What is a Residuary Clause?

You create an estate plan to make sure that your property goes to the right people upon your death. When making your last will and testament or trust, you identify your various assets and the beneficiaries who should take them. But what happens if you forget to list something? Or if you acquire new property after you make your will? Or if you make a specific gift to a beneficiary who ends up dying before you? What if you have financial accounts or life insurance policies without designated beneficiaries? 

That’s where a residuary clause comes in. A residuary clause is a provision in your will or trust that directs the disposition of any property not specifically identified in your estate plan, or assigned to a particular beneficiary.

Why You Need a Residuary Clause

A residuary clause, as the name suggests, deals with the “residue” of your estate—what’s left over after the rest of your estate has been distributed through specific gifts. You may, for instance, leave your home, investment portfolio, and bank accounts to your two children, your car to your favorite nephew, and your ceramic chicken collection to your granddaughter. But what about all the rest of your stuff, from the art on your walls to your coin collection to the socks in your sock drawer?

If there are no provisions in your will to address that property, it will be distributed according to state laws of intestate succession—which may or may not be what you would have wanted. While it may not matter much to you who gets your old argyles, you probably care much more about items with greater value, either financial or sentimental. A residuary clause helps you make sure your property goes to the right people, without you having to identify everything you own in your estate plan—and keep that list updated.

How Does a Residuary Clause Work?

A residuary clause is elegant in its simplicity. It is a catchall provision that applies to everything you own at the time of your death. A residuary clause in a will might say something like:

“I give all of the rest, residue, and remainder of my estate, both real and personal property, of whatever kind and wherever situated, to my spouse, Lee Smith. If Lee Smith does not survive me, I give all of the rest, residue, and remainder of my estate to my child, Pat Smith.”

A trust can—and should—have a residuary clause as well. A residuary clause in a trust might say: 

“Upon the termination of this trust, I direct the Trustee to distribute the rest, residue, and remainder of the property in the trust, of whatever kind and wherever situated, equally to my children, Andrew, Billy, and Christa. If one of my children has died prior to the termination of the trust, their share will be divided equally among their own children. If they have no children, the share of the deceased child will be divided equally among my surviving children.”

In essence, a residuary clause is a funnel that catches up all property in a trust or estate that is not otherwise accounted for, and directs it where you want it to go. A simple paragraph or two in your estate planning documents can prevent months of confusion and even litigation. 

Residuary Clauses and Updating Your Estate Plan

Having a residuary clause in your will or trust keeps you from having to update your estate plan every time you have a change to your assets and beneficiaries. But you should think of the residuary clause as a safety net, rather than something that allows you to make an estate plan once and forget about it. 

As a general rule, you should review your estate plan at least every few years, and more often if you’ve had a major life change such as a marriage or divorce, the birth of a child or grandchild, the death of a spouse or close family member, the purchase or sale of real estate or other major assets, or a move out of state. 

You may not need to actually make changes to your plan every time you review it, but you will be able to evaluate whether it still meets your current needs. Having an updated estate plan does make it more likely that your plan represents your present assets, heirs, and goals, and provides peace of mind for both you and your loved ones. 

To learn more about residuary clauses and other ways to make sure your estate plan achieves your goals, contact Estate Planning & Elder Law Services to schedule a consultation.