What is abeyance?
The word abeyance is something that you don’t hear every day and can be a bit intimidating. To put it in its most straightforward form, abeyance refers to a state of limbo or temporary inactivity until ownership can be fully determined. In the strictest terms, “abeyance” applies to the situation in which the rightful owner or claimant of an investment, a property, an office, or a title is yet to be determined. It also defines the state of temporary inactivity caused by a lapse in succession.
While abeyance usually happens when a real estate property or inheritance is passed on, it also applies to investments. If you’re investing in stocks and you want to avoid the pain and heartache that usually accompanies abeyance, read on.
Examples of abeyance
If you’ve read the news or watched historical fiction movies, then you’ve most likely already encountered abeyance. Literature is full of inheritance-in-limbo-related storylines such as:
1) A child who can only access a trust fund upon coming of age.
2) A parent or grandparent who is setting aside money for future child or grandchild.
3) A bank that is withholding a real estate property’s title until the previous owner’s next of kin is determined.
While abeyance may sound like just another financial term, you’d be surprised at the number of interesting stories—both real and reel—that are caused by abeyance. You may be familiar with the bestselling series-turned-Netflix phenomenon, A Series of Unfortunate Events, which hinges on the concept of abeyance.
Here’s a synopsis to jog your memory:
After a tragic fire in the Baudelaire mansion, a vast amount of fortune was left behind to the Baudelaire children—Violet, Klaus, and Sunny—whose parents specified in their will that they could only access their inheritance when one of them turns 18. Since the series began when Violet, the eldest of the three, was only 14 years old, the fictional bank held the fortune in abeyance, and the penniless orphans were forced to face one misfortune after another.
It’s a good thing that not everyone finds their inheritance held in abeyance is fated to suffer some form of misfortune. If you’re an investor, you don’t have to leave anything to chance.
How abeyance happens
There are at least three known situations wherein abeyance happens:
- a) The former owner specified that the claimant must meet certain conditions
- b) There is a lapse in succession
- c) No one can easily declare ownership
In the first situation, the future owner is identified and specified in a will. However, the claimant must fulfill certain conditions before taking full ownership. Such is the case of the Baudelaire fortune mentioned above, which is held in abeyance until at least one of the children meets the requirements.
How does abeyance affect investing?
Your reasons for investing in stocks may differ from another investor—someone may invest for college, to secure the funds to purchase a starter home or to acquire wealth for future generations. No matter what your goals are, it’s important to understand how certain situations, like abeyance, can affect your hard-earned investments.
To be a competent steward of your wealth, understanding what causes abeyance is critical. To avoid abeyance, make sure to check with a qualified estate planner. It’s the only way to ensure that all your hard work while saving and investing falls into the right hands.