What on earth is the residuary estate?

There are so many technical terms in will drafting which, if used incorrectly, can cause a whole load of trouble for your executors. We have spent some time in previous articles looking at some of these and why it is important you understand what they mean. Today, we are going to look at the residuary estate or the residue as it is sometimes called. This is the last main term that I think you need to know about when making a will.

For those of you who know me I like to give visual images when I explain what I do. They clearly work as I have often heard my clients explaining complicated terms to family members by using my visual images.

Today we are going to talk about pies! Pick your favourite, savoury or sweet. For the purpose of this exercise it doesn't matter!

What is a residuary estate?

When a person dies their money, investments, property and personal things go into one big mixing pot for the executors to sort. The administration process proceeds until the pie is baked and it needs to be divided. Some parts of the pie have to be handed out before others as this is set out in law.

• Specific gifts - my engagement ring

• Cash legacies - five thousand pounds to my nephew Freddie

• Funeral expenses, debts and taxes are paid

The bit of the pie that is left is called the residue. Everything that is left after specific gifts, cash legacies, taxes and debts are paid. Put simply it is everything left in the estate which hasn't specifically been given away in the will.

Why does the residue matter?

This is often the biggest chunk of the pie so deciding who gets it is a big deal. If the gift of the residue is not clearly dealt with in a will it can get very messy. There could be family disputes, parts of the estate not having a home to go to, distant family members inheriting. All these are easily avoided if time and care is given when the residue clause in your will is drafted.

How can I avoid getting it wrong?

First of all, take professional advice, but I would say that! Apart from that the first rule is don't make it complicated.

1. Look at who is important to you and write down the order of importance

2. Consider whether you wish the most important person to receive the most or whether it is different - the most important person may be extremely wealthy and not need any more money

3. Look at how you want to divide the residuary part of the pie - do you want to leave things equally between your important people, do you want to split things into percentages and what happens to any bit of your estate if someone dies before you - where does it go instead?

   
   

So, for example :-

• I leave my residuary estate equally between my three children

• I leave my residuary estate 50% to my wife, 25% to my son and 25% to my daughter

• I leave my residuary estate to my wife but if she has died before me equally between my two children Doris and Humphrey

When I advise my clients I ask them to look at the pie as one thing. A total amount, rather than individual items. It just makes life easier. If you know how much you have you can then work out how much everyone gets rather than trying to find a home for everything you have. When you know how much you have you can then allocate a percentage to a gift rather than a specific amount. This way, if your estat

Slice of estate pie

e goes up or down, all of your important people receive more or less. The last thing I ask my clients to look at is making sure that round pie dish has no gaps in it. We want your estate to flow in a lovely circle. If your wife dies, who inherits the bit of the pie she would have got. Is it your children? What happens if they have died before you? Are you thinking about your grandchildren?

If you think you might need some help in sorting your will I am on the end of the phone and happy to speak in our 15 minute first aid slots if you would like to!