Most people establishing estate plans have specific goals. Some people want to maximize what certain beneficiaries receive from the estate. Others hope to prevent their loved ones from fighting over their property.
Regardless of personal goals, there are certain oversights that people commonly make when establishing written estate plans. One of the most common oversights involves a failure to address their residuary estates. Testators may unintentionally create a scenario in which their loved ones end up fighting over their property and dealing with probate complications.
What is the residuary estate?
Frequently, testators drafting estate plans make a point of addressing their most valuable property. Financial accounts, real estate, vehicles and assets that have significant financial or emotional value may be the first items the testator addresses in their documents. They want to provide as much financial support to their beneficiaries as possible, and they may also make arrangements for assets that could serve as an emotional touchstone and source of memories after their passing.
They may not pay much attention to lower-value assets, such as their personal property. Any resources not directly included in testamentary instructions become the residuary estate. Clothing, kitchen equipment and furniture can all be part of the residuary estate. All directly-owned assets not directly addressed in an estate plan or in trust documents may become part of the residuary estate.
Families may fight over unassigned assets
Any resources not included in the estate plan could lead to estate administration complications. Certain friends or family members may ask for those resources, and conflicts might arise. The personal representative administering the estate may not know what to do with those assets and might let their personal preferences guide their decisions.
Some testators decide to allocate their entire residuary estate to one individual. Others may instruct their personal representative to hold an estate sale and then distribute the proceeds from selling those remaining assets among specific beneficiaries. People can also leave instructions to donate their residuary estates if family members and other loved ones are unlikely to want specific assets.
Taking the time to address various details that can cause probate conflicts is an important component of estate planning. Even low-value assets have the potential to generate conflict during estate administration.