Selling Property Before Death: Does the Gift in Your Will Still Work?

By Sofia Saad

Imagine that your will says a property is to be sold and the proceeds divided among particular beneficiaries.

You later decide to sell the property yourself. Contracts are exchanged, but you die before settlement.

Who receives the money?

Does it still go to the beneficiaries named in the will, or does the gift disappear because the sale had already begun?

The NSW Supreme Court considered that question in Re Estate Morrison [2026] NSWSC 1304.

What happened?

Janice Margaret Morrison made a will directing that her Campbelltown unit be sold and the net proceeds divided equally among three charities.

Shortly before her death, she entered into a contract to sell the unit for $505,000. Contracts had been exchanged, but settlement had not occurred when she died.

Importantly, the contract contained a condition allowing the vendor to rescind the contract if either party died before completion.

After Ms Morrison’s death, her estate representative completed the sale. He was also one of the beneficiaries of the residuary estate.

He then asked the Court to determine whether the charitable gift had failed, or been “adeemed,” because Ms Morrison had contracted to sell the property before her death.

If the gift had failed, the proceeds could instead have formed part of the residuary estate.

What is ademption?

Ademption can occur when a will makes a specific gift, but the relevant property is no longer part of the deceased’s estate when they die.

For example, if a will gives a particular car to a beneficiary but the will-maker sells that car during their lifetime, the beneficiary will not ordinarily receive the sale proceeds unless the will or another legal rule produces that result.

However, identifying whether a gift has been adeemed is not always as simple as asking whether the property was placed on the market or whether contracts were exchanged.

The Court must consider:

• the wording of the will;
• what was actually gifted;
• the terms of the sale contract;
• what property and contractual rights remained at death; and
• the relevant succession, property and equitable principles.

 
What did the Court decide?

Justice Lindsay held that the charitable gift had not been adeemed.

The will did not simply give the unit itself to the charities.  It directed that the unit be sold and that the net proceeds of sale be divided between them

At the date of death, Ms Morrison remained the registered proprietor. The estate also retained important rights under the sale contract, including the right triggered by the death clause to rescind the contract.

Because of that condition, the purchaser did not have an unconditional right to force completion of the contract at the moment of Ms Morrison’s death.

The Court concluded that property answering the description of the testamentary gift remained within the estate. The net proceeds were therefore to pass under the charitable gift rather than the residuary clause.

The judgment resolved that substantive issue. Final orders, including the precise declaration, calculation of the net proceeds and costs, were left for further consideration.

Does this mean a gift always survives if settlement has not occurred?

No.

The decision does not establish a universal rule that a gift survives whenever the will-maker dies between exchange and settlement.

A different result may follow where:

• the will gifts the property itself rather than its sale proceeds;
• the contract is unconditional;
• the purchaser can obtain specific performance;
• the will uses different language;
• the property has already been transferred or substituted; or
• another statutory exception applies.

 
Every matter turns upon the precise wording of the will and contract, and the rights remaining at the date of death.

What does this mean for people making a will?

If your estate plan refers to a particular property, it should also explain what happens if that property is:

• sold before your death;
• under contract but not yet settled;
• compulsorily acquired;
• destroyed and replaced by insurance proceeds;
• transferred into a company or trust; or
• replaced with another property.

 
Useful drafting may specify whether the beneficiary is to receive:

• the property itself;
• any unpaid purchase price;
• the identifiable proceeds of sale;
• replacement property; or
• a fixed or substitute gift if the original asset is no longer owned.

 
Your estate plan should also be reviewed whenever you exchange contracts to sell a specifically gifted property.

What should executors and administrators do?

An estate representative should not assume that a gift has failed simply because the deceased signed a contract before death.

Before distributing the estate, they should obtain and review:

• the current will and any codicils;
• the complete contract for sale;
• title information;
• settlement records;
• correspondence about the transaction; and
• evidence of the deceased’s remaining contractual rights.

 
Extra care is required where the estate representative may personally benefit if one interpretation of the will is preferred.

In that situation, affected beneficiaries should be notified and independent advice or judicial directions may be appropriate before the sale is completed or the proceeds are distributed.

The practical lesson

The period between exchange and settlement can create unexpected consequences for an estate.

A property sale may change the nature of an asset, but it does not automatically determine who receives the money under the will.

Careful drafting, and a prompt estate-plan review when a significant asset is sold, can prevent an expensive dispute later.

The Madison Marcus Wills & Estates team can assist with estate-planning reviews, the interpretation of wills and questions arising where property has been sold or placed under contract before death.

This article provides general information only and is not legal advice. The outcome in any matter depends upon the wording of the will, the contract and the circumstances existing at the date of death.