Residuary Estate

Thinking of who to give away your estate to, but not sure how?

The sections below explain how a residuary estate is commonly identified and distributed.

What is my residuary estate?

Your residuary estate is the whole of your estate after your executor:

• pays off your debts, mortgages, expenses, and taxes; and
• pays off any cash gifts or specific gifts that you may have added in your Will.

It includes assets under your name such as:

• Single bank accounts;
• Properties (owned under your sole name or as tenancy-in-common);
• Stocks and shares in your brokerage account or bank;
• Pensions/ IRA/ 401k and life insurances if no beneficiaries are appointed in the policies; and
• Your personal items (excluding those that are mentioned as gifts in your Will).

It does not include assets such as:

• Specific gifts and cash amounts that you have given away in your Will.
• Joint bank accounts - The surviving account holder would automatically own the entire account.
• Joint properties - Your properties held as joint tenancy or tenancy by the entirety would go to the surviving owner.
• Pensions/ IRA/ 401k or life insurances if you have appointed beneficiaries.

Can I give specific assets to my friends or family?

A Will can make gifts of personal possessions, cash or property to specific individuals.

Your personal possessions include your personal items such as your artwork, furniture, jewellery, watches, and does not include bank accounts, shares or properties.

If you would like to give away a life insurance or pension to a specific person, then you can contact your advisors and ask them to name beneficiaries in your policies. If no beneficiaries are appointed, then your life insurance and pensions forms part of your residuary estate.

Read more about gifts and what is in the Will.

Who can I give away my residuary estate to?

If you are not restricted by the laws of your own religion, then under the Inheritance laws in the US, you can freely distribute your estate however you want.

The most typical scenarios would be to give away your residuary estate to those that you are close to and who may need your financial support when you are gone, such as your spouse/partner, children and parents. If you are married, you should also bear in mind that the marital laws of some states require that you give at least part of your estate to your spouse. If you choose to exclude your spouse from your Will or give a lower amount than agreed, they may still have a claim to part of your estate.

There may be reasons that you would not want to give your estate away to your family, due to disputes or arguments, and having a Will allows you to exclude those persons and include others who you would wish to receive your estate. It is important though to be aware that your family or those that you are financially supporting could raise a claim if they are not included in the Will.

Can my Will be disputed?

Although you have full testamentary freedom to write your Will, some people can make a claim against your estate for financial provisions.

People who can make claims against your estate include your spouse, children, former spouse and anyone who you are financially supporting such as your step children or parents.

Some states also have community property from marriage. This is where you and your spouse both equally own assets acquired over the course of your marriage. So when you pass away, your spouse should be entitled to at least half of those assets from your estate.

Some states also recognize inheritance rights for surviving unmarried cohabitating partners, provided that they meet certain conditions i.e. the time they have resided together.

You should also take into account any pre-nuptial agreements or post-nuptial agreements that you have made before or during marriage and consider whether this would affect your Will.

You should also be aware if you have promised a part of your estate to someone during your lifetime. If the person acted to their detriment because of your promise, and you did not provide them what is promised in your Will, then they could potentially make a claim against your estate under the concept of “proprietary estoppel”.

In any of the above situations, you should consider including them in your estate distribution, or explicitly excluding them in the later section if you do not wish for them to receive anything, however, they may still have a right to raise a claim.

Can I exclude someone in my Will?

A Will can record an intentional decision not to benefit a particular person.

In this way, if they make a claim against your estate, your Will shows that you have already taken them into consideration when you were writing your Will, and that you decided not to include them in the distribution.

This section though is for the court to take into account when such situations arise, but it does not mean that this person would be excluded entirely if they make a claim in court.

What happens if my beneficiaries pass away before me?

A Will can name a substitute beneficiary in case the first beneficiary dies before you.

The typical scenario for example is to give all your residuary estate to your spouse - the first beneficiary, failing them to your children - the backup.