Austin Texas Estate Planning Blog

What Is a ‘Residuary’ Estate

What Is a ‘Residuary’ Estate?

January 4, 2023 • | Law Office of Zachary D Kamykowski, PLLC
In simple terms, a residuary estate is any part of your estate that hasn’t been distributed to your heirs through a last will and testament.

The “Residuary” Estate is also known as estate residue or residual estate. It simply means the assets left over after a court has determined the will’s validity, the executor has distributed specific bequests, and paid any final expenses. An estate planning attorney can help avoid leaving residual assets behind with a comprehensive estate plan, reports a recent article titled “How to Write a Residuary Estate Clause in a Will” from yahoo!

A will is a legal document used to name guardians for minor children and provide directions for how you want your executor to distribute assets when you pass. Any assets not included in your will or distributed through a trust automatically become part of the residuary estate on your death.

This can happen deliberately or unintentionally. For example, your will can state your wishes to having certain assets left to certain people. However, your will could also include a residual estate clause explaining what should happen to assets not already named in the will. In this case, you’re intentionally creating a residual estate and planning for it at the time of the will’s creation.

The Readiness is All

Some residual estates are created without planning. Here’s how that happens:

  • If you forget to include assets in your will.
  • If you acquired new assets after drafting a will, do not add a codicil making provision for the distribution of the assets.
  • Someone named in the will dies before you or cannot receive the inheritance you left for them.

This can also happen if you set up a Payable On Death (POD) account but neglect to add a beneficiary. The executor would lump into the residual estate any funds in the account.

What happens if you draft a will and don’t have a residuary estate clause? The executor would distribute unclaimed or overlooked assets according to your state’s inheritance guidelines. However, the executor would only do so after paying any estate taxes, outstanding debts, or final expenses. The executor would distribute assets as if you did not have a will. Heirs-at-law would receive assets according to kinship, including spouses, children, parents, siblings, and other relatives.

How does a trust work in relation to a residual estate? Trusts are legal entities allowing you to transfer assets to a trustee. The trustee is responsible for managing assets on behalf of the trust for beneficiaries according to your wishes. You may want to establish a trust if you have a substantial estate, want to plan for a family member with special needs or if you wish to create a charitable giving legacy.

Speak with an experienced Austin estate planning attorney to determine whether your will should have a residual clause and what assets you should include. The estate planning attorney will also be able to decide whether you need additional estate planning strategies, including a revocable living trust.

Reference: yahoo! (Dec. 4, 2022) “How to Write a Residuary Estate Clause in a Will”

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