Designating a beneficiary in your will can help your loved ones and friends to understand your wishes for your assets.
What’s a residuary property?
The residuary is the remaining portion of an individual’s assets after they have paid off all their debts, taxes and expenses. It also includes any gifts or property that were not given. Many people include instructions in their wills regarding what to do with their residual estates.
An example of a residuary property
If you have a $1,000,000 estate, $300,000.00 of these assets could be used to pay any taxes or debts you owe. Your executor might use $50,000 to pay expenses related to settling your estate, such as an accountant to prepare you final tax return, cleaning services to prepare your house for sale or funeral. Your instructions to leave specific property or money to certain individuals or organizations would be followed by the executor. For example, leaving a $10,000 heirloom necklace for your niece.
You may have assets remaining in your estate, such as up to $640,000 in this case. This is your residuary property. You might also add a residuary provision to your will, stating, for example, that any residuary assets go to Frank. If Frank is no longer living at the time you die, your will may state that the remainder of the residuary estate should go to two of your favorite charities. This would mean that Frank and/or charities are the residuary beneficiaries.
Giving a portion of your residuary estate as a bequest to charity could reduce the amount.
Estate taxes
Or
Inheritance taxes
The IRS allows estates deductions for charitable contributions. This makes less of the estate subject for tax (though most estates are not subject to federal estate taxes).
How are the residuary assets distributed?
-
The executor of a will is responsible to oversee the distribution of assets in accordance with the wishes of the deceased. If you die without a will, which is known as dying intestate, your estate might need to go through probate. A court could decide how to distribute your assets.
-
A will that does not contain a residuary provision may be required. The residuary part of your estate could have to go through probate and a court could decide how to divide it.
-
You might think about creating a pour over will if you already have a trust. This will instructs you to transfer any assets that you don’t want into the trust after your death.
Cornell Law School Legal Information Institute. Pour-over will. Retrieved February 23, 2023.
It is important to make sure your beneficiaries receive everything you promised.
Residuary estates are often large, sometimes even the entirety of an estate. It is important to have a trust executor, a will and an estate plan.