Residuary Estate: A Comprehensive Guide by Kevin C. Martin, Attorney at Law

Explore the intricacies of residuary estate with Kevin C. Martin, Attorney at Law, PLLC. Our guide covers everything from asset distribution to legal considerations in estate planning.


Understanding Residuary Estate in Estate Planning

Navigating the complexities of estate planning can be overwhelming, especially when terms like “residuary estate” come into play. If you are drafting a will or if you are named as a residuary beneficiary, it’s necessary to understand the term.

In a comprehensive estate plan, each property within the deceased person’s estate is typically designated to pass to specific beneficiaries. However, if there’s an oversight in naming a residuary beneficiary for specific properties, those assets become part of what’s termed the residuary estate.

When a residuary estate exists, it can complicate the probate process for your heirs. At Kevin C. Martin, Attorney at Law, PLLC, we understand the importance of managing your legacy with care and precision. We’re here to guide you through understanding the residuary estate and its critical role in your estate plan.

What Is a Residuary Estate?

This residuary estate consists of any assets remaining after the estate plan has allocated them to beneficiaries. A residuary or a residual estate can be created intentionally or unintentionally. For example, the testator can intentionally fail to include some of the assets in the will and identify the beneficiary of the residuary estate through a residuary clause.

But it can also happen unintentionally. The testator can simply forget to include some assets in their will or trust documents or acquire new assets after these documents have been drafted but fail to update them.

Residuary Estate Definition and Basics

A residuary or a residual estate comprises the assets and property left in an individual’s estate after:

  • The will has been read
  • Debts, estate taxes, and expenses have been paid
  • Specific gifts and assets have been distributed

The residual estate can include any part of your estate that hasn’t been distributed to heirs. It deals with remaining estate assets, ensuring nothing is left unaddressed. The executor or personal representative is responsible for distributing all of the unaddressed assets.

Legal Context

Understanding the legal context surrounding the residuary estates is vital to ensure that the distribution of estate assets aligns with the deceased person’s wishes or, in the absence of such specifications, under state laws.

In the District of Columbia, as outlined in DC Code Section 28-4802.02, each beneficiary is entitled to receive a portion of the undistributed assets according to the terms of the will.

But, if there is no residuary clause, the residuary portion of the estate may have to go through the probate. The probate court may have to decide how to distribute those assets. In that case, bear in mind that DC gives significant preference to a surviving spouse and direct children.

Importance in Estate Planning

The role of the residuary clause in wills and trusts cannot be overstated. By incorporating such a clause, you designate how your remaining assets—those not otherwise accounted for—are to be distributed upon your passing.

This feature of estate planning serves as a safety net, ensuring your entire estate benefits your chosen beneficiaries and preventing unforeseen assets from being subject to default state laws.

Role in Wills and Trusts

As with a will, it’s also possible to have a residuary beneficiary or beneficiaries of a living trust. They will receive any property or assets transferred to the trust that weren’t designated for specific beneficiaries.

Handling residuary estate with a trust can be easier than it is with a will. The only property that’s considered in this case is already been transferred to the trust. However, if a named beneficiary passes away and you haven’t named a residuary beneficiary, you could still suffer complications.

Potential Complications

Without clear guidance, residuary estates can be a source of disputes among beneficiaries, potentially leading to lengthy and costly probate proceedings.

Common issues arise from ambiguities in the will or trust documents, leading beneficiaries to contest allocations based on interpretations.

Furthermore, owning assets in foreign lands brings its unique set of challenges. Hiring an international estate planning attorney to help can be beneficial and ensure that your international assets are passed down according to your wishes.

We can’t stress enough the importance of drafting clear, comprehensive estate plans that address potential gaps and prevent conflicts.

Distribution of Residuary Estate

The process of distributing a residuary estate can be accomplished in several ways.

Process Overview

For instance, the will may provide that the residual estate is left to a revocable trust. In that case, the remaining property will “pour over” into that trust.

The will can also provide that the undistributed assets should be divided by percentage or fractional shares to residuary beneficiaries.

Our estate planning attorneys at Kevin C. Martin, Attorney at Law PLLC, can guide executors and trustees through distribution steps with skill and diligence, ensuring a smooth transition of assets to the deceased’s beneficiaries.

Tax Considerations

Navigating estate, inheritance, and other taxes is crucial to managing a residuary estate.

The executor is in charge of distributing the estate according to the terms of the will. Their job also includes pulling together all estate assets, from real property to bank accounts, and figuring out estate debts, including probate costs and estate taxes.

In the District of Columbia, the estate tax applies to any estate worth more than $4.71 million in 2024.

How Kevin C. Martin, Attorney at Law, PLLC Can Help

In the intricate dance of estate planning, the residuary estate plays a final, vital role in ensuring that all your assets are allocated as you desire. Although residuary estate planning may sound straightforward, it’s easy to forget to include certain assets in a will or a trust or forget to include a residuary clause.

Taking time to plan for residual assets can help eliminate confusion between your loved ones when the time comes to divide your estate.

At Kevin C. Martin, Attorney at Law, PLLC, we bring a blend of experience, empathy, and dedication to every interaction, ensuring that your estate planning is handled with the care it deserves. Whether you’re in the initial phases of creating your estate plan or reviewing existing documents, we’re here to provide the guidance you need.