Maybe you’ve started thinking about estate planning after a loved one passed away. What exactly is an inheritance? Who gets it? And how can you use the law to distribute your estate? Those are very common questions when it comes to estate planning. With today’s article we’re focusing on a very specific part of estate planning. Lets explore the term residuary estate: what is and how to distribute it.
What is residuary estate?
A residuary estate is the remaining property of an estate after you have completed certain tasks. For instance, the executor of a last will needs to pay all debts, taxes ad other expenses of the testator. Moreover, they would need to satisfy any specific bequests that the will includes. More on specific bequests later. Residuary estates can be present in wills and trusts or passed on at death intestate (without a will). You may have also heard of a residuary estate as the residual estate or residue instead.
Example of residuary estate
Maybe it would be useful to use an example here to make sure that the term is clear. Suppose you have a will that says: “I leave all my assets, including the house and all its contents, to my sister”.
The residuary estate is the remaining assets after you’ve settled everything else in your will. So, when the executor has given away everything away or disposed of it for other purposes. In this case, it would be the house and its contents. This is what would be the leftover over after your sister inherited her share. And of course before any property distribution takes place, the executor needs to pay off all your debts and expenses.
What is the difference between a specific bequest and residuary estate?
A specific bequest is a gift that you direct your estate to pay out in a certain way. You’re then specifying how you want to share your money and property within a will. A specific bequest could be important during three different parts of estate planning:
The first part is part of the last will itself. It contains all of your instructions for what happens after your death. For example who gets what and who makes decisions about distributing it. This is the most common place to encounter the term. You can also decide what to explicitly do with residual estate within your last will. Then you would be technically using a specific bequest for your residual estate. Such instructions would take place after all other distributions are complete. This is because that bequest is about your residual estate.
The second part is an inventory of all assets you own at the time of death. You must value them at their fair market value. A beneficiary of a specific bequest could be part of such inventory too.
The third portion consists of any additional directives that may apply depending on state law or personal preference.
Where does the residuary estate go?
You can define yourself where the residuary estate goes to. This way you also make sure that everyone gets what they need without having someone else taking advantage of them. That’s why having a will can be crucial in estate and end-of-life planning.
How to Distribute your Residuary Estate
Let’s have a look at the basic steps of residuary estate distribution.
You could inform all beneficiaries of your intentions.
If you have a will, you should give it to the executor.
The executor will distribute your residuary estate according to your wishes.
If there is no will, then an administrator will be appointed by law to make decisions about how the estate should be distributed.
Residuary estate is the estate that remains after all debts, taxes, expenses and specific bequests have been paid. It includes everything else in an estate. The residuary estate is usually the largest part of an estate. That is unless you’ve made many specific bequests are or our estate is extremely small.
When you create a will or trust, you can leave gifts to people other than your spouse. In addition, you can also set aside some assets for special uses. That could for example include setting up a scholarship fund or building new playground equipment at your child’s school.
The term residuary estate is very important for estate planning. Most people tend to think about the couple important assets and ignore the rest. However, there could be a lot of wealth to inherit through residuary estate.
Myend offers the perfect estate and end-of-life planning for all! This way navigating such complicated issues gets easier. Our own last will offers you all the legal tools necessary to protect yourself and your heirs. This includes a specific section regarding your residuary estate. Have a look here to learn more. And if you’re ready for action, sign up today for your free account! The estate planning of the future is here today.