To the extent the will gifts property no longer in existence, those gifts must necessarily fail. If specific gifts cannot be carried out, what is left should pass per the residuary clause. If the will is not clear, the executor will need to do the best he or she can, and beneficiaries may have the option to contest the disposition.
Best of luck,
Disclaimer: I am a VA attorney and only licensed in that state. This answer does not constitute legal advice, as each situation is dependent on its own set of facts and circumstances. Nothing in this answer creates an attorney-client relationship.
It's really sad when these kind of fights happen, isn't it?
The executor can always file Request for Instructions with the Probate Court. Essentially, this is a petition in which you lay out the facts: "(1) Mom left $100,000 to Joe and $100,000 to Jay. (2) Mom died with $50,000. (3) Judge -- I think the fair thing is to split the $50,000 in half -- tell me what to do!" If anyone wants to present an argument about what the judge should do, they can. Ultimately, what the judge says goes. This kind of action takes time and money.
This would be a good time to get an experienced probate attorney involved. It's possible that a letter from a lawyer to the family which states "here's the law, and if you want to fight it in court there will be less for everyone" will be enough to shut everyone up.
As a first step, you should have an attorney review the will and the estate, and then put together a common sense proposal to all beneficiaries for the division and distribution of the estate. Certain beneficiaries may have an argument that they do not need to share. Not all distributions are treated equally in the event that there is insufficient estate property or assets. For example, a $10,000.00 specific bequest may have priority over a beneficiary entitled to split "1/2 of the rest and residue" of the estate.
Please feel free to contact my office if you would like to schedule a consultation or learn more about your options.