None of us like thinking about our own mortality, but in today’s times, it’s more important than ever to plan ahead to ensure that your estate is in order to cover all of your costs and debts while providing financial security to your family members after you pass on. Estate law is complex in order to account for the wide range of factors and variations that go into each individual’s unique estate plan. If you’re unsure how to create an effective plan, our estate planning attorneys in Bethesda are here to help. JDKatz has proudly served as your trusted estate lawyers in Maryland and D.C. since 2000, relying on a diverse team of experienced professionals to deliver a comprehensive and personalized approach for your needs.
From tax advice to dedicated criminal litigation, the JDKatz team is here to help deliver the best outcome for your case and deliver optimal results for here and in the future. One vital benefit of professional estate planning is that it accounts for all of the administrative costs associated with your estate. Failure to plan ahead can lead to the abatement process, which can severely disrupt your family’s lives once you pass way. Today, we’ll briefly highlight what abatement is versus ademption and the value of planning for any expenses in advance. If you’re worried about your legacy and its stability when you die, be sure to reach out to our experts for guidance!
What is Abatement?
In terms of your will and estate, certain costs and debts will be collected after your death. From creditors’ claims to bequests for your family members, the finances of your estate play a major role in how the process will develop. Estates that are too small in value may not be able to cover all of these financial obligations while still accounting for beneficiary bequests. Anytime the bequests exceed your assets, abatement will occur. Often referred to as abatement of legacies, this process results in some or all gifts for beneficiaries to be reduced.
The Order of Abatement
As the testator, you can place instructions in the will that organizes your order of abatement for reducing amounts to pay debt responsibilities. Failing to provide clear arrangements means that the state will determine the order in which your estate is abated to satisfy all creditor amounts. Some jurisdictions will allow for differentiation between real and personal property, with real property consisting of anything that cannot be moved. Most states, like Maryland, do not distinguish between these two property types when deciding the order of abatement:
- Property not taken care of by the will. Any finances or property that is not bequeathed in the will that passes through intestacy will be collected first and foremost. As the assets not designated in your will (which is rare), the court will assign this aspect for abatement.
- Any residual legacies. Known as the gift remaining after all general legacies have been addressed, residuary estates consist of any remaining amounts not paid out of the general assets of the estate.
- General legacies. Consisting of the general assets of your estate, this legacy is comprised of all valuables and cannot be distinguished from one another upon your death. From vehicles to stocks, anything of value is considered a general legacy. Maryland holds an order for these assets in regards to abatement, with the order of dependents, then creditors, then surviving spouses from first to last affected.
- Demonstrative devises. Gifts that are devised from bank accounts, stocks, or bonds can be considered demonstrative. These assets often represent a direct dollar value.
- Specific devises. Any gifts given at the time of your death that is specifically bequeathed to an individual falls under this category. Commonly consisting of assets such as property, your will provides exact details for what to be done with your estate. If you have already designated a beneficiary for your house, for example, you can allocate finances for another beneficiary through a special savings account created for the purpose.
The purpose of deciding on an order for abatement is to allow for general assets to be utilized first before impacting specific instructions. Gifts that are more general in nature and less valued in terms of value for your will be used first to satisfy any existing debts. Your specific devises, for example, will come out of a personal fund and not the general assets category. It’s important to remember that property being abated will normally be done pro rata, which is the rate of reduction in gifts when the estate cannot pay for all of its obligations.
Property that Does Not Face Abatement
Our Bethesda estate planning attorneys will work with you to create an effective approach that minimizes your financial costs and concerns after you pass away. One important aspect of abatement is the fact that it does not pertain to non-probate property. Your will and the probate process will go through an extensive review of your estate, yet some assets are transferred without interruption. Property such as life insurance policies, joint ownerships with a spouse, assets with payable-on-death (POD) designations, and more are enacted quickly after you die, avoiding probate and possible abatement.
The process of abatement serves to satisfy all creditors upon your death. This action can disrupt your family’s inheritance, causing more stress and concern during a time that is already full of sadness. It helps to find professional assistance, which is where our estate lawyers in Maryland come in to help. JDKatz is here to serve as your trusted team to provide comprehensive estate planning solutions. Contact us today to learn more!