What Is a Residual Trust?

When you have a living trust, you can give a certain amount of assets or money to each one of your beneficiaries. If the value of your estate grows beyond what it is when you create the trust, there may be some left over. To avoid any controversy about what happens to the leftover, you can create a residual clause in your trust. With this clause, you get to name who will receive the residual from your estate.

A residual clause in a trust can be beneficial to help deal with unexpected circumstances. When you create your trust, you may have everything figured out specifically the way you want it. Along the way, circumstances can change that could affect how your assets are distributed. For instance, if one of your beneficiaries passes away before you do, her portion of the money will remain in the estate. With a residual clause, you can make sure that this money goes to someone.

Another reason that a residual trust can be beneficial is to help with property that may have been overlooked. When you go through estate planning, you have to list all of the property that you own and give it to someone. If you leave something out, you can simply include a residual clause that will give all of the rest of your property to someone. This can be beneficial if property turns up that you forgot to list specifically.

Creating this type of trust arrangement could also save you time. For example, if you have a great deal of property, you may not want to list every single piece of property you have. In this case, you can simply specify the major property like your house and your car and then include the rest as part of the residual. This way, you can simply give everything left over to one person without having to waste time listing it.