When the assets of an estate are insufficient to satisfy debts, claims, expenses of administration, and devises under the will, the rules of abatement will be applied. The rules of abatement determine the order in which devises shall be given effect when there are not enough assets to satisfy all the gifts designated. For example, this would apply when there are specific bequests of cash but not there is not enough cash to satisfy all the bequests and debts.
Abatement is the reduction of testamentary legacies because estate assets are insufficient to pay debts and other legacies. If the will does not specifically direct the order of abatement, shares of the estate normally abate in the following order: (1) property not disposed of by the will; (2) residuary devises; (3) general devises; and (4) specific devises. Minn. Stat. § 524.3-902(a). A specific devise is a gift of a particular portion of the estate, such as securities, land, or items or personal property, which can be differentiated from the rest of the decedent’s property. A general devise may be satisfied out of any of the estate assets and does not describe any specific property. The residue is the estate assets remaining after all debts, expenses, taxes, and specific devises have been satisfied. Abatement within each class is pro rata, meaning each devisee in a class receives a proportionate reduction.
So when applying these rules, specific bequests are satisfied before residuary bequests. For this reason it is important to plan your estate carefully and to work with an experienced attorney.
The order of abatement may be altered in those situations where the statutory order of abatement would defeat the “implied purpose of the devise”. Minn. Stat. § 524.3-902(b).
However, the normal order of abatement does not apply to devises in favor of a surviving spouse. The underpinning of this rule is the fact that a surviving spouse who does not elect against the will is deemed to take her share of the estate as a purchaser for value, rather than a recipient of bounty. This is true whether the share the spouse receives under the will is greater or less than the share he or she would receive if he or she elected against the will.
For assistance with estate administration or to prepare your estate plan, contact us at (507) 288-5567 or send an email.