What Is Abeyance?
Abeyance occurs when the current owner or holder does not declare a beneficiary. Instead, the new owner is determined through the outcome of a particular event at some time in the future. Thus, the ownership of the property, office, or title is left unfilled. Abeyance is derived from the French word "abeyance," which means a longing or gaping with future expectations. Many estates are placed in trusts with stipulations that must be fulfilled before ownership can be taken. For example, if a trust fund is to be given to a child once he or she finishes college, the funds are said to be in abeyance until that goal has been completed.
Abeyance also exists when there is no one who can easily declare future ownership. For example, a trust could be set up by a parent who has no grandchildren, but hopes to have grandchildren one day, and wishes to leave funds to them at some future date. Because these grandchildren do not yet exist, the proceeds would be held in abeyance until these children are born.
- Abeyance is when the rightful owner of a property or trust has not been decided or has not met the obligations required to inherit the property, such as age or achievement requirements.
- Abeyances are used in testamentary trusts.
Abeyance in Testamentary Trusts
A testamentary trust is a legal arrangement created according to the specifications in a person's will. It is created to address any assets accumulated during that person's lifetime or generated as a result of a postmortem lawsuit, such as a settlement in a survival claim or the proceeds from a life insurance policy held on the settlor. A trust can be created to oversee such assets. A trustee is appointed to direct the trust until a set time when the trust expires. This date can be when minor beneficiaries reach a specified age or meet some kind of stipulation such as completing a set educational goal or achieving a specified matrimonial status.
Four parties are involved in a testamentary trust. The first is the person who specifies that the trust be created, usually as a part of a will. It can also be set up in abeyance during the person's lifetime. This person may be called the grantor or trustor but is usually referred to as the settlor. The trustee's duty is to carry out the terms of the will. The trustee is named in the will or may be appointed by the probate court that handles the will. In addition, there is the beneficiary or beneficiaries, who will receive the assets in the trust. Although they are not part of the trust itself, the probate court is a necessary component of the trust's activity because the court oversees the trustee's handling of the trust.
Example of Abeyance
Suppose Rakesh passes away suddenly without leaving a will. During his lifetime, he has acquired numerous assets including property and cash. His siblings and children all claim ownership of his assets. Until the court can settle the competing claims and divide the assets from his estate between them, the property and cash are held in abeyance.
Suppose that in this example, Rakesh does leave a will. In the will, Rakesh leaves his New York City apartment to his son when he turns 21. He also creates an incentive in his estate for the son. If he gets into an Ivy League school, he can inherit $100,000. His son is currently five years old. As a result, the apartment and funds are held in abeyance until the time he turns 21 or is admitted to Harvard.