January 27, 2016

Residuary Clause in a Will

An important clause to include in a testamentary document such as a will is a residuary clause. This clause serves as a catch-all for any item that is not specifically distributed in the document. The benefit of including a residuary clause is that it serves as a safeguard in case the person fails to distribute their entire estate through specific gifts. Otherwise, the asset or assets will be distributed to their next of kin, i.e. intestate succession. The following example illustrates this point.

Mo Mozart was a widower who had no children. Mo's estate was mainly comprised of a home and bank account. Yes, Mo had a austere existence. Mo decided one day to write a will without the assistance of a lawyer. He found an online will template that was palatable to him. Unbeknownst to Mo, the online form did not contain a residuary clause.  

Mo devised his home to his close friend Bob Beethoven and his bank account to another close friend, Harry Handel. Both were musicians like him. I hope you can see the musical angle here. He also named the two of them co-executors.     

One of the reasons Mo decided to write a will was to make sure that his next of kin, Bo Mozart, his brother, did not inherit his estate. Mo was disappointed that Bo opted to become a professional mime instead of pursuing a career in music like the rest of his family. Mo believed that his will would ensure that Bo did not inherit from him. Or so he thought........

When Mo passed away, his will was submitted to the local probate court by Bob and Harry. An inventory and appraisal of his estate showed that in addition to his house and bank account, Mo had many items that were not accounted for in his will, notably musical instruments.

Bo was notified of the probate because he was next of kin (this is required by CA law). When Bo realized that Mo had not specifically mentioned the distribution of his musical instruments in the will and it contained no residuary clause, he petitioned to be named the beneficiary of the musical instruments. Due to those two aspects, the musical instruments became part of Mo's intestate estate. See Probate Code § 21111(a)(3) This meant that the musical instruments were treated as if Mo wrote no will. Therefore the musical instruments would be distributed to his next of kin, i.e. Bo. Naturally Mo wanted to avoid this scenario. Unfortunately Mo was not given proper legal advice when he wrote his will. Alas Mo could not change his will from beyond the grave and Bo became a beneficiary of Mo's estate.