What Is a Residuary Clause and Why Is It Important?

When developing your estate plan, it is nearly impossible to address every account or property you own. There are sure to be some things you unintentionally overlook. However, by including a residuary clause, you can intentionally disburse any remaining items inadvertently left over during the estate or trust administration process to a named beneficiary or group of beneficiaries. 

Ensuring That Everything You Own Goes to the Right People 

During the estate planning process, you may decide that you want to leave certain items to specific individuals. But what happens in the following situations?

• You forgot to include everything you own in your will or trust.

• You do not address personal property of little value, like clothing or your extra set of emergency batteries and hand tools in the basement.

• You acquired new accounts or property after your estate plan was completed but you did not update it accordingly.

• You have retirement accounts, bank accounts, or insurance policies but do not have completed beneficiary designations.

• You have not named backup beneficiaries if something happens to your first choice (e.g., they predecease you, are unable to receive their inheritance for some reason, or decide they do not want it). 

A residuary clause outlines what should happen to any property that has not been addressed in your documents or assigned to a beneficiary. 

Without a residuary clause, your loved ones may be subjected to complications in the probate or trust administration process. Any money or property that has not been specifically left to someone will be distributed according to state laws, potentially going to individuals you did not intend. 

The Challenge of Remembering Everything in Your Will or Trust

It can be difficult to meticulously catalog and address every single possession in your will or trust. That is why the residuary clause exists. Provisions can be made in your will or trust for each beneficiary and what they should receive. Then, to ensure that everything you own or that is part of your will or trust is accounted for, a clause similar to one of the following can be added to your will or trust:

“I wish to leave the remainder of my estate to _____.” 

“The deceased settlor’s remaining property will be administered as follows:”

When crafting the residuary clause, you can name a person or charity that you would like to have inherit what is left over after you provide instructions for specific items or property. You could also decide to have the remaining amount divided among multiple people, charities, or a combination of both. For more than one person or charity, it can be helpful to specify the percentage that each person or charity will get to eliminate any problems or confusion.

The residuary clause guarantees that everything you own ultimately finds its way to the individuals or charities you want.

Working with an Experienced Attorney

The last thing anyone wants is to leave their grieving family to deal with confusion and disappointment after they pass. When designed properly, wills and trusts can offer clear instructions for an executor, personal representative, or trustee to navigate a smooth administration process. Estate planning attorneys understand how to create comprehensive legal documents that leave no room for ambiguity and avoid complications during probate and trust administration. By working closely with an experienced attorney, you can be confident that every aspect of your estate is thoughtfully considered and that your legacy will be passed on according to your wishes. Call MLO Law, LLC on 314 932 7111 to schedule a free Estate Planning consultation to ensure that all of your hard-earned money and property are properly planned for.

Inspiring Action: The Guide to Creating or Updating Your Estate Plan

Creating or revising an estate plan can feel overwhelming, causing many people to procrastinate. But the longer you put it off, the more potential there is to be caught unprepared in an emergency. So how can you motivate yourself and your loved ones to begin the process? Here are some strategies to help you overcome some of the negative feelings associated with this process and meet the challenge head-on.

Reward Yourself for Your Accomplishments

While the benefits associated with updating or creating a new estate plan are a reward in and of themselves, we can all use an extra push. Sometimes the promise of a small indulgence as a reward can change your frame of mind when initiating the process. However, your idea of a reward may be more substantial and might involve a more significant gift for the entire family to enjoy. What other projects have required extra motivation in the past? How much easier might they have been to complete if you rewarded yourself or your family for their completion? Get inspired with a few meaningful ideas that could serve as a reward:

• Plan a well-deserved vacation

• Make a reservation at your favorite restaurant

• Book a family photo session

• Buy the new phone, laptop, or computer you have been eyeing

The key to an effective reward is personalization. Choose something that resonates with you and can serve as a reminder of the importance and the effort you put into completing the estate planning process, which is essential to protecting your family's future.

Break Your Estate Planning Project Down into Smaller Steps

Estate planning can be a complex process, and facing it as a whole may seem impossible. To make it more manageable, break the process down into smaller, more achievable steps.

Identify the first three steps you need to take using these suggestions: 

1. Learn more about estate planning tools and how they work. Find out what is typically included in a comprehensive estate plan, such as wills, trusts, powers of attorney, and advance directives. 

2. Collect financial information. Gather and organize your financial information, including a detailed inventory of your money, property, debts, and sources of income. List bank accounts, investments, real estate, insurance policies, personal belongings, and more. 

3. Set specific goals for your estate plan. Establish clear goals based on the following factors: 

• Family structure

• Business and personal financial objectives

• Intentions for protecting and supporting your loved ones after your passing

• Desired lifestyle in retirement

• Wishes for how you would like to be cared for as you age

• End-of-life wishes

1. Choose your beneficiaries, personal representatives, trustees, and agents. Determine the beneficiaries you want to inherit your money and property and the individuals you want to be responsible for managing and distributing these accounts and property after your death. Think about the people you would trust as guardians for your minor children and whom you feel comfortable choosing to make financial and medical decisions for you if you become unable to make those decisions for yourself. 

2. Ask for the help you need. Throughout this first phase of preparing your estate plan, identify estate planning attorneys as well as tax and financial professionals in your area. Schedule consultations to discuss your needs and assemble a reliable team.

3. Review and update an existing plan. If you already have estate planning documents in place, review them for accuracy and relevance. Life circumstances such as marriages, divorces, or births, as well as changes in financial status, usually require updates. Ensure that beneficiary designations on accounts and insurance policies are current. 

By following these initial steps, you will lay a solid foundation for participating in the estate planning process. Each step keeps you on track and moves you toward the larger goal of completing your estate plan.

Tell Someone about Your Plan 

Accountability can be a powerful motivator. Share your intention to create or update your estate plan with a trusted friend or family member. This person can offer support and encouragement. They can also check in on your progress so you will be more likely to follow through on your commitment. For some people, simply saying the words out loud or putting them on a calendar also makes the project a priority. Choose the best way to hold yourself accountable.

Use Positive Affirmations 

Still feeling reluctant to engage in estate planning? This may stem from deeper concerns or anxieties about the future and your mortality. Counteract negative thoughts and shift your mindset by using positive affirmations to focus on why you may not want to proceed with preparing an estate plan. The following affirmations may help you take the worry or fear out of estate planning by focusing on the positive benefits. You may even want to write out one or two and post them in a place where you commonly look.

• I am taking proactive steps to protect the future of my loved ones if something happens to me.

• Planning my estate is an expression of love and support for my family.

• I value the peace of mind that comes with having a detailed and thoughtful estate plan.

• My estate plan provides critical information and instructions that my spouse and children may need in emergencies.

• I recognize the importance of making decisions now to ease the burden on my loved ones later.

• My estate plan reflects my commitment to responsible financial planning and is a tangible expression of love and protection.

• Taking control of my financial and healthcare decisions throughout life is empowering.

• I approach estate planning with confidence, knowing it is a positive and necessary step for a happy and healthy family.

Repeating these affirmations regularly can help cultivate a positive mental attitude to get you through the estate planning process. And by combining these strategies, you can develop the motivation for establishing or revising your estate plan. 

Making an appointment with an estate planner is often the first step. Contact us to get started – drop us an email at mlolaw@mlolaw.us or call us om 314 932 7111 for a free consultation with our Estate Planning attorney. 

Do Not Leave Your Trust Unprotected: 6 Ways a Trust Protector Can Help You

Trust protectors are commonly used in the United States. Essentially, a trust protector is someone who serves as an appointed authority over a trust that will be in effect for a long period of time. Trust protectors ensure that trustees maintain the integrity of the trust, make solid distribution and investment decisions, and adapt the trust to changes in law and circumstance.  

Whenever changes occur, as they are bound to do, the trust protector has the power to modify the trust to carry out the trustmaker’s intent. Significantly, the trust protector has the power to act without going to court—a key benefit that saves time and money and honors family privacy.  

Here Are 6 Ways a Trust Protector Can Help You 

Your trust protector can take the following actions:

1. Remove or replace a trustee who is not performing their duties appropriately or is no longer able or willing to serve

2. Amend the trust to reflect changes in the law

3. Resolve conflicts between beneficiaries and trustees or between multiple trustees

4. Modify distributions from the trust in response to changes in beneficiaries’ lives such as premature death, divorce, drug addiction, disability, or lawsuits

5. Allow new beneficiaries to be added when new descendants are born  

6. Veto investment decisions that might be unwise

Warning

The key to making a trust protector work for you is to be very specific about the powers available to that person. It is important to authorize that person, and any future trust protectors, to fulfill their duty to carry out the trustmaker’s intent—not their own. 

Can You Benefit from a Trust Protector?

Generally speaking, the answer is yes. Trust protectors provide flexibility and an extra layer of protection for the trustmaker’s intent as well as for the trust’s accounts and property and its beneficiaries. Trust protector provisions can easily be added to a new trust, and older trusts may be changed to add a trust protector. If you have created a trust or are a beneficiary of a trust that feels outdated, call our office now.

Don’t Forget to Tell Them How to Share

Personal property can be an important part of many people’s lives. Whether it is something that has monetary value or something that you have collected for many years, certain items hold a significant place in your heart. Figuring out what to do with these items when you are no longer around to enjoy them can be quite the task. This is especially true if you have multiple loved ones who you would like to receive your personal property. Without your instructions, this situation might turn into a disaster. People may start fighting or hiring lawyers to sue each other to determine what is rightfully theirs. You can help prevent this from happening by providing your loved ones with instructions. The following are some ways you can divide your personal property to help maintain harmony among your loved ones.

Draw Numbers and Take Turns Choosing

One method for dividing personal property, especially if you have a large collection of similar items, is to have each beneficiary draw a number and have them take turns choosing items in sequential order starting with the person who drew number 1. Once the last person chooses, the person who drew number 1 can start the next round. (Example: Round 1: 1, 2, 3, 4; Round 2: 1, 2, 3, 4; Round 3: 1, 2, 3, 4)

To mix things up a bit, once everyone has had an opportunity to make their first selection, the person who drew the largest number can start the second round, continuing in reverse sequential order. For the third round, the person who drew number 1 can start, and the selections continue in sequential order. (Example: Round 1: 1, 2, 3, 4; Round 2: 4, 3, 2, 1; Round 3: 1, 2, 3, 4)

Alternatively, after choosing sequentially in the first round, the person who drew number 2 can start the second round, and the selections continue in sequential order, ending with the person who drew number 1. Number 3 starts the third round and the selections continue in a similar pattern. (Example: Round 1: 1, 2, 3, 4; Round 2: 2, 3, 4, 1; Round 3: 3, 4, 1, 2)

Number Items for a Drawing

This process can work if you have many items of similar value. Instead of having the beneficiaries figure out who gets what, they could leave the decision up to chance. With this method, all items that are to be distributed are numbered, and a set of corresponding numbers are placed in a hat or bowl. The participants then choose a number and get the item that matches their number. 

Auction With Fake Money

If there is an item that more than one person wants, one way to solve this is through an auction. During the auction, each participant is allotted an equal amount of fake money. Then, each item is presented in a random order, and the participants bid on the items they want. The highest bid wins. This helps ensure that the person who wants it the most gets it, but it also means that people may not receive the same monetary value.

Use Stickers to Stake Claim

Another way to divide personal property is to give each beneficiary the same number of colored stickers (with each person getting a different color) and have them place stickers on the items they want. If an item has only one sticker, the person who chose it gets the item. If an item has multiple stickers, beneficiaries can discuss what to do with the item. This allows beneficiaries to identify items that need to be discussed while quickly dividing items that are not in contention.

Sell Everything and Divide Proceeds

Sometimes, when more than one person wants something, there is just no compromise or solution. In these situations, you could sell the item and divide the proceeds. While this may not be a desirable solution, sometimes there is no other way. Unfortunately, this method only works well with items of high monetary value. Purely sentimental items may not be worth much, in which case an alternate method may be needed.

Need Help? Bounce Your Ideas Off of Us

We understand that this can be an emotional and time-consuming experience. We are happy to help you think through the available options and draft instructions that fit your unique situation and convey what is most important to you. Give us a call to discuss different options and select the one that is right for you.

Sometimes Stuff Is the Most Important Part of Your Estate Plan

Most people usually think about who will receive their retirement and bank accounts, life insurance proceeds, real estate, and other valuable possessions upon their death. However, a person’s personal property (their stuff) can also be a source of value that needs to be addressed. When looking to start or continue your estate planning journey, ask yourself the following questions about your personal property.

Do your items have monetary or sentimental value?

Value is in the eye of the beholder. Some items may have significant monetary value, like an antique clock, while others may have sentimental value, like your grandmother’s class ring. Each type of value necessitates its own strategy when planning for its receipt.

If Personal Property Has Monetary Value

It is important that you find out the actual value of items that you think may be worth a lot of money. If an item is very valuable, it may need to be insured. A renter’s or homeowner’s insurance policy may limit what it covers and how much it will pay if your personal property is damaged or stolen. Also, if the item requires maintenance or upkeep, you must make sure that the person who receives it understands what is required so that the value does not decrease.

If Personal Property Has Sentimental Value

Sometimes personal property that has sentimental value can cause the most family conflict. Because your loved ones will already be dealing with your loss, dividing up your mementos without proper guidance can also be emotionally taxing. This may be an even more compelling reason to document your wishes, so that everyone is on the same page. You should think carefully about who will receive sentimental items and ways to mitigate future conflicts if more than one person wants the item.

Will Someone Want Your Stuff?

When crafting your estate plan, it is important to understand what you have and who you want to leave it to. But you may also want to speak with your beneficiaries before creating your plan to find out if the person you plan to give an item to actually wants the item, particularly if the item has storage or maintenance requirements that the person will be responsible for. 

If More Than One Person Wants an Item

You may have an item that multiple people want. Being aware of this during your estate planning journey is important so you can address what you want to happen to the item to hopefully prevent conflict after you pass away. You should also think about how you want to balance inheritances if only one person will receive a valuable item or how you want to divide a large group of similar items. Talk to your loved ones so that everyone is on the same page and fights can be avoided. 

If No One Wants an Item

While an item may be incredibly important to you, it may not hold the same level of importance to your loved ones. As you take steps to put a plan together, determine what will happen if no one wants an item. You could choose to have it be sold, donated, or offered to an acquaintance with a similar fondness for the item.

Include Your Personal Property in Your Estate Plan

There are a few different ways you can share your wishes for your personal property through the use of an estate plan.

Specific Gift in a Last Will and Testament or Revocable Living Trust

A specific gift in a last will and testament (will) or revocable living trust (trust) allows you to specifically name who will receive a particular item. In either a will or a trust, you can specifically state, “I leave my blue antique vase with pink roses to my daughter, Susan Jones.” When you die, the executor or successor trustee will then give the vase to Susan. However, if you change your mind, the will or trust will need to be changed, which will require a new document to be executed with the requisite formalities.

Personal Property Memorandum

Another option that can be used in many states is a document called a personal property memorandum. This document lists your specific personal property and names who will receive each item. As opposed to a will or trust, generally, you just need to sign and date the personal property memorandum to make it valid—no witnesses are necessary. The document is then referenced in your will or trust as containing your wishes regarding your personal property. This approach allows you to specifically designate who will receive an item, but if you change your mind, you can simply create a new personal property memorandum instead of having to change your will or trust.

The Residuary Clause

Most, if not all, wills and trusts contain a clause that addresses any items that have not been specifically mentioned and distributed in the will or trust. This is referred to as a residuary clause. A will or trust may provide that anything left be “divided equally among my then living children” or “all to my spouse.” However, you can also decide to direct distribution to other individuals or entities. This ensures that your personal property is distributed. However, if the items are to be divided among a group of people and you do not provide instructions for how the items are to be divided, someone will need to decide how to do so, which could cause turmoil.

We Can Help 

Once you know what you have, how much it is worth, and who you want to leave it to, you need to make sure that your wishes are reflected in an estate plan that is complete and legally enforceable. By working with an experienced estate planning attorney, we can craft a plan that is unique to you and your situation. Give us a call to schedule your appointment.