When most people think about a Will, they focus on specific gifts – who gets the house, a treasured heirloom, or even a lump-sum cash gift. But one of the most important (and often misunderstood) components of a Will is something called the residuary estate.
You can think of the residuary estate as the “leftover” portion of a person’s probate estate. So, after those specific gifts mentioned above are distributed, whatever assets remain constitute the “residuary estate.” A Will’s “residuary clause” directs the Personal Representative to distribute whatever is left to the “residuary beneficiary” or beneficiaries.
Many people assume that, if they are named as a residuary beneficiary, they are guaranteed to receive something. That is not necessarily true. Why? Because the residuary estate is often the primary source used to satisfy the estate’s financial obligations.
Let’s look at a simplified scenario. Grandpa George creates a Will leaving $100,000 to each of his three sons (totaling $300,000 in specific gifts) and the remainder (the “residuary”) of his estate to his favorite grandson, Charles. At his death, Grandpa George’s estate is worth $350,000. At first glance, it appears that Charles will receive the remaining $50,000. But Grandpa George also died with $50,000 in unpaid medical bills. Those debts must be paid before distributions are made, and the funds to pay those debts are drawn from his residuary estate per RCW 11.10.010. The result? The $50,000 “residue” is entirely consumed by debts, and Charles, the excited residuary beneficiary, receives nothing.
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