The Residuary Clause – Handling the Leftovers
We are reaching the end of our discussion about
Wills. The Will is the most basic
and fundamental document of your Estate Plan. Any individual can benefit from having a Will, even if they
do not have much. Unfortunately,
after a divorce, if you did not have much before the divorce, you probably have
less than half when it is done, because the lawyers always get their due. However, assuming I handle your divorce
economically, we would try to preserve as much as possible, for you to build
forward. If you have children, the
greater goal is to preserve the post-divorce wealth, let you use and grow that
wealth, and then pass along as much as possible to care for your children. Having a Will allows you to avoid
probate, and let your Estate avoid other fees after your passing.
Assuming you have applied the many tools discussed
in prior blogs and dealt with all the special items and gifting, you may still
have some leftovers. You may also
not have a lot of special gifting to do, in which case everything is a
leftover. It is also possible that
you made your Will, but as time passes, things change, and you never changed
your Will to keep up. Therefore,
these new or other things need some way to pass under your Will. The way we cover this unknown is the
“Residuary Clause”. The Residuary
Clause functions as the catchall provision that ensures that the Will disposes
of all property included in your Estate.
The law gives a broad and open-ended definition for
a residuary devise or gift to encompass an almost unlimited array of property,
unless the Will provides otherwise.
Essentially, unless something is specifically gifted in the Will,
everything could go by way of the residuary clause. If you failed to include, if the intended gift is defective,
void or lapsed, whatever there may be is saved by the residuary clause.
There may be a variety of special issues that come
up regarding residual property to flow through this clause. As I caution throughout my blogs, you
must consider each case on its own.
Your unique facts and variables will offer something different every
time. You may fall into a simple
general application, but you may have some little item that makes your
situation special, so always have complete disclosure, full show and tell, with
your Estate Planner, so that we can work to create the results you want.
For the sake of story telling, let’s assume there is
some problem with your Will when you pass. The law favors people having Wills rather than passing with
a Will, so the court will do whatever is reasonable and practical to find a
valid Will. The primary reason is
that if there is some expression of your intent to pass your things to your
heirs or designates, the court will try to respect your intent and fins a
Will. Sometimes, this simple
Residuary Clause can be the primary valid remainder of a defective Will, so at
least some of your intent can be supported. However, if your Will is terminally defective, and the
Residuary Clause fails to save the Will, then your things will pass to heir
under the laws of intestacy.
While we are getting ahead of ourselves, in a more
comprehensive Estate Plan, there is usually a Will AND a Trust, a very standard
practice is to have the Residuary Clause pass all remaining property to your
Trust. This is referred to as a
“Pour Over” to an existing trust.
It is also common for a Trust to be created by this “Pour Over”.
Another very common technique is to have the
Residuary Clause pass the remainder of your property to a number of heirs, such
as your children of grand children.
All of the rules and ways to give to a group of people, as we discussed
in prior blogs, apply to the Residuary, as if it is a Will in the Will. Gifts can be general or specific. Gifts can be fractional to individuals
or classes. What seems to be an
emergency net, can be the best way to direct to any number of heirs or
recipients in a broad manner.
Next time, we are going to continue our wrap up
phase on Wills and talk about Charitable Devises and other issues. After that, I hope to have special
discussions on taxes. In the meantime, I hope you will review your Estate
Plan with you're “A” Team, or at least begin to seek out an Estate Planning
Attorney to start this process. Stay tuned for future blogs.
However, if you have any questions, feel free to respond below, or if you are
interested in learning more about an Estate Plan, Wills, Trusts, Advanced
Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal
Support, Property Division, Modifications, Remarriage, or Pre-Nuptial
Agreements, please contact me at please contact me at fbegun@gmail.com,
or through my other websites, www.fcbegun.com, or www.linkedin.com
for Fred Begun.
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