What is Abatement?
Abatement describes what happens to an estate when there is not enough money, property, or other assets to pay off administration expenses, debts, and accomplish what the testator (the person making a simple will) wants to do such as cash bequests.
The first type of bequest that abatements usually deal with are residuary bequests. Residuary bequests give beneficiaries of the estate the remaining assets left in the estate after the other assets in the estate are allocated. However, if there are not enough assets to pay for creditor claims on the estate, then there would be no residuary estate. In this case, the residuary bequests are null and void.
The next type of bequest that may be affected by an abatement is a general bequest which is considered as a cash bequest. General bequests abate proportionately. For example, say you had three children and left $5,000 to two of your children and $10,000 to one child. However, if you owe $10,000 to creditors, your estate will be worth only $10,000. In this case, two of your children would receive $2,500 each and your third child would receive $5,000.
Demonstrative bequests receive preference over general bequests if both sources of assets are in the estate. For example, if the testator leaves one of their beneficiaries $10,000 from a specific checking account, the money within this account will be used to pay the demonstrative bequests before any general bequests. However, if the account is no longer active or cannot sufficiently pay the demonstrative bequest, the demonstrative bequest will become a general bequest. Further, this request will go through abatement appropriately if the estate does not have enough assets to pay all of the general bequests.
Trust and estate laws are complex. This is so no matter the type of trust you decide to establish. As such, it is extremely important to have legal representation that can help you correctly set up your trust. The Antonoplos & Associates trust and estate lawyers have over 20 years of experience helping clients in DC, Maryland, and Virginia set up qualified domestic trusts. With this knowledge and experience, we can help with any legal issues that occur from setting up your trust.
Furthermore, Peter Antonoplos, founder and managing partner of Antonoplos & Associates has an LLM in Taxation from Georgetown University Law Center. With this knowledge, Peter can help you effectively set up your trust to maximize the tax savings you receive from setting up this account in DC, Maryland, and Virginia.
Contact Our DC Law Office for More Information
Finally, for more on what is ademption, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding estate planning, check out our blog.