Residuary bequest
A residuary bequest is a gift of the portion of an estate that remains after expenses, creditor payments and specific bequests or devises are covered. For owners of businesses, real estate and private investments, the amount of each residuary share depends on the net estate after expenses and specific gifts.
How it works
Estate planning practitioners describe a specific bequest or devise as paid out of the estate ahead of residuary bequests or devises. A specific beneficiary is entitled to specific assets or a specific dollar amount.
Practitioners regard a specific bequest as one that may be distributed after creditor payments. A residuary bequest generally waits until creditors and specific bequests are paid.
Where it shows up for owners of businesses, real estate and private investments
A business interest, real estate holding or private investment is part of the net estate that funds residuary shares when it passes through the estate. Each residuary share is calculated after expenses and specific gifts.
For a Schedule M residue bequest, the IRS instructions require an attached computation and specified supporting information. The supporting information includes nonprobate gross-estate property and legacies.
Points that are easy to confuse
A specific bequest names assets or a dollar amount, so its size is known from the instrument. A residuary bequest has no stated size because the net estate determines it.
Trust and estate practitioners describe an advance made on roughly one-third of total account value that did not account for the spouse's share being one-third of the net estate after expenses.
Practitioners note that an advance against the residue is riskier before final expenses are known.
Common questions
How does a specific bequest differ from a residuary bequest?
A specific bequest identifies particular assets or a dollar amount for a beneficiary. A residuary bequest covers what is left of the net estate, so creditors and specific bequests come first and the residuary share is sized last.
Does a residuary share have a fixed amount?
A residuary share has no fixed amount set in advance. Its size depends on the net estate after expenses and specific gifts, and final expenses are part of that figure until they are known.