Making the effort to establish an estate plan is a smart decision. People who draft wills or fund trusts can help ensure that their assets pass to specific beneficiaries in accordance with their wishes. The focus during the estate planning process is often on major resources.
Business owners want the right person to take over managing the company. Homeowners want specific family members to inherit their real property. Retirement accounts, vehicles and family heirlooms are often important inclusions in comprehensive estate plans. Unfortunately, people may become so fixated on addressing their high-value resources that they overlook other assets.
Many people fail to address their residuary estates in their testamentary instruments. Their families may then end up fighting. A residuary estate consists of any assets not explicitly addressed in testamentary instruments. How can people address their residuary estates?
By naming a beneficiary
Residuary estates may include hundreds of items that have limited economic value. Furniture, clothing, kitchenwares and various other assets may not seem worth including in an estate plan. However, they could trigger conflict among beneficiaries who want to maximize what they retain from the estate.
Many testators select a specific person to inherit their residuary estate. Maybe they have a grandchild who enjoys thrift shopping or who hasn’t yet established their own household. Choosing one person to inherit the residuary estate is a common approach.
People might also name multiple beneficiaries to split up the residuary estate. In cases where there isn’t a family member who might enjoy or benefit from those personal resources, a testator might instead choose to leave instructions to donate their residuary estate to a specific charitable cause, such as a domestic violence shelter or a homeless shelter.
By planning for a sale
Another way to address the residuary estate is to provide instructions to hold an estate sale. Selling assets that do not warrant individual inclusion in an estate plan can be a way to increase the overall value of an estate and optimize what beneficiaries ultimately inherit. Leaving instructions to sell personal property can prevent confusion and conflict about assets that are not financially or emotionally valuable enough to justify their specific inclusion in estate planning documents.
Identifying issues that can complicate estate administration and undermine a legacy can help people establish strong estate plans. The personal property of a testator can be an important issue to address when drafting documents.
