03 December 2020

Ademption of Gift: Taylor v. Platt

Status of a redeemed $250,000 life assurance policy raised legal arguments about ademption on death of Faye Leslie Taylor in 2018.  Did the money go to residuary beneficiaries of her estate, or to two named charities? 

Ms Taylor and Jeanette Platt commenced a relationship in 2006.  They jointly purchased a Motueka property in 2013.  Ms Taylor contributed $227,500; a bank loan signed by both completed the purchase.  At the time of the Motueka purchase, Ms Taylor held a $250,000 AMP life assurance policy taken out nearly thirty years previously.  The High Court was told Ms Taylor was diagnosed in 2016 with terminal ovarian cancer.  A will signed some months later stated proceeds of her life policy were to be used to pay off her share of the Motueka bank mortgage, with any surplus going to two named charities.

AMP paid out on the policy in full three months prior to Ms Taylor’s death, at her request.  Life insurers make early payment at their discretion on proof of imminent death to thwart exploitative third parties.  Sectors of the money-lending industry developed a tactic of offering to buy life policies from terminally-ill policyholders at a steep discount just prior to death.  A policy holder got to enjoy the money whilst still alive, they said.  Months later, the money lender would collect, at a handsome profit.  In response, life insurers decided to cut out the middle man; redeeming policies in full prior to imminent death.

The early redemption of Ms Taylor’s AMP life policy raised legal questions for her estate.  On her death, the life policy no longer existed; it had been paid out.  The High Court was asked if the gifts funded from her life policy had adeemed.  If the asset named in a will as the source of a gift no longer exists on death, the gift fails.  Ademption would see residuary beneficiaries of Ms Taylor’s estate inheriting.

Justice Cull ruled ademption did not apply in this case. Ms Taylor’s will stated ’the proceeds of [her] life insurance policy’ were to be used first to pay off her share of the Motueka mortgage and secondly be paid to two charities.  The ‘proceeds’ still existed Justice Cull ruled; they had been paid into a NZCU Baywide account.  The funds had remained untouched in the bank account up to her death, bar deductions for monthly bank charges.

The two charities sharing part of the $250,000 life policy were named as: Nelson Society for the Prevention of Cruelty to Animals Incorporated and Second Chance Group.  Ms Taylor’s half share of the 2013 bank loan was $125,000.

Taylor v. Platt – High Court (3.12.20)

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