"Rest and residue" refers to the portion of an estate that remains after all specific gifts, debts, taxes, and administrative expenses have been paid. It is essentially the "everything else" or "leftovers" of an estate, a crucial concept in estate planning and the administration of wills.
Understanding "Rest and Residue" in Estate Planning
In the context of a will, the terms "rest," "residue," and "remainder" are often used interchangeably or in combination, such as "rest, residue, and remainder." As per the provided reference, "Anything not specifically gifted to someone in the will is the 'residue.' So the 'rest, remainder, and residue' is the lawyer way of saying 'everything else.'"
This means that after a will maker (testator) has outlined specific bequests—such as giving a particular piece of jewelry to one person or a sum of money to another—whatever assets are left over constitute the residuary estate.
Components of an Estate
To better understand "rest and residue," it's helpful to differentiate between the types of gifts made in a will:
- Specific Bequests/Devises: These are gifts of particular items of property (e.g., "my house at 123 Main Street to my daughter, Sarah") or specific sums of money (e.g., "$10,000 to my nephew, David").
- Demonstrative Bequests: Gifts of a certain amount of money to be paid from a specific source (e.g., "$5,000 from my savings account to my sister, Emily").
- General Bequests: Gifts of money or property that are not specified as coming from a particular source (e.g., "$1,000 to my friend, Tom").
- Residuary Estate: This comprises all assets that remain in the estate after all specific, demonstrative, and general bequests have been fulfilled, and all debts, taxes, and administrative costs have been settled. This is the "rest, residue, and remainder."
Why is the Residuary Clause Important?
A residuary clause in a will is vital for several reasons:
- Ensures All Property is Distributed: Without a residuary clause, any assets not specifically mentioned or those that remain after specific gifts are fulfilled would pass according to the laws of intestacy (dying without a valid will) in that jurisdiction. This can lead to unintended beneficiaries receiving portions of the estate.
- Catches Omitted Assets: It acts as a safety net, covering any assets the testator may have forgotten to specifically name in the will, or assets acquired after the will was drafted.
- Handles Failed Gifts: If a specific gift cannot be carried out (e.g., the named beneficiary dies before the testator, or the specific asset is no longer owned by the testator at the time of death), that asset typically falls into the residuary estate to be distributed according to the residuary clause.
- Simplifies Administration: It provides clear instructions for the executor on how to distribute the entirety of the estate, streamlining the probate process.
Practical Example
Consider a will that states:
- "I give my antique watch to my brother, Mark."
- "I give $50,000 to my sister, Lisa."
- "I give the rest, residue, and remainder of my estate, both real and personal, to my children, equally."
In this scenario:
- The antique watch is a specific bequest.
- The $50,000 is a general bequest.
- All other assets—such as a house, cars, bank accounts (after paying debts and expenses), investments, and any other personal property not specifically mentioned—would form the rest and residue of the estate, which would then be divided equally among the children.
Summary of Estate Distribution Terms
To clarify the concepts further, here's a brief comparison:
Term | Description |
---|---|
Specific Gift | An explicitly named asset or sum of money designated to a particular person (e.g., "my car to John"). |
Residue | "Everything else" not specifically gifted, debts, or expenses. The "leftovers" of the estate. |
By including a comprehensive residuary clause, a will ensures that the testator's intentions for their entire estate are clearly documented and that nothing is left undistributed.