Residuary Clauses And Where Leftovers Land

Most attention in a will goes to the specific gifts. The clause that determines the largest share is usually the one nobody discusses: the residue.

What the residue is

The residue is what remains after specific gifts, debts, taxes and administration expenses are settled. It is defined by subtraction rather than description.

In many estates it is the bulk of the value, because the specific gifts are personal items and modest sums while the house and investments fall into the remainder.

The residuary clause names who receives that remainder and in what proportions. It is often two sentences long and carries most of the estate.

What happens without one

A will with no residuary clause, or one that fails, leaves part of the estate undisposed. That portion passes under intestacy rules instead.

Intestacy follows a statutory order of relatives that may bear little resemblance to the testator's intentions, and it ignores unmarried partners and stepchildren in many jurisdictions.

The result is a partially intestate estate, administered under two schemes at once, which raises cost and invites argument about which assets fall where.

How a clause fails

The commonest failure is a named residuary beneficiary who dies first with no substitute named. That share may then lapse.

Anti-lapse rules in many jurisdictions redirect a lapsed gift to the deceased beneficiary's descendants, but only for certain relationships, and the outcome may still surprise.

Percentages that do not total the whole are another recurring defect, particularly in wills amended several times without recalculating the arithmetic.

Its interaction with debts and taxes

Expenses are generally charged against the residue before specific gifts are touched. The residuary beneficiaries absorb the cost of administration.

An estate with large debts and generous specific gifts can therefore leave the residuary beneficiaries with far less than intended, or with nothing.

Where the residue is exhausted, specific gifts may be reduced under abatement rules, but the residuary takers are the first to feel the shortfall.

Drafting it to survive time

A durable residuary clause names alternates, states what happens if a beneficiary predeceases, and describes shares in a way that still works if the family changes.

Describing a class, such as surviving children in equal shares, adapts better than listing individuals by name in a will that may not be revised for twenty years.

Lapse rules, intestacy schemes and abatement order all differ by jurisdiction and change over time. A qualified professional should review how a specific clause would operate.