Individuals with valuable personal holdings must take care when developing an estate plan. They need to make sure that they appropriately address valuable assets to preserve them, limit the risk of conflict among their beneficiaries and reduce estate tax obligations.
People often prioritize planning for real property, businesses, financial resources and investment holdings. They may also make a point of designating beneficiaries for assets that carry significant emotional value.
Testators with extensive personal property may overlook their residuary estates after addressing their most valuable resources. Making such a mistake might ultimately lead their loved ones to fight over their property.
What is a residuary estate?
The estate of a deceased individual does not just contain their most valuable assets. Everything that they own directly is also potentially part of their estate.
Testators can easily forget to address their home furnishings, wardrobes and other personal property. The residuary estate consists of any assets not directly addressed in estate planning documents.
There are several ways to address the residuary estate. Testators may provide instructions to divide it evenly among certain beneficiaries. They can instruct their personal representatives to hold an estate sale and allocate the proceeds from the sale in a certain way. Some people even choose to donate personal property to charities that they support.
Left unaddressed, a residuary estate that was not included in an estate plan might lead to conflicts among beneficiaries, many of whom may wish to retain the same assets or as much of the estate as possible. Discussing current estate planning documents and any assets not included in such documents may help testators effectively address their residuary estates.