Though a person may spend a lot of time in preparing a well thought out Last Will and Testament, things do not always go as planned. If that person does not update their will as ownership of assets change over the years, then those which are deemed to be the inheritance of another person may not always be available. In addition, if a person’s financial situation changes, then upon their passing the estate may not hold enough funds to distribute money to a beneficiary. There are rules in place for these situations which determine whether a beneficiary is still entitled to anything.
Ademption is what occurs when property which was identified in a will is no longer owned or available at the time of death. In this scenario, the beneficiary to whom the property or gift was deemed will receive nothing. If the asset no longer exists then, in layman’s terms, the gift no longer exists either. There are two exceptions to this rule. First, if insurance proceeds are payable to the estate due to the loss of property which a beneficiary was to receive, then that beneficiary is entitled to those proceeds. Second, ademption does not apply in cases where a person has left a cash inheritance to a beneficiary and specifically named the source or account from which it is to come. Even if that account is closed at the time of death, the beneficiary is still entitled to those funds from the estate.
Abatement is what occurs when an estate does not have enough money and assets are combined to pay all of the owed debts, expenses and court costs. When this happens, all creditor claims will be paid from estate funds first, then if there are any funds left they will be allocated out to beneficiaries. If there are no monies left after creditors have been paid, all beneficiary claims are null and void.
A party would be ill advised to count solely on an inheritance for income. Most times, beneficiaries are completely unaware of the debts of a decedent. Creditor claims take priority in estate matters, and can easily dry up estate funds. An attorney can be a great help in making sure assets and funds of an estate are protected.