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If my level 5 druid with +1 hide armor wild shapes into a brown bear, does his armor resize to fit the new form?

In the PHB for druid wild shape it says:

You choose whether your equipment falls to the ground in your space, merges into your new form, or is worn by it. Worn equipment functions as normal, but the DM decides whether it is practical for the new form to wear a piece of equipment, based on the creature’s shape and size. Your equipment doesn’t change size or shape to match the new form...

In the DMG description of wearing and wielding magic items it says:

In most cases, a magic item that's meant to be worn can fit a creature regardless of its size or build. Many magic garments are made to be easily adjustable, or they magically adjust themselves to the wearer.

To me, it sounds like the druid can wear the armor in wild shape as long as it is magical, as it will adjust to the new form. Is that correct?

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Rule interpretation in general

There are two points to remember when looking at an ambiguous rule:

  1. Your group, with the DM as final arbiter decides the ruling for the rule. So, you need to establish what this is for each group you play with.

  2. Specific beats general. So, start with the most general rule you can find and see how the specific rules change this.

armor resizing in particular

For your issue, start with PHB p. 145 (ignoring the optional part because it makes no difference to the case at hand)

Variant : Equipment Sizes

In most campaigns, you can use or wear any equipment that you find on your adventures, within the bounds of common sense. For example, a burly half-orc won't fit in a halfling’s leather armor, and a gnome would be swallowed up in a cloud giant’s elegant robe.

So there's your general rule: No armor that fits a PC race (size S or M) would fit a bear (size L).

Wild shape (p. 67 PHB) says:

Worn equipment functions as normal, but the DM decides whether it is practical for the new form to wear a piece of equipment, based on the creature’s shape and size. Your equipment doesn’t change size or shape to match the new form.

No help there, the armor will be too small and the wrong shape. In addition, there is a ruling that has to be made right here: Is it practical for a bear to use armor; even if it is the right size and shape? My ruling would be yes but your results may differ.

Now from p. 140 DMG:

In most cases, a magic item that's meant to be worn can fit a creature regardless of its size or build. Many magic garments are made to be easily adjustable, or they magically adjust themselves to the wearer.

So the ruling needed here is does the hide armor a) need easy adjustment or b) magically adjust itself. If b) then all is easy, if a) then the druid may need to allow it to drop to the floor and then get some assistance to put it on which would take 5 minutes (p. 146 PHB) which makes it pretty useless in combat.

So, those are the issues; your group needs to make the ruling.

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Yes, by RAW your magic armor should adjust automatically to your wildshape form during the wildshape trans-formative process.

For 5E, you start with general and go to specific.

1st General rule: Equipment (PHB pg.144, Variant: Equipment sizes)

In most campaigns, you can use or wear any equipment that you find on your adventures, within the bounds of common sense. For example, a burly half-orc won't fit in a halfling's leather armor, and a gnome would be swallowed up in a cloud giant's elegant robe.

So regular equipment does not alter to other forms, especially radically different forms, as the examples provide. However, this is only a variant rule, and after the quote it goes on to say that the DM can change this to allow moderate alterations, or very petty and that different individuals of the same race can't wear another's armor without getting it adjusted first. So, there is flexibility, and definitely not definitive.

2nd General Rule: Magic Items (DMG pg. 140/141, Wearing and Wielding [Magic] Items)

In most cases, a magic item that's meant to be worn can fit a creature regardless of size or build. Many magic garments are made to be easily adjustable, or they magically adjust themselves to the wearer. Rare exceptions exist. If the story suggests a good reason for an item to fit only creatures of a certain size or shape, you can rule that it doesn't adjust. For example, armor made by the drow might fit elves only. Dwarves might make items usable only by dwarf-sized and dwarf-shaped characters. When a non-humanoid tries to wear an item, use your discretion as to whether the item functions as intended. A ring placed on a tentacle might work, but a yuan-ti with a snakelike tail instead of legs can't wear boots.

The first part says yes, magic items will "magically adjust themselves to the wearer", and initially it gives no limitation on size or form of the magical adjustment to fit. In the last part of the quote it specifically addresses the limitations on magical adjustment, in that there is no size limitation, strange pairings are OK (ring on a tentacle), but impossible ones are out (snake tails have no feet for boots).

Your magical Druidic power of Wildshape gives 3 choices, drop, magically merge with new form, or adjust to new form. If it can't adjust, then you only have two options. As the General Equipment rule tells us that without specific DM changes, non-magical equipment will not adjust, so it must drop or merge. The DMG tells us that Magical items do adjust to fit the wearer, your armor would fit most forms you would take (that would use it) and there is no impossible match-up (armor on an air elemental), you should be fine to have it change with your new form.

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I would say that this is up to the DM, but I would rule that yes it does change shape with wild shape. If the armor changes shape with you then if you change shape it makes sense that it would also change shape.

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