An abatement during estate settlement or inheritance is a reduction of gifts to beneficiaries when the funds and assets of an estate are insufficient to pay them.
What you need to know
Abatement means a reduction in the assets that were supposed to be given to a beneficiary.
If the decedent does not specify the order of abatement, courts follow an order according to local or state law, usually beginning with the assets in the will not gifted to anyone specific.
Avoiding abatement is why gifting percentages instead of specific dollar amounts is popular.
Abatement is what happens when an estate doesn’t have the cash or assets to give what is stated in the will.
An executor has to pay off the estate’s debts, taxes, and other expenses such as legal services, executor fees, and so on. Sometimes the testator (person who created the will) overestimates how much they will be able to give, triggering abatement.
When abatement happens, some of the decedent's bequests have to be reduced. In other words, people won’t get everything they thought they would inherit. Normally, the decedent expresses the order of abatement in their will, but sometimes they don’t.
If they didn’t, abatement generally occurs in this order:
- Residuary estate assets
- General bequests
- Specific bequests last.
That just means anything that wasn’t specified in the will is first to be taken from, then the general catch-all requests, and then the last things to be taken to pay off debts and expenses are the direct gifts given by name to beneficiaries.
Abatement is a royal pain and can be extremely frustrating to your family and beneficiaries. It essentially means that they may not get what someone wanted them to receive via the will.
One smart strategy to get around abatement is to give beneficiaries gifts in percentages instead of dollar amounts. This means that whatever debts and expenses the executor has to take care of won’t affect a beneficiary’s perception of what they are owed.
What to do when a loved one dies
When people die, they leave behind a life that must be closed out. Don't tackle it all alone. From planning the funeral to tackling the legal & financial estate, here's an ultimate checklist of all the things an executor needs to do following the loss of a loved one.
Learn moreSam’s will states that $500 would go to both of her son’s, her 1965 Ford Mustang to her brother, and her residuary estate to her sister. After Sam’s death, the residuary estate to pay all debts and expenses was insufficient by $1,000.
Because of this, her sister (residuary) and both of her sons (general bequest) receive nothing. Her brother will still inherit the car because it was a specific bequest.
In collaboration with
Jack Wilkes
Jack Wilkes is a trust professional and Private Wealth Client Account Manager at Northern Trust Wealth Management in Boston, MA.
Jack received his undergraduate degree in Trust and Wealth Management from Campbell University in North Carolina, along with a minor in Financial Planning. Jack continued his education with an MBA in Financial Services, also from Campbell University.
Jack is a frequent industry writer on trust, wealth management and fiduciary topics.
In collaboration with
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