When creating a will or trust, most people focus on distributing their major assets, such as the family home, retirement accounts, and valuable heirlooms. But what happens to assets you don't specifically mention? Perhaps you acquire new property after drafting your will, forget to list certain accounts, or simply can't anticipate everything that will be part of your estate.
This is where a residuary clause becomes essential. Without one, your unmarked assets could end up potentially causing family disputes and preventing your property from going to your intended beneficiaries.
Let's explore what residuary clauses are, why they matter, and how ambiguous language can create unexpected problems for your loved ones.
What Is a Residuary Clause?
A residuary clause is a provision in a will or trust that designates who receives all assets not specifically distributed elsewhere in the document. Think of it as the "everything else" section of your estate plan; it ensures that every asset you own at the time of your death has a clear destination.
Estate planning often involves identifying and allocating high-value assets: Your home goes to your spouse, your investment portfolio is split among your children, and your classic car goes to your nephew. But what about the savings account you opened two years after signing your will? Or the antique furniture you inherited from a relative? Or the proceeds from a life insurance policy you didn't specifically designate?
Rather than amending your will every time you acquire something new, you can include a residuary clause to automatically capture these items. The person or people named in this clause (your residuary beneficiaries) will receive whatever remains after all specific assets have been distributed and all debts, taxes, and expenses have been paid.
What Is an Example of a Residuary Clause in a Will?
A straightforward residuary clause might state:
"I give all the rest, residue, and remainder of my estate, of whatever kind and wherever situated, to my daughter, Sarah Martinez."
However, many people choose to include contingent beneficiaries in case their primary residuary beneficiary predeceases them. For example:
"I give all the rest, residue, and remainder of my estate to my spouse, Michael Chen. If my spouse does not survive me, I give the remainder of my estate to my children, Emma Chen and Lucas Chen, in equal shares."
Some residuary clauses distribute the remainder among multiple beneficiaries:
"I give all the rest, residue, and remainder of my estate to the following individuals in equal shares: my brother James Thompson (25%), my sister Rebecca Thompson (25%), and the Austin Children's Hospital (50%)."
More complex residuary clauses might place assets in trust:
"I give all the rest, residue, and remainder of my estate to the Trustee of the Family Trust established under this will, to be held and distributed according to the terms set forth in Article V."
The key is clarity — your residuary beneficiaries should be identified by their full legal names, and the distribution method should be unambiguous.
Why Is It Wise to Put a Residuary Clause in a Will?
Including a residuary clause in your will can offer several critical protections for your estate and beneficiaries. Here are a few of the potential advantages of having one in place:
Ensuring Complete Distribution
Without a residuary clause, any assets not specifically mentioned in your will become intestate property, meaning they pass according to state law rather than your wishes. A residuary clause guarantees that everything you own goes where you intend.
Accounting for Forgotten or Future Assets
Memory isn't perfect, and life brings changes. You might overlook a small bank account when drafting your will, or you might acquire new property after signing it. A residuary clause will automatically cover these items without requiring constant will amendments.
Handling Failed Gifts
If you leave your coin collection to a friend, but they pass away before you do, and you haven't named an alternate beneficiary, the gift will "lapse". Your residuary clause can catch such assets and redirect them to your residuary beneficiaries.
Simplifying Estate Administration
Your executor's job becomes significantly easier when there's clear direction for every asset. Instead of petitioning the court for guidance on unmarked property, your executor can efficiently distribute everything according to the terms of your residuary clause.
Preventing Family Disputes
Ambiguity sometimes breeds conflict. When assets lack clear beneficiaries, family members may disagree about who should get them. A residuary clause can eliminate this uncertainty, reducing the potential for costly litigation and damaged relationships.
Providing Flexibility
Rather than meticulously listing every possession, you can specifically gift only your most important assets and let the residuary clause handle everything else. Doing so will save you time and keep your will more concise.
What Happens If There’s No Residuary Clause in a Will?
When a will lacks a residuary clause, any property that’s not specifically accounted for becomes subject to the state's intestacy laws. This means the court determines who receives these assets based on a statutory formula, typically prioritizing spouses, children, parents, and siblings in that order.
As such, failing to include a residuary clause can have many negative consequences, including:
Loss of Control
Without a residuary clause, your carefully considered estate plan becomes partially meaningless. While your specific bequests still stand, everything else follows a legal formula that may not align with your wishes.
Unintended Beneficiaries
Intestacy laws don't account for personal relationships or circumstances. Your estranged sibling might inherit property you would have preferred to leave to a close friend, or your spouse might have to share assets with adult children from a previous marriage when you intended everything to go to them.
Probate Complications
Property transmitted through intestacy requires additional probate proceedings. Your executor will have to petition the court to determine heirs, adding time, expense, and stress to an already difficult process.
Family Conflicts
When the law determines distribution rather than clear testamentary instructions, aggrieved family members may contest the outcome. These disputes can drag on for months or even years, depleting estate assets through legal fees and straining family relationships permanently.
Timing Issues
If someone who would inherit under intestacy laws is a minor, the court may need to appoint a guardian or conservator to manage their inheritance, creating additional complications and delays.
For example, imagine that you draft a will leaving your home to your daughter and your investment account to your son, but you don't include a residuary clause. After you pass, your executor discovers that you also had a savings account containing $75,000, a small rental property, and various valuable personal belongings.
Without a residuary clause, these assets would enter intestacy. Under Texas law, if you're married with children, your spouse might receive a portion while your children split the rest, possibly triggering a distribution that doesn't reflect your wishes.
Examples of Problematic Residuary Clauses
Not all residuary clauses are created equal. Vague or ambiguous language can create the very problems these clauses are meant to prevent. Here are examples of residuary clauses that could lead to litigation or other issues:
Each of these clauses attempts to provide direction but instead introduces uncertainty that could lead to court interpretation, beneficiary disputes, and outcomes the testator never intended.
