Abatement of debts and legacies
Encyclopedia
Abatement of debts and legacies is a common law
doctrine of wills
that holds that when the equitable assets of a deceased person are not sufficient to satisfy fully all the creditors, their debts must abate proportionately, and they must accept a dividend
.
In the case of legacies when the funds or assets out of which they are payable are not sufficient to pay them in full, the legacies abate in proportion, unless there is a priority given specially to any particular legacy. Annuities are also subject to the same rule as general legacies.
The order of abatement is usually:
A general devise, is a monetary gift to a specific person to be satisfied out of the overall estate. For example, if James's will states that he is leaving $500,000 to his son Sam then the money would be a general devise.
A residual devise is one left to a devisee after all specific and general devices have been made. For example James's will might say: "I give all the rest, residue and remainder of my estate to my daughter Lilly." Lilly would be the residual devisee.
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
doctrine of wills
Will (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
that holds that when the equitable assets of a deceased person are not sufficient to satisfy fully all the creditors, their debts must abate proportionately, and they must accept a dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
.
In the case of legacies when the funds or assets out of which they are payable are not sufficient to pay them in full, the legacies abate in proportion, unless there is a priority given specially to any particular legacy. Annuities are also subject to the same rule as general legacies.
The order of abatement is usually:
- IntestateIntestacyIntestacy is the condition of the estate of a person who dies owning property greater than the sum of their enforceable debts and funeral expenses without having made a valid will or other binding declaration; alternatively where such a will or declaration has been made, but only applies to part of...
property (property not disposed of in the will itself) will abate first - The residuary estateResiduary estateA residuary estate, in the law of wills, is any portion of the testator's estate that is not specifically devised to someone in the will, or any property that is part of such a specific devise that fails. It is also known as a residual estate or simply residue. The will may identify the taker of...
will abate next - General devises (gifts of cash) will abate next
- Demonstrative devises (gifts of stockStockThe capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
, or orders to sell property and give the proceeds to the beneficiary) will abate next - Specific devises (gifts of tangible propertyTangible propertyTangible property in law is, literally, anything which can be touched, and includes both real property and personal property , and stands in distinction to intangible property....
) will abate last
Definitions
A specific devise, is a specific gift in a will to a specific person other than an amount of money. For example, if James's will states that he is leaving his $500,000 yacht to his brother Mike, the yacht would be a specific devise.A general devise, is a monetary gift to a specific person to be satisfied out of the overall estate. For example, if James's will states that he is leaving $500,000 to his son Sam then the money would be a general devise.
A residual devise is one left to a devisee after all specific and general devices have been made. For example James's will might say: "I give all the rest, residue and remainder of my estate to my daughter Lilly." Lilly would be the residual devisee.