When you’re making a will, your ‘estate’ is essentially everything you own. Bank accounts, pensions, stocks, shares, property, insurance policies and belongings all make up a person’s estate. In the will, you’ll need to explain how every part of that estate should be dealt with when you’re no longer around.

One way to do this is to leave specific gifts in your will – giving your sister your hat collection, for example, or giving your cousin £300 (lucky cousin). But you’ll also need to think about something called the residuary estate. Here, we’ll cover what this means and what you’ll need to consider when putting your wishes on paper.

 

What is the residuary estate?

Your residuary estate is made up of all the things left in your estate after all the specific gifts in your will have been given out, and debts, tax and funeral costs have been taken care of.

For example, let’s say you have a bank account with £15,000 in, a flat worth £250,000, and a lot of general ‘stuff’.

In your will, you state that there are some specific gifts you want to give away, like:

  • £1,500 to a charity
  • £2,000 split between your two children
  • Your guitar to your sister
  • A painting to your brother

And you decide to give your residuary estate to your partner.

When you die, no inheritance tax is due, but £4,000 is spent on your funeral, and £500 is used to pay off your credit card debt.

Everything left over – £7,000, the flat, and all your belongings apart from the guitar and the painting – is your residuary estate, and goes to your partner. They are then known as your residuary beneficiary, which means…

 

What is a residuary beneficiary?

A residuary beneficiary is just a name for someone who is given the residuary estate – that is, everything left over after tax, debts, funeral costs and specific gifts have been handed out.

You can have more than one residuary beneficiary. You just need to use your will to say what percentage of the residuary estate each person should get.

A residuary beneficiary has rights in the UK that most other beneficiaries don’t. For example, a residuary beneficiary is entitled to see the estate accounts after the will is settled. These will show how the estate has been distributed, along with a list of all payments made and received.

If the executor of the will refuses to share the estate accounts, the residuary beneficiaries can take them to court to force them to comply.

 

Making a will? Don’t forget this!

Residuary estate distribution always happens after specific gifts are given out. This means that it’s really important to make sure the numbers add up. Giving out large specific gifts can have unintended consequences. For example:

Imagine you want to give your partner your house when you die. When you make your will, you might say you’d like to give £16,000 to your children, £10,000 to charity, and the rest – the residuary estate, including the house – to your partner.

But what if you die with only £9,000 in your accounts? As the specific gifts have priority, the executor of your estate might need to sell the house to pay the charity and your children what they’re owed. You partner will then lose the house, only getting the profits from the sale minus the £16,000 owed.

So, how do you keep things like this from happening? Get a really good idea of your financial situation before you make your will. That way, you can make sure the specific gifts don’t take up more of your estate than you’d like. And if your financial situation changes significantly later on, remember to amend your will or replace it with a new one.

 

Make a will for free with Beyond

You can make a legally binding will for free in just 10 minutes on the Beyond site. It doesn’t cost a thing, and you can do it all from home, online, in your own time.

Find out more on our wills page here.

 

 

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