The Residuary Estate.

Another odd concept that often causes confusion for clients when they see it appearing in their draft Will – especially when in essence this is what most people think of when they write a Will – namely who they are leaving their estate to. Think of ‘residuary’ as meaning whatever is left of the Estate once any debts and legacies have been paid.

A simple example would be an Estate worth £500,000. Once the debts totalling £70,000 and the legacies totalling £30,000 have been paid, the residuary Estate is worth £400,000.

Generally, couples leave everything to one another (and if the documents are exactly the same they are known as a Mirror Will). For married or civil partners, this is tax efficient as it utilises the spousal exemption which allows for such couples to leave everything to one another without incurring any inheritance tax.

Often, couples who have children intend for them to be the beneficiaries on the second of the couple’s deaths.  Such an arrangement remains fairly common however with the increase in blended families, this kind of disposition can result in some family members feeling like they have lost out or been treated unfairly.

In a blended family you will often find couples with children from previous relationships but who treat all the children equally. In the vast majority of cases there are no issues with a couples’ intention to ultimately share their Estate between their children and their step children (I am using the term ‘step’ children but these scenarios can apply to unmarried/non-civil partnered families). However, this generosity of spirit may be the very cause of a future dispute.

Upon that parent’s death, their biological children may not be best pleased that their step parent inherits everything of their parent’s Estate (which may consist of the proceeds of an earlier matrimonial home or inheritance from grandparents). If such a disposition occurs it is entirely possible for the surviving parent to then leave everything they have (which now includes their late partner’s estate) to their biological children – leaving nothing to their step children.

When I say this is entirely within the realms of possibility – I mean it happens regularly and I often have the unhappy descendants seeking advice.

It is entirely correct for a couple to leave everything to their spouse/civil partner. There is no legal requirement for them to do otherwise – but they must make that decision on the basis of sound legal advice. There are many factors that need to be considered when making your Will – particularly so if there are complexities to your Estate. The biggest mistake I see is people assuming that their families will ‘just sort things out’. Never underestimate people’s capacity to argue.

If you remain confused by the concept of a residuary estate or are facing the considerations I have described above, then I would suggest contacting Mundays Private Wealth team who will be able to draft a Will to fit your circumstances and advise you further on any particular element you should consider in your Will. If you would like to discuss any concerns you may have with your existing Will or an Estate dispute contact Michael Brierley head of the Trusts, Wills and Probate Disputes team.

The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP.


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