Understanding Abatement in Wills

When a Testator creates a Will, whether through a professional Will Writer or by preparing it themselves, they carefully decide on the gifts they wish to leave to their loved ones. However, if an abatement occurs, these gifts may not be fully distributed as intended. Instead, they might need to be used to pay off outstanding debts and expenses.  

In this estate, the property made up 78% of the bequeathed assets, while the bank accounts constituted the remaining 22%. Consequently, the property proceeds covered 78% of the shortfall, with the remainder covered by the bank accounts. Although both the niece and the friend received funds from the estate, the amounts were reduced to cover the debts and expenses. 

Abatement explained 

Abatement happens when the estate's debts, funeral costs, and testamentary expenses exceed the available funds, leaving insufficient resources to cover the legacies specified in the Will. This situation typically arises when a Will includes multiple legacies—both specific (e.g., "I leave my house at 1 Main Street to my son Thomas") and pecuniary (e.g., "I give £10,000 to my son Thomas")—but the remaining assets (the residue) are not enough to cover the estate's obligations. 

In estates of abatement, the estate is still considered solvent since the total assets exceed the debts and expenses. However, the Executors may not have immediate access to enough liquid assets to cover these obligations. To address this shortfall, the legacies must be reduced (abated) accordingly. This situation differs from insolvency, where the estate's debts and expenses outweigh its assets, resulting in reduced payments to creditors. 

When abatement occurs, the law provides a specific order for reducing bequests to cover the outstanding payments. This order is outlined in Part II of the First Schedule of the Administration of Estate Act 1925: 

1. Residue: The residue of the estate is reduced first. If the residue is insufficient to cover the necessary payments, there will be nothing left to distribute to the residual beneficiaries. Unless a residual beneficiary is also receiving a legacy under the Will, they will not receive anything.

2. Pecuniary Legacies: If the residue is exhausted, the next step is to reduce the pecuniary (money) legacies. If there are multiple pecuniary legacies, they will be reduced proportionally. For example, if Thomas is to receive £5,000 and Rebecca £10,000, Rebecca’s legacy would be reduced by £2 for every £1 reduction in Thomas’ legacy, maintaining the same rate of reduction. If this category is exhausted and there is still a shortfall, only then would the process move to the next category.

3. Specific Legacies: Finally, if needed, specific legacies will be reduced. This can be challenging, as it may involve selling an asset, such as a property, to cover the remaining shortfall. However, if the beneficiary of a specific legacy is willing to cover the shortfall from their own funds, this could prevent the asset from being sold, allowing them to retain it. Each case should be reviewed individually.

A contrary provision in the Will could alter this order, such as specifying that a pecuniary legacy must be paid first or that a property is given free of mortgage. 

How to avoid abatement? 

For Will Writers, it is crucial to take a full account of the Testator’s assets and liabilities at the time of drafting the Will to minimise the risk of abatement. This review should also be updated if the Testator revises their Will. While new debts arising after the Will's execution may be beyond the Will Writer's control, careful consideration during the preparation stage can help mitigate potential issues. 

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