[UPDATED 2023] Why Do I Need a Residuary Estate Clause?
Many people execute Last Wills to ensure their assets are distributed according to their desires after death. Without a Will, Maryland’s intestate laws decide who inherits your property. However, even with a Will, there could be problems with your probate estate.
Wills must comply with all Maryland requirements for a valid Will. Furthermore, Last Wills should contain various clauses and legal language to ensure your wishes are carried out after your death. An essential clause in a Will is a residuary clause.
Working with a Maryland estate planning attorney is the best way to ensure your Will has a residuary clause and other provisions that can avoid problems for your family when they probate your estate. Contact our law office to speak with an estate planning attorney.
What Is a Residuary Clause?
The residuary clause in your Will instructs how the residue of your estate passes to specific beneficiaries. It is considered a safety net to ensure that no items in your estate fall under Maryland intestate succession.
What Does a Residuary Estate Include?
The “residue” of an estate is any asset or property that remains in the estate after the devised assets are distributed to heirs. A devised asset is any property that you leave to a specific person.
For example, you might leave your vehicle to your brother. The vehicle is a devised asset because you specifically named a beneficiary to receive the vehicle. Likewise, you might leave your clothing, furniture, and all other personal property to your spouse. All of this property is devised property.
Why Does My Will Need a Residuary Clause?
Your Will must have a residuary estate clause to ensure all the assets in the estate are distributed according to your wishes. Reasons for a residuary clause in your Will include:
Ensure all property is distributed to the person or persons you want to inherit the bulk of your estate
Provide for assets that you acquire after you execute your Will
You want to leave specific property to certain individuals and direct your personal representative to sell the residual estate to divide among heirs
Preventing heirs that you do not want to receive your property from receiving assets from your estate
Avoid assets falling into intestate succession
Most people do not list all of their assets individually in their Wills. A residuary clause assures them that the remaining assets will be passed to the correct person.
What Happens if I Don’t Have a Residuary Clause?
If you do not have a residuary clause, there could be a great deal of confusion for your heirs. Your family members must petition the probate court to determine the beneficiaries for the property in the residual estate. Furthermore, your family may bitterly fight over the residual estate, especially if your residual is worth a substantial amount of money.
In most cases, Maryland courts divide the residual estate according to the state’s intestate succession laws when a Will does not have a residuary estate clause. Intestate succession is the legal priority for heirs to receive property when a person does not have a Will or a residuary clause for residual property. Intestate succession does not include extended family members, friends, or charitable organizations.
Unfortunately, the state statute controls who receives your residual estate if your Will does not have a residuary estate clause. Instead of you deciding who receives your assets, the state does, and you might disagree with how the state would distribute your residual estate.
How a Maryland Estate Planning Attorney Can Help
An experienced Maryland estate attorney discusses residuary estate clauses with you during the estate planning process. Even if you do not believe you need a residuary clause, it is good to have one in your Will. A residuary estate clause ensures that none of your estate will be subject to intestate laws.
Contacting a probate law firm to draft and execute a Will is the best way to ensure your wishes are carried out after your death. A Will is one portion of an estate plan. A Maryland estate planning law firm can help you develop estate plans that:
Minimize the probate process or avoid probate to save time and money for your loved ones
Ensure your family members have access to the resources they need upon your death without delays
Name guardians and trustees to care for your children and manage a minor child’s inheritance
Appoint personal representatives to handle estate administration
Ensure assets are distributed to the correct family members and beneficiaries
Asset protection to protect property from creditors for future generations
Avoid probate by using revocable and irrevocable trusts
Asset protection to provide for a child or other family members with special needs
Reduce or prevent estate taxes and capital gains taxes for family
Appoint durable powers of attorney for incapacitation planning
An estate law firm helps you with business succession planning to protect family businesses, small businesses, and other business entities
Create end-of-life documents to appoint someone to make medical decisions for you if you become incapacitated and make decisions regarding end-of-life treatment to save your family from making these difficult decisions
Make retirement planning and wealth planning easier by coordinating your estate plan with a comprehensive retirement plan
Leave money to a charitable organizations
Working with an experienced Maryland estate planning attorney can accomplish estate planning easily and affordably. If circumstances change, your attorney also helps you modify your estate plans and legal documents. Attorney Steve Thienel provides legal advice and guides you through the estate planning process to ensure you, your family, and your property are protected.
Our Maryland Estate Planning Attorney Answers FAQs About Residuary Estate Clauses
Below are answers to frequently asked questions about residuary estate clauses.
Who Bears the Tax Burden of a Residuary Estate?
Who bears the tax burden of a residuary estate depends on how you direct taxes to be paid when you write your Will. Wills can include a clause that pays taxes from the estate before distributing assets. In that case, all assets passing through the Will are subject to estate taxes.
However, you can also direct estate taxes to be paid from your residuary estate. In that case, people who receive specific gifts or bequests receive those items without paying estate taxes. The estate taxes would be paid from the residuary estate. The beneficiaries receive their inheritance less any estate taxes owed.
What Happens to a Residuary Estate if the Legatee No Longer Exists?
If the residuary clause directs what happens to the property if the legatee predeceases the testator, the residuary estate passes according to the instructions in the residuary clause. However, if you do not name a successor beneficiary for your residual estate, the assets pass to your heirs according to Maryland intestate laws.
Is a Residuary Trust Revocable or Irrevocable?
A residuary trust is revocable or irrevocable depending on the terms of the trust, the purpose for creating the trust, and whether specific events have occurred. For example, residuary trusts created through Wills for bypass purposes becomes irrevocable trusts upon one of the spouse’s deaths.
A bypass trust is often used with a pour-over Will. Pour-over Wills name a trust as the beneficiary of your residual estate. Residuary trusts can be used to avoid or minimize estate taxes for married individuals.
The estate is divided into a marital estate and a residual estate. The surviving spouse receives the marital estate and becomes the trustee for the residuary trust. The spouse handles the trust administration for the residuary trust and can receive income from properties within the trust. Upon the surviving spouse’s death, the residuary trust is disbursed to the trust beneficiaries.
How Much Does an Estate Have to be Worth to go to Probate in Maryland?
According to Maryland estate law, an estate must be opened if the decedent owned any property in their name alone or as a tenant in common. However, you can choose to file a small estate if the property's value is less than $50,000 or less than $100,000 if the surviving spouse is the sole heir. Otherwise, you file a regular estate.
How Long Do You Have to Settle an Estate in Maryland?
Generally, the probate process takes about one year to complete. Once you file the estate, you must meet certain deadlines for specific steps and filing documents. However, each estate is unique. Therefore, the probate court might extend some deadlines for a good cause.
Complex estates and high-net-worth estates could take longer to settle. Small estates are typically closed within a few months after opening the estate.
Do I Need a Probate Law Firm in Maryland to Help Me with an Estate Plan?
You are not required to hire an attorney to draft a Will. However, just because the law does not require hiring an attorney does not mean you do not need a probate attorney to help you with an estate plan.
A probate attorney understands elder law, estate law, trust administration, and business planning. They understand how to draft valid estate planning documents. An attorney also knows which estate planning documents accomplish your desires and needs. The best way to ensure that your final wishes are carried out after your death and protect your family's future is to have an experienced probate attorney draft your estate planning documents.
Contact Our Maryland Estate Planning Attorney for More Information
Our experienced Maryland estate planning attorney at Thienel Law firm can help you develop an estate plan that accomplishes your goals, meets your needs, and protects the legacy you created for your loved ones. Contact our law firm to schedule a time to speak with attorney Steve Thienel about your Maryland elder law and estate planning.
