt from CGT?
The executor proceeded as if the house never existed and carried out the rest of the instructions on the will, paying the expenses incurred from the proceeds of the sale, and leaving the remainder to the wife of the deceased.
I know it is a complicated question, and it caused a lot of arguments, as no one knew where they stood legally.
There was also the matter of property and a bank account overseas. As far as we are aware, there was no will made abroad, but the deceased left the property to his wife in his Irish will. What can be done in this situation?
Mr F.A.
Oh boy, this is a bit of a mess all round. I understand from the wording of the letter that you are not the executor, but the first thing I would say is that whoever is needs to be getting some specific legal and tax advice even at this late stage, not least because I believe they are leaving themselves financially exposed if the estate has been managed in the way you set out.
Cases like this are also a salutary reminder of the importance of updating one’s will when your circumstances change. And selling a house that you had intended to be sold upon your death with several people listed to benefit is certainly a change in circumstances.
Having said that, and understanding that I am no lawyer, I am fairly clear on some points. If a specific bequest relates to an asset that is no longer part of the estate when the person intending to give it has died, then the bequest falls. This, I learned today, is called ademption by extinction.
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I’ll admit ademption is a new word by me. It is defined as the complete or partial withdrawal of a legacy by an act of the testator (the person whose will this is) during his life. Ademption by extinction happens when the asset being left to a person in a will no longer exists either because it was sold or destroyed in the lifetime of the person who owned it.
You can also have ademption by satisfaction which is where a gift that was intended to pass under a will is handed over during the lifetime of the person who owns it – say a work of art gifted to a child during a person’s lifetime, but which was also mentioned in their will.
A key part of the executor’s duties is the gathering of all the assets of the deceased and also an accounting and settlement of any outstanding debts
Anyway, the key thing is that when an asset is sold during someone’s lifetime, it is simply not there to be taken into account when it comes to the executor managing the estate. And there is no provision that will ringfence money in the person’s bank accounts upon their death as representing the value of the house.
The bequest falls and those who were due to receive money from the sale of the house after this man’s death are not compensated from the estate just because it was sold before he died. They simply lose out as far as that property is concerned, though obviously they can still benefit from the will if they are named in relation to any other assets or in a residuary clause – which is a kind of catch-all clause at the end of a will to address how any assets not already specifically provided for earlier in the will are to be distributed.
The money from the sale of the property goes back into the estate and is distributed in accordance with the other provisions of the will. It could make specific provision for certain financial bequests, or it could simply say the money is divided in equal or other shares to a number of people, or the money in any bank accounts could fall into a residuary clause.
In this case, if the man’s wife was the residuary beneficiary of all of the estate (other than the now irrelevant provision regarding this property) after all costs had been paid, she gets everything, including the financial proceeds of the house sale, or what is left of them.
So the executor appears to have been correct in ignoring the issue of the house. However, they could find themselves in some difficulty over the failure to address any capital gains tax liability.
If this was the dead person’s main family home, it would be exempt from capital gains tax and it could pass to the wife. However, if it is a second property – an investment or a holiday home – then it would have been liable for capital gains. And if that had not been sorted by the time the man in question died, then it would be a Revenue debt on his estate.
A key part of the executor’s duties is the gathering of all the assets of the deceased and also an accounting and settlement of any outstanding debts. They cannot simply ignore such a debt.
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If the property had been sold years before, they might have some excuse that they could not have known of the outstanding debt, but in this case, you say, the property was sold only months before he died. In those circumstances – and especially seeing as how it appears to be common knowledge that the capital gains tax liability was left outstanding – the executor has a responsibility to deal with it.
More importantly, they – and not the beneficiaries under the will – can be held personally responsible in law for any negligence in carrying out their duties.
It makes sense to have a will drawn up locally where you own property abroad, covering that asset only, just to make sure that your affairs are in order
A second potential landmine comes with the foreign assets. My understanding is that the money in the bank accounts can be distributed under the terms of an Irish will. However, there is no certainty that the same can be said of the physical property.
You don’t say in which country this property is located. The issue is that many countries, even in Europe, have their own rules for how property is passed on after death and how that transfer is taxed. If you know the country, clearly it is possible to find out what those rules say in that jurisdiction. Without that information, I cannot say where the wife, the estate, the executor and any other potential beneficiaries stand.
Any time I speak to a solicitor in this area, the advice is invariably that it makes sense to have a will drawn up locally where you own property abroad, covering that asset only, just to make sure that your affairs are in order. It makes sense to liaise with solicitors in both jurisdictions to make sure you have nothing in an Irish will that will clash or contradict with the legal requirements in another country or the terms of a foreign will.
There is standard phraseology that solicitors use in drawing up wills to make sure no such clash occurs. I’m a little nervous as you seem to know a fair bit about this will and yet there is no hint of any such clause being present. Quite the contrary, in fact. But that does not mean there was no foreign will drawn up and the executor would have been expected to check if that was the case.
From the executor’s point of view, it means there might be an outstanding tax liability in that country for which, again, they could be liable. And from the position of this man’s wife, there might be questions about her ownership of this property, especially if it clashes with the succession law of the country in question – or its rules of intestacy if there is no local will.
All told, you are correct. It is complicated and, given the gaps in the information you have been able to provide, my answer is necessarily vague in parts as well. If you know where this foreign property is, it should be possible to find out what rules apply to succession of property in that country, and any taxes due.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
