What happens if something is left to you in a will, but the whatever is no longer owned by the person who died?

Factual Questions
1

Say you are one of three kids, and your father wanted to split his estate to you all evenly. His will specifies that Al (you, eldest son) should inherit his house and property, Bob (middle son) inherits his investment portfolio, and Carol (youngest daughter) gets his restaurant. All of pretty much the same value at the time the will is drawn up.

But over the few years since then, there was a major stock market upset, and the value of his stock portfolio massively dropped. Also, some client at his restaurant sued because there had been a massive food poisoning outbreak at a catered event, and father had been forced to sell off all his remaining stocks to pay off the case settlement. The restaurant’s reputation was ruined, and although it’s still open, it’s limping along and looks like it will inevitably fail fairly soon. The house and land is still fine.

So, Father kicks off unexpectedly. Al inherits a house/land worth around three million dollars. Bob gets absolutely nothing. Carol gets a failing restaurant that is probably a net negative to her worth.

Is that just how it goes? I mean, yeah, Al could sell the house and give the other two a million each, but he’s not willing to do that voluntarily. (You greedy bastard, you.) Can Al be forced to do so?

What if the will had started with some text about how Father had loved each of his kids equally and wanted them to inherit equally, and that that is why he was dividing the estate as he had? Does that statement of intent have any effect? Or are Bob and Carol simply screwed because Father didn’t get around to updating his will?

2

I suspect it will really come down to the minutiae wording of the will, all the way down to tense, grammar, verbiage and whatnot. But in most cases as you describe, Al is probably simply lucky, it sucks to be Bob, and it sucks to be Carol.

If the father didn’t specify that the kids must get equal value by having the inheritance handled in such a way that it’s split to create value that’s fair, then the stock portfolio is only worth as much as it is at the time of his death, and the restaurant can be crap.

But even adding the proper verbiage might not make it any easier or fairer. What if Al is compelled to sell the house and land and split up fairly with Bob and Carol “to give each one equal value”, but then suddenly Bob’s stock portfolio soars in value again and Carol’s restaurant suddenly becomes a booming success? Do Bob and Carol now suddenly have to compensate Al back again? It would be a lawyer nightmare.

3

When I made my will, the lawyer warned me about things like that (the specific example was “I bequeath X dollars to worthy cause and the remainder of the estate to my beloved son, Mervin” - if the estate has been spent down to less than X by the time I die, Mervin is out of luck).

4

With an estate of $9M, there’s a pretty good chance that Father has a lawyer write up will rather than trying to do it himself. As such, it’s likely that the wording of the will will be very clear as to how things are supposed to be split up. If Father wants everyone to get equal value, then it will say something like the estate is to be liquidated and split in equal shares. There could be language about heirs giving first right of refusal so that they could buy an asset that they really want. Or Father could specify that certain heirs are to get certain things regardless of their relative values and that’s just the way it is.

5

If dad wanted to divide his estate equally, then he should have simply said so. “I name A, B, and C as my heirs. I devise my entire estate to be divided into equal shares among them.” And some more words as needed to cover what happens if A, B, C, or more than one of the above predeceased dad.

Heck, he could have just had no will and the laws of intestate succession probably would have accomplished as much assuming A, B, and C are the only children and he has appropriately acknowledged them under law.

But he didn’t. He made specific bequests to each. So… yeah. In general A lucks out and B and C are screwed. A is likely under no obligation to give them anything, even if he sells the home. Maybe whatever jurisdiction they are in will have an exception to this general rule, but I won’t hazard a guess as to whether any jurisdiction actually has such a rule.

6

Yeah, I thought it might be a Too bad, so sad situation. Though perhaps Al should make getting his own will drawn up right away should be his first priority if he is unmarried and childless. Otherwise he might tumble down his staircase some night, and Bob and Carol could get half the pot as his default heirs…

7

Something similar happened when my mom passed away.

Cash/investments/insurance policies and any income from the personal items in the estate auction was to be divided 3 ways.

Real estate other than farm ground was to be sold and divided 3 ways unless one of us wanted it then an appraisal was done and bought from the estate for 2/3rds the appraised value. Which 2 of us did for 2 houses.

The farm ground at the home farm was separated into 3 divided interests. Each about 90 acres. Due to CSR ratings (Corn Suitability Rating) my 1/3 was valued at a total of about $500,000. Another sibling’s was $650,000. The last 1/3 (pure farm ground with no trees, small waterway, higher CSR rating than the other 2 parcels, $800,000.

So, my property was worth $300,000 less, but with no equality clause in the will that is what I got and no money could be transferred to me (or the other sibling) to make it “fair”. Kind of sucks but I was happy that my parents were able to leave us kids something as I know plenty of people who received little or nothing from their parent’s estate.

8

Your parent’s will may not have had any such provision but you three could have come to any post-distribution agreement you were collectively willing to make.

My late wife was the outsized beneficiary of her mom’s will versus her only sister. Wife and I always intended to make it even w sis after mom’s estate was distributed unequally per the will.

In actuality my wife died before her mom so the issue was moot. But if it had gone the other way and her mom had died first we’d have done the right thing.

9

Possibly, but the tax implications could be very different if it’s not handled by the estate. Suddenly you’re giving an extra share to uncle sam and some people aren’t cool with that.

10

Would be interesting to get a tax or probate attorney’s perspective on that. What would the tax mechanism be, if any? I mean, at least at the federal level, there is no estate tax for all but the wealthiest estates. Same with the gift tax, IIRC.

It’s also possible for an heir to forgo some or all of their inheritance. Like, just because your father devises you his underwater home doesn’t mean you have to accept it, especially if it’s literally the entire estate (but to be clear, creditors have to be made whole before beneficiaries or devisees get their share, so while you cannot be compelled to take on your father’s debts, you also can’t just take the assets and let the liabilities die with your father: if there are more liabilities than assets, then you may not get any assets you are not willing to either pay for or assume a portion of the debt for).

11

Every family situation is different. I and the one sibling (who also got land valued less) were co-executors. The 3rd person was sure they were getting screwed because they were not part of the process. No way were they going to make it “fair” when they thought they were not getting what they deserved in the first place.

12

I would say it was pretty piss poor estate planning on the father’s part.

The gift of a specific asset in a will which is no longer owned is an ademption - the gift will fail and the beneficiary will receive nothing.

The beneficiaries could come to an arrangement between them, which could have adverse revenue implications.

Bob and Carol could also take advantage of any ‘family provision’ rules in their jurisdiction and bring a claim against the estate.

Rather than make specific gifts of assets to each child (which frankly was never likely to work out equally) the father could have created testamentary trusts (or equivalent arrangements) and left the residue equally alongside an appropriatley drafted memoranda of wishes and equalisation clauses to achieve his overall objective.

A few grand in professional fees before dying could save the estate hundreds of grand in potential litigation costs.

13

For a cringe-inducingly dark and cynical take on the OP’s question, see the movie Very Bad Things.

14

In this specific case, Carol would probably just refuse it. The rules vary from state to state but in general she just disclaims the bequest and then the estate has to dispose of it somehow.

Zero sucks, but it’s better than taking the hit.

15

English law of inheritance (which I suppose is similar to the laws of the US in general) distinguishes between specific legacies and general legacies (and residual and demonstrative ones, but that’s not at issue here). “Specific” means one particular item (such as a house) is bequeathed, “general” means it comes out of the value of the overall estate. If you give a specific item, the legatee will get it, no matter what it’s worth; and if the item isn’t owned by the testator anymore (because he gave it away after writing the will and forgot to amend the will, for instance), that gift will fail, and the legatee will get nothing (this is called ademption).

It’s a matter of interpreting the will to decide what kind of legacy was intended. This is not always straightforward; a classic textbook case is where the will says “I give an Omega Speedmaster to X”, and at the time of writing the will the testator owned an Omega Speedmaster which he sold prior to his death. Looks like a failed specific legacy, only that the wording was “an Omega Speedmaster” rather than “my Omega Speedmaster”. So it’s a general gift after all, and the executors must use estate funds (if available) to purchase a watch and give it to X.

16

It’s one of those areas where the popular trope - based on innumerable fictional works - and optimal reality are severely at odds…

The popular trope is of a will which allocates the substantial assets specifically. But many decades ago when I did a tiny bit of estate planning it was drummed into me that I was never, ever to draw up such a will without a thorough CYA lecture (followed by the same lecture in writing) to the client about how what they were insisting on doing was likely a Very Bad Idea.

17

When my Dad passed he left his house and contents equally to me and my sister in his will. (Fortunately we get on well!)

I live nearest, so took charge of selling the property.
We agreed that my sister would come by and take whatever she wanted (e.g. Mum’s jewellery, which is what Mum wanted her to have.) I got some books.

Then we split the proceeds amicably.

18

I think the acronym, “SOL”, pretty much sums this up. Once one writes a will, that will needs updating when circumstances change. This situation is a cut and dried one, but there are others that are not such as a new spouse or a newborn child arriving on the scene. Outdated wills can be a big problem.

19

Your point is sort of right. Any such post-estate transfer between any people is subject to gift tax. But …

See here:

There is an annual gift tax exemption. You can give $18K (this year, the amount is inflation adjusted every year) to any individual for any reason with no requirement to even file about the transfer. Ditto someone can receive up to $18K from someone with no requirement to file or pay anything. If one legatee got the windfall and their e.g. 2 sibs got relatively stiffed, they could chip away at their excess at a rate of $36K/year until everything was even. No IRS paperwork is filed by anyone in any year, no taxes are owed, and it’s all 100% legal.

Now there’s also the lifetime gift tax exclusion. Currently about $13 million and, like the annual limit, adjusted for inflation. You can give up to $13M to any collection of anyone(s) for any reason(s) during the course of your life. You pay zero tax. They pay zero tax. The only rule is if you exceed the $18K annual limit to any one person in any one year, you must include a form with your tax return telling IRS about the gift so they know how you’re chipping away at your $13M lifetime total. Again zero tax is owed by anyone. Damned few Americans are ever in the position to want to give away more than $13M. maybe 1 in 10,000 or 1 in 100,000. For the rest of us it’s a total non-issue.

So in the case of the windfall legatee wanting to make their two stiffed sibs even, as long as the total amount to be transferred to both is less than $13M, just send them each a check for their share, include 1 extra piece of paper in your tax return, and that’s the end of it.

See here for more:

But you’re also sorta right that some people are so irrational about taxes that they’d screw their e.g. sib out of 100K just to avoid paying IRS $5K. Or worse yet, they’re so irrational about taxes that even when they’re told by experts that there won’t be any taxes owed, they still won’t do it because they’re afraid somehow the IRS will invent a tax just for them.

Bottom line: People are often irrational innumerate selfish jerks. Film at 11.


For sure doing the right thing requires everybody to have a cooperative mindset and agree on what that “right thing” is. And lots of families lack that.

My point was just that there is a possible remedy available for a badly drawn will. Not everyone will be able to use that remedy.

Bottom line: People are often irrational innumerate selfish jerks. Film at 11.

20

In some jurisdictions (again, England as an example), getting married will automatically annul an existing will in its entirety. So a testator who does not update the will after the wedding will be treated as intestate.