While “residue” may make you think of the icky bits left over in your kitchen drain, there is nothing unpleasant about being named the beneficiary of a residual estate. If you are drafting a will or named in a will as a residuary beneficiary, you need to understand the term.
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Estate Planning: Who Gets What?
Estate planning can include many different legal elements, like living trusts and powers of attorney, but a will is often the most important. A will sets out in writing who gets your assets when you die.
How does that work? You make lists of specific beneficiaries, often family members or close friends, to whom you want to give certain assets. For example, you might want to leave your house to a favorite sister, and other real estate to your brother. Or maybe you want to leave a special picture or other personal property to Aunt Em as a specific bequest.
When your will goes through probate, that property passes according to the instructions in your will.
When you draw up a will, it’s easy to assume that your relatives and friends will be alive when you die. But there are no guarantees that this will be the case. That’s why naming alternate beneficiaries for specific gifts is important.
An alternate beneficiary is a person who will inherit a specific gift if the named beneficiary dies before the testator. For example, your will might provide that a painting goes to Aunt Em, but if she is not alive, it goes to Uncle Henry. In this example, Uncle Henry is an alternate beneficiary.
Residuary Clause: Who Gets the Remaining Assets?
In an air-tight estate plan, every piece of property in the deceased person’s estate passes to a selected beneficiary. But few wills are this thorough. Often there are items of personal property left over.
For example, someone making a will might not include specific bequests for smaller items like household furnishings or that old record collection. And what about those boxes that have been in the storage unit for so long that nobody even remembers what’s in them?
That is the reason for naming a residuary beneficiary. A residuary beneficiary takes the left overs, a term that would work nicely as a residuary estate definition. Both the word “residue” and the term “residual” come from a Latin word meaning “to be left behind.” Whatever assets are left behind after the executor distributes all of the specific gifts are, taken together, the residuary estate.
Who Gets the Residuary Estate?
Anyone drafting a will should consider naming a beneficiary for the residuary estate. Include the name of this person in a residuary clause, the part of the will that identifies the residuary beneficiary.
What does a residuary legatee inherit? That depends on the terms of the will and who survives. The person named to inherit the residuary estate gets all the property and assets left in the probate estate after the executor distributes specific gifts and pays estate debts.
Understanding the Probate Process
It is easier to get an overview of how a residuary estate bequest works if you understand something about the probate process. When a person dies leaving a valid will, the executor files the will with the probate court.
The executor is the person in charge of moving the estate through probate. Their job is to distribute the estate according to the terms of the will. To do this, the executor must pull together all estate assets, from real estate to bank accounts, and figure out estate debts, including items like the decedent’s credit card bills as well as projected probate costs and estate taxes.
When the estate includes enough cash to cover the debts, the executor distributes specific bequests to the primary beneficiaries. If one or more of the primary beneficiaries isn’t alive, that person’s gift goes to the alternate beneficiary. If both the primary and alternate beneficiaries are dead, the gift remains part of the estate.
Once the executor pays the estate bills, everything that remains is part of the residuary estate and passes to the person named in the residuary clause. This includes that old record collection and everything else that was not assigned to a beneficiary in the will. It also includes specific gifts when neither the primary nor the alternate beneficiary survived.