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’
What is meant by debts, taxes, administrative fees, probate costs and court costs?
Leaving part of the Residuary Estate to Charity