The Importance of a Residuary Clause in Your Will: Ensuring Your Assets are Distributed According to Your Wishes

Let's talk about the important topic of residuary clauses in a will. When you make a will, you'll want to ensure that all of your assets are distributed according to your wishes after you die. That's where the residuary clause comes in.

Essentially, a residuary clause specifies who will receive any assets that are left over after your debts, funeral expenses, inheritance tax, and any other specific bequests have been paid out.

This clause is incredibly important because it ensures that your assets will be distributed exactly as you want them to be, rather than being divided up according to the rules of intestacy, which may not be what you had in mind.

In some cases, a simple will may only have one clause that designates the residuary beneficiary or beneficiaries. If no executor is appointed or able to act, the residuary beneficiaries can prove the will, which means they'll be entitled to a "grant of letters of administration with the will annexed."

Residuary clauses can be drafted in a variety of ways, depending on your specific circumstances and preferences. For example, you may choose to name one or more individuals who will receive assets outright, either in equal or unequal shares. You can also specify that the beneficiaries must reach a certain age before they can inherit, or add default provisions that dictate what happens if a beneficiary dies.

Charitable organisations can also be named as beneficiaries in a residuary clause, but careful consideration must be given to inheritance tax implications when dividing the residue between beneficiaries who qualify for exemptions and those who don't.

More complex residuary clauses can establish trusts that provide greater flexibility, control, and protection for beneficiaries. Discretionary trusts, for example, allow trustees to decide which beneficiaries should benefit from the assets, and to what extent. This can help account for changing circumstances and allow for tax-efficient planning.

Finally, life interest trusts give named beneficiaries the right to receive the income from the trust fund during their lifetime, while ensuring that the capital passes to other named beneficiaries or into a discretionary trust. This can be an excellent option for those who wish to benefit their spouse during their spouse's lifetime, while ensuring that their children ultimately receive their estate.

Overall, a well-drafted residuary clause is an essential part of an effective will, and can help ensure that your assets are distributed according to your wishes after you're gone.