Your estate typically includes any assets you own, including property, possessions, investments and capital. If you’re in the process of writing your Will, then you may have heard the term residuary estate.
In this guide, we explain what you need to know about residuary estates and how they work in conjunction with your Will.
What is a residuary estate?
A residuary estate is a clause in your Will that takes care of any remaining assets after distributing everything to the beneficiaries. This clause helps ensure that all your assets are accounted for in your Will should you forget any or don’t have time to add new ones.
Why should I have a residuary estate?
The residuary estate works by acting as a catch-all for assets in your estate that you have not specifically mentioned in your Will to go to a beneficiary. If you don’t have a residuary estate, your will could risk partial intestacy. Dying intestate is dying without a valid will.
They also allow you to provide a range of ways to distribute the remaining assets. For example, you may include that a certain property goes to one person, and the remaining capital is donated to a charity of your choosing.
They’re also especially helpful if you name a specific beneficiary in your Will who passes before you and don’t update your will. That beneficiaries assets become part of the residuary estate instead of going through intestacy law.
Beneficiaries of a residuary estate
It’s common to nominate a spouse or family member to receive any of your assets that remain in the residuary estate. You can nominate more than one beneficiary and divide the assets however you want.
If you don’t name a beneficiary in the residuary estate, the assets will be handled using intestate law. Therefore, whatever is left over goes over to the state. It’s important to understand that for a residuary clause to take effect, it must include a beneficiary's name.
Example of a residuary estate
When you write your Will, you include your home and a few possessions that you pass on to your spouse. In your will, you include a residuary clause. After you pass away, all assets you accumulated when you wrote your will automatically go to the beneficiary named in the residuary clause.
Now is the best time to write your Will and include a residuary estate clause. As time goes on, your estate will grow along with your family and friendship circles. However, what you have now to give to your beneficiaries is likely to change when you pass away.
Estate planning is for you and your loved ones, so start writing your will online today.