What’s a residual beneficiary?

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A residual beneficiary inherits assets not designated for specific beneficiaries in a will. The remaining assets are left to a single entity, but may be subject to debt settlement by the executor.

A residual beneficiary is an individual or entity that inherits real property assets that are not specifically designated for other beneficiaries. The idea is that any property or belongings associated with the estate that is not named in a will and will and is left to someone in particular is considered part of the residual estate and will be vested in this type of beneficiary. This approach is not uncommon in many cultures, with the terms of a will designating certain assets and belongings to certain people, with the remainder of the estate going to a single entity.

One of the easiest ways to understand the concept of a residual beneficiary is to consider a will in which multiple beneficiaries are identified. The will may specify that the deceased’s book collection is to be given to a close friend, while another friend or relative is given a gift of a specified amount of cash from the estate. From there, the home and all of its contents can be left to a spouse or partner. Finally, there may be a provision that allows all remaining property and assets to be left to a particular individual, who is considered the residual beneficiary.

The identification of a residual beneficiary is very common in various crops. Rather than include an exhaustive list of all assets in the decedent’s possession at the time of death, the terms of the last will and testament will leave specific items to certain individuals, but then leave the remaining assets to that single beneficiary. The understanding is that all assets not specifically bequeathed to someone in particular are considered part of the residual estate and will vest in the person identified as the residual beneficiary.

The actual extent of assets that the residual beneficiary eventually inherits may be subject to the need for the executor to have to settle any outstanding debts owed by the estate. Executors typically have the power to sell assets if necessary to pay off debts, which can reduce the range of residual assets that are eventually transferred to the beneficiary. The benefit of this approach is that the remaining assets do not come with any liens or obligations, allowing the recipient to use the assets however they see fit, after settling any inheritance or other taxes that may apply to the acquisition of assets.

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