Florida probate administration has statutory rules governing what should happen if there are simply not enough assets to pay all the distributions identified in an estate. These statutory rules are known as the rules of abatement. These statutory rules will control unless the Last Will and Testament admitted to probate Court in Florida has a specific set of rules for which property should be satisfied or liquidated to pay an expense of administration.
STEP 1 – IDENTIFY THE CLASS OF GIFTS IN YOUR LAST WILL AND TESTAMENT
Florida law recognizes different categories of gifts. They are as follows
a) Specific gift: As the name implies, this is a specific asset of the decedent devised to a beneficiary. These gifts can only be satisfied by giving the person the specific item of property. If the item does not exist at the time of the death of the decedent, that gift or devise fails, meaning that the provision is not enforceable and the beneficiary is not entitled to an item of equivalent value.
Example: To my daughter Angelina, I give my engraved hunting rifle
b) Demonstrative Gift: A bit of a hybrid of the previous two, a demonstrative gift is a gift payable out of a particular source, but if not available then out of the general assets of the estate.
Example: I give 200 shares of Z Corp to my daughter Angelina if she survives me. This is to be paid from my Z Corp shares which I have at death if it exists, otherwise my Personal Representative shall make provision for payment of the equivalent value of 200 shares of Z Corp from other assets in my estate then existing at my death.
c) General Gift: General gifts are payable from the general assets of the property and may be satisfied from a range of assets in the estate. Importantly, unlike a specific gift, if this item does not fail if it does not exist at the time of death.
Example: To my daughter Angelina, I give a 2016 Nissan Rogue, if I do not own such a vehicle at my death I direct my Personal Representative to purchase one and provide it to her.
d) Residuary Gifts: The term residue, or “rest, residue and remainder” of an estate is the catch all for the remaining assets after all specific assets have been distributed.
Example: “I give the rest, residue and remainder of my estate wherever situated whether it be personal or real property to my wife.”
STEP 2 – APPLY THE RULES OF ABATEMENT
Florida Law provides specific instructions on which assets must be first liquidated when you are administering an estate and there are not enough assets to cover all of the expenses of administration. Those rules are identified in Florida Statute 733.805(1) which provides:
733.805. Order in which assets abate
(1) Funds or property designated by the will shall be used to pay debts, family allowance, exempt property, elective share charges, expenses of administration, and devises, to the extent the funds or property is sufficient. If no provision is made or the designated fund or property is insufficient, the funds and property of the estate shall be used for these purposes, and to raise the shares of a pretermitted spouse and children, except as otherwise provided in subsections (3) and (4), in the following order:
(a) Property passing by intestacy.
(b) Property devised to the residuary devisee or devisees.
(c) Property not specifically or demonstratively devised.
(d) Property specifically or demonstratively devised.
(2) Demonstrative devises shall be classed as general devises upon the failure or insufficiency of funds or property out of which payment should be made, to the extent of the insufficiency. Devises to the decedent’s surviving spouse, given in satisfaction of, or instead of, the surviving spouse’s statutory rights in the estate, shall not abate until other devises of the same class are exhausted. Devises given for a valuable consideration shall abate with other devises of the same class only to the extent of the excess over the amount of value of the consideration until all others of the same class are exhausted. Except as herein provided, devises shall abate equally and ratably and without preference or priority as between real and personal property. When property that has been specifically devised or charged with a devise is sold or used by the personal representative, other devisees shall contribute according to their respective interests to the devisee whose devise has been sold or used. The amounts of the respective contributions shall be determined by the court and shall be paid or withheld before distribution is made.
So assets not devised via a last will and testament will be first liquidated to pay debts and costs of administration in Florida. Next up is the residuary, the catch all provision and then general and specific devises. So the general idea in Florida Probates for determining which property must be liquidated is that the more specific devisees are kept to the extent possible to the detriment of more general or non-specific bequests.