What if I No Longer Own What I’ve Willed?

Suppose you leave your 2003 Ford Mustang to your son in your will, but then you sell. To avoid this kind of situation, you need to keep your will up to date. Any time you make a major change in what you own, you should change your will, too. willing property that you do not own can lead to complications and the rules governing this problem vary considerably from state to state.

If you have left someone a specific piece of property, for example, a Renoir painting or a 2003 Ford Mustang, but you no longer own that property when you die, the beneficiary is out of luck. Technically, this is called ademption but people who don’t inherit the property usually call it something else.

If you leave cash gifts but you don’t leave money to cover them, a proportionate reduction, called abatement, is made. If you fail to include in your will instructions about what to do if a cash shortfall occurs, state laws govern how the executor must proceed. Some states require that property first be taken from the assets that remain, after all specific gifts are made, which are then sold so cash gifts can be paid. Other states require a pro rata reduction of cash gifts without the sale of specific property. Since states’ laws do vary, you should check with an estate attorney in your state.

Examples:

1. Residuary
   Steven leaves $20,000 each to four beneficiaries, Dave, Robin, Sal and Stuart. When he dies, only $40,000 cash remains in his estate, but Steven’s estate also contains a house that is left to the residuary beneficiary, Beverly. To give each beneficiary the full amount of cash gift, the house must be sold and the residuary beneficiary, Beverly, gets what is left after all cash gifts are paid.
2. Pro-Rata
   Jessica leaves cash gifts of $20,000 to each of three friends, Katie, John and Mary. But when she dies, only $30,000 is left in her estate. The three beneficiaries each receive $10,000.

The bottom line: Make a new will whenever changes in what you own affect your gift-giving plans. Don’t leave more than you own.

Case Studies: The Impact of Outdated Wills on Gift-Giving Plans

Case Study 1: Ademption of a Specific Gift

Sarah had always been passionate about art and owned a valuable Renoir painting. In her will, she specifically bequeathed the painting to her niece, Emma. However, a few years before her passing, Sarah decided to sell the painting to cover some financial difficulties.

Unfortunately, she never updated her will to reflect this change. When Sarah passed away, Emma was disappointed to learn that the Renoir painting was no longer part of the estate, and she did not receive the intended gift.

Case Study 2: Abatement of Cash Gifts

John was a successful businessman who had amassed significant wealth over the years. In his will, he left generous cash gifts to his children and grandchildren. However, due to unforeseen financial circumstances towards the end of his life, John’s estate had insufficient funds to fulfill all the cash gifts specified in his will.

As a result, the executor of the estate had to proportionately reduce the cash gifts for all beneficiaries, causing disappointment and financial adjustments for the recipients.

Case Study 3: Failure to Account for Change in Ownership

Michael was a car enthusiast and owned a vintage 1965 Ford Mustang, which he intended to leave to his son, David, in his will. However, a few months before his passing, Michael decided to sell the car to a collector.

Unfortunately, he never updated his will to reflect this change. When Michael passed away, David was surprised to learn that he would not be inheriting his father’s beloved Mustang, as it was no longer part of the estate.