When creating a Will, individuals often think about how to distribute their assets, provide for loved ones, and address their final wishes. A crucial aspect of this process is the concept of the “residue” of an estate, which plays a significant role in the distribution of remaining assets after specific gifts have been made.
What is the “residue”?
Legislation provides that all the assets of a deceased are to be used for the payment of the funeral, debts and administration and testamentary expenses when there are sufficient assets in the estate. Therefore, the residue of an estate refers to the portion of a deceased person’s assets that remains after all debts, taxes, expenses, and specific gifts have been settled. This includes any assets not explicitly allocated to specific individuals or entities in the Will. Essentially, it’s what’s left over once all other distributions have been accounted for.
For instance, a scenario in a Will can be as follows:
- A monetary gift of $10,000 to a friend;
- All shares and investments to a siblings; and
- The residue of the estate to their children
In this case, the residue of the estate will include all remaining assets, such as bank accounts, personal belongings, real estate and anything else that hasn’t been specifically mentioned or gifted in their Will.
Residuary gifts in a Will
The executor is responsible for distributing the residue of the deceased’s estate in accordance with the Will.
Specific gifts are different to the residue of the estate as outlined above. Specific gifts are paid first, unless of course the gift does not exist at the time of death. However, beneficiaries of the residuary estate aren’t able to access this until all the debts and estate matters have been finalised as part of the administration of the estate. Every estate is different; therefore it depends on the specific matter as to how long it will take to finalise the estate and then when the executor will be in a position to ascertain how much is in the residuary estate and be in a position to divide it between the beneficiaries.
Drafting a residue clause
It is really important that when a Will is drafted that careful thought and consideration goes into who gets the residue of the estate – especially if there are no specific gifts and most of your assets are comprised in the “residue”.
It is also common for individuals to draft their own Wills, also known as a “DIY” Will, and they leave some gifts to their friends or family but then don’t address who the residue of their estate is going to. This can become very problematic when administering the estate as there is now a partial intestacy and the deceased’s estate now risks going to someone who they did not anticipate for it to go to. This means that everything that has not been mentioned in the Will will be divided according to the Administration Act and it’s almost as if the deceased has died without a Will. Read more about dying intestate here.
That’s why when drafting and thinking about your Will and who the residue of your estate will go to, you put a lot of thought into it and get the correct advice and ensure your Will is drafted properly by a lawyer.
We are more than happy to assist with the preparation of Wills and other Estate Planning documents. Please contact us today on 9375 3411 to make a time to see us.
About the Authors: This article has been written by Ida D’Alonzo. Ida obtained her Bachelor of Laws at Murdoch University in 2020, after graduating with a Bachelor of Criminology. Ida was admitted as a lawyer in 2022 and has worked in the Wills and Estates area since starting her career.
