What To Know About Residuary Beneficiaries

The term “residuary” gets used a lot in Florida probate law. Understanding what a residuary is, and what the rights of residuary beneficiaries are in both Wills and trusts can help you make more informed estate planning decisions. Here’s what you need to know about residuary beneficiaries and a residuary trust.

What Does “Residuary” Mean?

In probate law, the word “residuary” essentially means “everything else.” Most estate plans, including both Wills and trusts, include awards of specific property (such as the family house, heirlooms, or pets). Anything not included in these “specific devices” falls into the residuary. The residuary can be awarded to one person, a class of people (like “my children”), or a series of people as alternate beneficiaries.

That doesn’t mean that residuary beneficiaries are left with the scraps of a loved one’s estate. Often a person’s residuary estate is quite large. It could cover everything from bank accounts to household furnishings and clothing. The size of the residuary estate depends on what a deceased person owned when they died, and how detailed their estate plan is.

Rights of a Residuary Beneficiary Under a Will

A residuary beneficiary has all the same rights as a specific beneficiary under a Will. This includes the right to:

• Receive notice that a Florida probate case is filed
• Contest the validity of the Will
• See an inventory and accounting of estate assets
• Object to errors in the formal accounting
• Receive the fair market value of any asset awarded to them
• Pursue a homestead exemption to protect property from creditors
• Notice of any Will contest or litigation against the estate
• Petition for removal of a personal representative who does not do their duties

Because residuary beneficiaries receive whatever is left after specific devises are distributed, theirs are often the last claims resolved by the probate court. Because of this, residuary beneficiaries are often the parties most interested in avoiding delays and moving the estate along to its final distribution.

What is a Residuary Clause in a Trust?

The term “residuary” may also come up if your loved one’s estate plan included a revocable living trust or irrevocable trust. Many trusts include a “residuary clause” which operates just like a residuary estate in a Will. The residuary beneficiaries in a trust are entitled to the benefit of any asset not specifically assigned in the trust documents. That residuary clause can designate that the remaining assets pass to one or more persons, a charity, or even another trust (such as the surviving spouse’s revocable living trust).

Using a Residuary Trust to Protect Beneficiaries’ Assets

There are also specific residuary trusts. A residuary trust is different from a residuary clause in a trust. As addressed above, a residuary clause comes as part of a larger trust, and controls whatever assets aren’t distributed in the rest of the trust documents. A residuary trust, sometimes called a “bypass trust” is a separate legal document that is paired with a pour-over Will and is often used by married couples to avoid or minimize estate taxes. Here’s how it works.

When the first spouse of the couple dies, his or her estate assets are divided up into two separate trusts. The “marital” trust is controlled by the surviving spouse, who can use or dispose of those assets however they like. The second residual trust names different beneficiaries – often the couple’s children or grandchildren – who are named residual beneficiaries. The surviving spouse acts as trustee for the residual trust, managing funds, receiving income from the properties, and paying out distributions to the residual beneficiaries as needed. However, the trustee spouse is not considered the owner of the residual trust. When the trustee spouse dies, both the marital trust and the residuary trust are distributed to the beneficiaries named in the trust document. This reduces the size of the surviving spouse’s estate and helps some families avoid having to pay federal estate taxes.

Most Florida estate plans have a residuary of some kind. Understanding the rights and the interests of residuary beneficiaries in your Will or trust can help you decide how specific to be in drafting your estate plan, and whether a residual trust will be necessary to protect your family’s assets. At Harrison Estate Law, we know how to best use a residuary trust in estate planning. We can help you make thoughtful decisions about your estate plan, to make sure your family will be taken care of after you pass away. Please contact us online or via email or call 352-559-9828 to schedule a free consultation. If you don’t live close to Gainesville or are practicing social distancing, we are happy to set up a phone or Zoom call.