When someone creates a last will and testament, the estate they expect to leave behind may look very different from the estate that actually exists at death. Medical expenses, long-term care costs, taxes, creditor claims, administrative expenses, changes in investments, and the sale or loss of property can all reduce the assets ultimately available to beneficiaries.

Sometimes an Arizona estate does not have enough property to satisfy all obligations and still make every gift provided for in the will. When that happens, Arizona's rules concerning abatement of testamentary gifts may determine which beneficiaries receive less than the amount originally intended.

 

Understanding abatement in Arizona wills is therefore important both when administering an estate and when preparing or updating an Arizona estate plan.

 

What Is Abatement in an Arizona Estate?

 

In probate and estate administration, abatement generally refers to the reduction of gifts or distributions when the assets available for distribution are insufficient to satisfy them in full.

Arizona law establishes a default order governing which types of property and testamentary gifts are reduced first. That order appears in A.R.S. § 14-3902.

 

Unless the will provides otherwise or the testator's estate plan requires a different result, Arizona law generally provides that property abates in the following order:

1. Property not disposed of by the will;

2. Residuary devises;

3. General devises; and

4. Specific devises.

The distinction among these categories can have a significant financial impact on beneficiaries. Arizona law also generally requires proportional abatement among beneficiaries within the same classification.

In addition, the statutory order is not necessarily absolute. If the will specifies a different order, or if applying the default order would defeat the testator's testamentary plan or the purpose of a particular gift, a different result may be appropriate.

 

1. Property Not Disposed of by the Will

The first property subject to abatement under Arizona's default rules is property not disposed of by the will.

 

This situation can arise when a will makes gifts of particular assets but contains no provision addressing other property the testator may own at death.

 

For example, suppose Mike's will provides that his house goes to his brother Steve and his Camaro goes to his brother Walt. At Mike's death, however, he also owns a checking account and a mutual fund. If the will contains no provision disposing of those additional assets, they may constitute property not disposed of by the will.

 

Under Arizona's statutory abatement order, those assets generally abate before testamentary gifts falling into the other categories.

 

This is one reason a professionally prepared Arizona will will ordinarily contain a residuary clause. A residuary clause provides instructions for property remaining after other gifts and estate obligations have been addressed.

Do-it-yourself wills and outdated estate planning documents sometimes omit an effective residuary provision, potentially creating unintended consequences during probate. If you are creating or reviewing a will, working with a Tucson estate planning attorney can help ensure that both specifically identified assets and property acquired later are addressed.

 

2. Residuary Devises

 

The second category to abate under Arizona law is the residuary devise.

 

The residue of an estate generally consists of the property remaining after debts, expenses, taxes, and other testamentary gifts have been addressed.

Using the same example, suppose Mike's will provides:

 

• The house to Steve;

• The Camaro to Walt; and

• All the rest, residue, and remainder of his estate to Steve and Walt in equal shares.

The final gift is a residuary devise.

 

Because residuary beneficiaries receive what remains after other obligations and gifts are satisfied, their inheritances can change substantially depending on the size and composition of the estate at death.

This makes careful will and estate planning particularly important when residuary beneficiaries are intended to receive a meaningful or approximately equal portion of an estate.

 

3. General Devises

 

The third category in Arizona's statutory abatement hierarchy consists of general devises.

A general devise is commonly a gift of a fixed dollar amount or quantity of property payable from the estate's general assets rather than from one specifically identified asset.

For example, a will might state:

“I give $10,000 to my mother.”

That is generally a general devise. The will does not require the personal representative to use any particular bank account, investment, or other specific asset to fund the gift. Instead, the $10,000 can ordinarily be paid from assets otherwise available to the estate.

If the estate lacks sufficient property to satisfy all distributions, general devises ordinarily abate after property not disposed of by the will and residuary devises, but before specific devises.

 

4. Specific Devises

 

The final category in Arizona's default order of abatement is the specific devise.

 

A specific devise is a testamentary gift of a particularly identified item or asset. Examples might include:

• “I leave my residence at 123 Main Street to Steve.”

• “I leave my 1969 Chevrolet Camaro to Walt.”

• “I leave my shares of XYZ Corporation to my daughter.”

• “I leave the funds in my specifically identified investment account to my children in equal shares.”

The defining feature is that the will identifies the particular property being given rather than simply directing payment from the estate generally.

A gift involving money can therefore sometimes qualify as a specific devise. For example, a gift of “$20,000” is ordinarily general, while a gift of “the balance of my savings account at ABC Bank, account ending in 1234” may be specific because it is tied to an identified asset.

 

Because specific devises are the final category in Arizona's default abatement order, they ordinarily receive greater protection from abatement than residuary and general gifts.

That does not, however, guarantee that a beneficiary will receive a specifically devised asset. Other probate principles, including creditor rights, estate administration requirements, and ademption when specifically devised property is no longer owned at death, may affect the ultimate distribution.

 

Can an Arizona Will Change the Order of Abatement?

 

Yes. Arizona's statutory abatement hierarchy is a default rule, not necessarily an inflexible requirement.

 

Under A.R.S. § 14-3902(B), if the will expresses a different order of abatement, that direction can control. The statute also recognizes that the default order should not be applied when doing so would defeat the testamentary plan or the express or implied purpose of a particular devise.

 

This creates an important estate-planning opportunity.

 

A carefully drafted will can address which assets or beneficiaries should bear estate expenses or reductions first. That may be particularly useful when a testator wants to protect a particular beneficiary, preserve a family residence, coordinate gifts among children from different relationships, or account for significant differences between probate and non-probate assets.

An experienced Arizona estate planning attorney can help structure these provisions so that the will more accurately reflects the client's priorities.

 

Abatement Is Different From an Insolvent Estate

 

Abatement can arise even when an estate is not technically insolvent.

 

An insolvent estate generally has insufficient assets to satisfy its enforceable debts, expenses, and other obligations. Abatement, by contrast, may also become relevant when the estate can satisfy its obligations but does not have sufficient property remaining to make every testamentary distribution in full.

 

For example, an Arizona estate might contain $300,000 in assets and incur $100,000 in enforceable debts, expenses, and other charges. The estate may have sufficient assets to satisfy those obligations. But if the will calls for distributions that exceed the $200,000 remaining for beneficiaries, some testamentary gifts may need to abate.

 

For families already administering an estate, a Tucson probate attorney can help determine what property is available for distribution, which claims and expenses must be addressed, and whether Arizona's abatement rules affect beneficiary distributions.

 

Abatement and Arizona Community Property

 

Arizona is a community property state, which can add another layer to the abatement analysis for married decedents.

A.R.S. § 14-3902 contains additional rules addressing estates that include both separate property and community property. Among other things, the statute addresses how community debts, separate debts, and expenses of administration are charged against those different categories of property.

 

Accordingly, determining what is actually available to satisfy a devise may require more than simply adding up the assets listed in the probate estate. Characterization of property and liabilities can matter as well.

 

Living Trusts and Other Estate Planning Tools Can Affect the Analysis

 

Not every asset passes through a will.

 

Assets held in a properly funded revocable living trust, property held with survivorship rights, retirement accounts, life insurance, payable-on-death accounts, and other assets subject to valid beneficiary designations may pass outside the probate estate.

 

For that reason, evaluating potential abatement problems requires looking at the entire estate plan, not simply the language of the will.

For example, leaving one child a substantial beneficiary-designated retirement account while leaving another child a testamentary gift through a will may produce an unintended imbalance if the probate estate later decreases substantially.

 

Coordinating wills, living trusts, beneficiary designations, account ownership, and real estate titles can help reduce these risks and better align the ultimate distribution with the estate owner's objectives.

 

Why Arizona Estate Plans Should Be Reviewed Periodically

 

It is impossible to predict precisely what assets a person will own—or what liabilities an estate will face—years after a will is signed.

A sound estate plan should therefore be reviewed periodically, particularly after major changes involving:

• The purchase or sale of real estate;

• Significant changes in savings or investments;

• Marriage or divorce;

• The death of a beneficiary;

• Births or adoptions;

• Changes in business ownership;

• Retirement;

• Major medical or long-term-care expenses;

• Large gifts made during life; or

• Changes in beneficiary designations.

An estate plan that worked well ten years ago may produce a very different distribution today. Our Arizona estate planning checklist provides additional issues to consider when reviewing an existing plan.

 

Frequently Asked Questions About Abatement in Arizona Wills

 

What does abatement mean in Arizona probate?

Abatement generally refers to the reduction of distributions under a will when estate property is insufficient to make all distributions in full. Arizona law establishes a default priority for determining which categories of property and devises abate first.

 

What is the order of abatement in Arizona?

Under A.R.S. § 14-3902, the default order is: (1) property not disposed of by the will, (2) residuary devises, (3) general devises, and (4) specific devises.

 

Do beneficiaries in the same category abate equally?

Arizona law generally provides for proportional abatement within each classification based on the amounts the beneficiaries would otherwise have received if full distribution had been possible.

 

Does a specific gift always survive abatement?

No. Specific devises are last in the default statutory hierarchy, but they may still be affected if the remaining estate is insufficient or another applicable probate rule affects the particular property.

 

Can my Arizona will specify a different abatement order?

Yes. Arizona law permits the will to establish a different order. The statutory default may also yield when applying it would defeat the testator's intended estate plan or the purpose of a particular gift.

 

Is abatement the same as ademption?

No. Abatement concerns the reduction of testamentary distributions when insufficient estate property is available. Ademption generally concerns what happens when specifically devised property is no longer part of the testator's estate at death. Although both issues can arise during administration of the same estate, they are legally distinct concepts.

 

Does abatement apply only when an estate is insolvent?

No. Abatement can become relevant even when an estate has enough assets to pay its enforceable obligations but not enough remaining property to satisfy all gifts made under the will.

 

Speak With a Tucson Estate Planning Attorney About Your Will

Proper estate planning involves more than deciding who receives particular property. A well-designed plan should also consider what happens if assets change, debts increase, property is sold, or the estate is significantly smaller than anticipated.

 

At Lancer Law, our Tucson estate planning attorneys help individuals and families throughout Southern Arizona prepare and review wills, trusts, powers of attorney, beneficiary designations, and related estate planning documents. We also assist personal representatives and beneficiaries with Arizona probate and estate administration when questions concerning debts, distributions, and abatement arise.

If you have questions about an existing will or would like to create or update an Arizona estate plan, contact Lancer Law or call (520) 352-0008 to schedule a consultation.

 

This article is provided for general informational purposes only and does not constitute legal advice. The application of Arizona probate and estate-planning law depends on the facts and terms of the particular estate plan. You should consult a qualified attorney regarding your individual circumstances.