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What is meant by ‘Residuary Estate’ in a Will?

The Residuary Estate is the property that remains in a deceased person’s estate after all specific gifts have been made and all debts, taxes, administrative fees, probate costs and court costs have been paid. Often, the residuary estate will be left to the spouse on first death, and then to the children on second death. However, family arrangements are becoming ever more complex in modern society and so this simple distribution is not necessarily relevant.

When choosing how to divide your residuary Estate, what should you consider?

Some Estates are very straightforward and everything will be divided between the children on second death. On other occasions, there may be children from previous relationships that need to be protected. In these cases, Trusts are generally recommended; more information on Trusts can be found by clicking this link.

You may wish to leave more to one child than another or you may even wish to exclude a child absolutely. English law allows you to leave your Residuary Estate to whomever you choose but some people, including children, stepchildren, spouses and ex-spouses who have not yet remarried, are able to make a claim against your Estate. For more information on Exclusion of Beneficiaries, take a look at our article on this here.

It is also important to consider on what age a child, grandchild or other beneficiary should inherit. For tax purposes, we usually recommend no older than the age of 25. It is also possible to include a Children’s Protective Trust, also known as a bereaved minors Trust, which allows chosen beneficiaries to manage funds until the underage beneficiaries reach the age of attainment (more information on Children’s Trusts found here).

What happens if a beneficiary passes away before you: ‘Substitution of Issue’

If one of your children passes away before you, would you want their share of your Estate to pass to their own children or, alternatively, to their siblings? These are important questions that Goodwills always asks when we take Will instructions (for more general information on our Will services click here). We call this substitution and, very often, clients want a deceased beneficiary’s share to pass down their own bloodline. This means to their own children (the client’s grandchildren) or even further down their own bloodline if successive deaths have occurred; we call this ‘substitution of issue’.

What is meant by debts, taxes, administrative fees, probate costs and court costs?

When you pass away, there are likely to be debts owed out of your Estate, and naturally these need to be paid off before your Estate is distributed. There are also various administrative fees that need to be paid by the Estate and, if the Estate is taxable, then amount of tax needs to be correctly calculated, the appropriate forms submitted to HMRC and, finally, the tax paid. Executors are personally liable for these costs, so if you are in the position of dealing with someone’s Estate and would like assistance, then get in touch with us for some no cost advice and a free quote. Probate costs would include the cost of Solicitors to deal with the Estate, which is something that Goodwills is able to do for a very competitive fee. There are also Court Costs, which have recently risen; more information can be found on the rising Court Fees by clicking here.

Leaving part of the Residuary Estate to Charity

Clients should also carefully consider whether and how much they wish to leave to a charity, as, whilst this can have positive tax consequences, it can also have serious unintended negative tax consequences if not drafted correctly; Goodwills is able to advise on the tax consequences of leaving part or all of your Estate to charity.