Life can change in the blink of an eye. As such, it is pretty safe to assume that things can change a great deal over the course of several years, including a person’s financial situation. This can lead to an heir receiving a much smaller inheritance or even no inheritance upon the death of a loved one.
In many cases, beneficiaries of a deceased party are completely unaware of a decedent’s financial affairs. While the family has believed for years that Grandma or Grandpa were extremely wealthy and there was a large inheritance to be collected, reality may show differently. They may be so deep in debt that it will take every penny in the bank account to pay off creditors. Therefore, estate funds will be depleted and there will be none left to disburse to beneficiaries. This scenario is known legally as “abatement“, and it happens more often than one might think. By definition, abatement occurs when an estate does not have enough money and assets combined to pay all debts, expenses and costs.
A similar situation, known as “ademption”, can occur regarding physical, non-monetary assets. It occurs when property that was willed to an heir by a decedent is no longer owned or available. For instance, consider that Uncle Joe willed his 1969 Mustang to his nephew, Jimmy, in a last will and testament prepared 15 years prior to his death. However, Uncle Joe suffered some financial hardships during that time and was forced to sell the vehicle for income. Since the asset is no longer owned, Jimmy does not receive anything upon his uncle’s death and the gift is deemed null and void.
In estate planning, an attorney can be a great resource in making sure money and assets of an estate are placed in such a way that they are protected from loss.