Can I Plan My Estate to Avoid Leaving Residual Assets?

Can I Plan My Estate to Avoid Leaving Residual Assets?
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What Is Residuary Estate?

When looking into your estate plan, you see “residuary estate.” This is any part of your estate that hasn’t been distributed to your heirs through a will. It’s also called estate residue or residual estate. However, it simply means assets left over once your will’s been read, the assets have been distributed to your heirs, and any final expenses have been paid.

Proper estate planning can help you avoid leaving residual assets behind, says Yahoo Finance’s recent article entitled “Residuary Estate Definition and Example.” An experienced estate planning attorney can help you select a structure for your estate that accomplishes your objectives.

A will lets you state how you want your assets divided among your heirs when you pass away. However, not all of your assets may make it into your will for some reason. Any assets that aren’t included in your will or distributed through a trust automatically become part of your residuary estate when you pass away.

You can create residual estates without advance planning. For example, your heirs may be left to deal with a residuary estate if:

  • You neglected to include certain assets in your will;
  • You acquired new assets after drafting your will and failed to amend the document for the distribution of these assets; or
  • Someone you named in your will dies before you or cannot receive their inheritance for some other reason.

This can also include assets designed to have a named beneficiary but don’t have one in the residuary estate.

When a residuary estate exists, it can complicate the probate process for your family. Any unclaimed or otherwise overlooked assets would be distributed according to the state’s inheritance laws after any estate taxes, outstanding debts, or final expenses have been paid.

You should also know that it’s possible to have a residuary beneficiary of a living trust. This person would receive any property or assets transferred to the trust you did not designate for specific beneficiaries. If you create a trust properly, there should be a provision for each beneficiary you want to be included and which assets they should receive. However, you could still run into issues if a named beneficiary dies and you haven’t named anyone as a residuary beneficiary.

A residuary estate is something you may need to plan for when creating a will or trust. Fortunately, it’s pretty easy to include the proper wording in your will and trust documents. Ask an estate planning attorney to eliminate confusion and plan your estate properly.

Reference: Yahoo Finance (Dec. 30, 2021) “Residuary Estate Definition and Example”