Specific Gifts, Taxation
Unless a will directs otherwise, all death taxes assessed against a specific gift are paid out of the residuary estate.  These payments must be made before any distribution to the residuary beneficiaries.

For Example:
Rachel has a $300,000 estate when she makes her will, $200,000 in cash and a horse worth $100,000. Her will makes one specific gift to her friend and leaves the rest of her property to her daughter, as follows:
"I give my grey horse, Traveller, to my friend, Paul. I give all the rest of my estate to my daughter, Ashley."

Paul's gift incurs $15,000 in Pennsylvania inheritance tax and Ashley's gift incurs $9,000. However, the entire $24,000 is paid from the $200,000 residuary estate. Rachel's daughter will receive $176,000 and the friend will receive the horse valued at $100,000.

Also, specific gifts may increase in value, while cash may be depleted.

For Example:
Suppose that Rachel incurs medical expenses of $50,000 prior to her death, reducing her cash to $150,000. During this time Traveller's value increases to $125,000. With these changes, Rachel has an estate valued at $275,000 at the time of her death.

In this instance, Ashley receives $124,500 and Paul receives the horse valued at $125,000. Although Rachel intended to give her daughter twice as much as her friend, they actually receive the same amount.

An alternative is to have Paul pay the $18,750 of tax on the specific gift, for a net gift of $106,250 leaving Ashley $143,250.

However, this may also produce unintended results. If the beneficiary does not have the cash to make the tax payment, the beneficiary may have to take a loan or even sell the specific gift to make the tax payment.

See: Pennsylvania Inheritance Tax, Generally; Federal Estate Tax, Generally