What is the term for reduction of gifts when assets are insufficient?

What is the term for reduction of gifts when assets are insufficient?

• A. LAPSE (WILLS)
• B. ABATEMENT (WILLS)
• C. ADEMPTION BY EXTINCTION (WILLS)
• D. INSANE DELUSION (WILLS)

Answer: (B)

Abatement is the term for reducing gifts when there aren’t enough assets to satisfy all bequests and estate expenses. When the estate cannot cover debts, funeral costs, and taxes, the remaining assets are allocated to gifts only after those obligations are paid, which can mean prorating or cutting back the gifts. The idea is to allocate the funds in a lawful order so obligations are met first and the gifts are adjusted accordingly. Other terms you might see have different meanings: lapse happens if a beneficiary dies before the testator, causing a specific gift to fail; ademption by extinction occurs when the exact bequeathed property is no longer in the estate; insane delusion refers to a mental state that can affect testamentary capacity, not how gifts are reduced due to insufficient assets.

Abatement is the term for reducing gifts when there aren’t enough assets to satisfy all bequests and estate expenses. When the estate cannot cover debts, funeral costs, and taxes, the remaining assets are allocated to gifts only after those obligations are paid, which can mean prorating or cutting back the gifts. The idea is to allocate the funds in a lawful order so obligations are met first and the gifts are adjusted accordingly.

Other terms you might see have different meanings: lapse happens if a beneficiary dies before the testator, causing a specific gift to fail; ademption by extinction occurs when the exact bequeathed property is no longer in the estate; insane delusion refers to a mental state that can affect testamentary capacity, not how gifts are reduced due to insufficient assets.