The term “residuary” refers to the “residue” of an estate or trust, which is all of the property that remains after the specific gifts detailed in the will or trust are distributed. An asset, such as personal property or real estate, is considered to be part of the residue of an estate or trust if it is not explicitly left to a beneficiary.
A “residual trust” is different from the “residuary” of a trust. While various types of trusts can be labeled as “residuary,” broadly speaking, a residuary trust is a trust that contains the remaining property that is not specifically left to a beneficiary in pour-over will, in the trust, or through another trust.
For instance, some lawyers use the term “residual trust” to refer to a “bypass trust.” A bypass trust is an estate planning tool used by married couples to minimize estate taxes. When the first spouse dies, the estate’s assets are divided into two separate trusts.
The first trust (the “marital” trust) is for the surviving spouse, and the second trust (the “bypass” or “residual” trust) is typically for the couple’s heirs. The surviving spouse can access the residual trust or receive income from it during their lifetime, but it does not belong to them. Then, when the surviving spouse dies, assets from both trusts are usually distributed to the couple’s beneficiaries.
Is a Residuary Trust Revocable or Irrevocable?
Whether a residual trust is revocable or irrevocable depends on the purpose for which a trust is created, the terms of the trust, and whether certain events have occurred. A bypass trust, for instance, becomes irrevocable once the first spouse passes away.
What Is a Residuary Clause in a Trust?
A residuary clause in a trust dictates who should receive the trust residue. This clause will determine the disposition of all trust assets that are not specifically devised to a beneficiary. The residual beneficiary can be a person, several people, a charity, or even another trust.
For example, a grantor of a trust can gift a certain amount of money, specific personal property, or real estate to a beneficiary. Once all of the specifically devised assets are distributed to their intended beneficiaries, the remaining property will be distributed according to the residuary clause.
Can I Contest a Residuary Trust?
Yes, as with all trusts, an interested party can contest a residual trust in certain circumstances.
To contest a residual trust in Florida, you must file a lawsuit. However, the rules don’t allow any person to contest any trust. Only “interested parties,” such as the beneficiary of the trust or a beneficiary of a previous trust created by the same person, are considered to have “standing” to contest a trust. Additionally, a close relative who was excluded from the trust or another interested party, like a former trustee or a guardian, may be able to contest a trust.
Even if you have standing, you must also have specific legal grounds to contest a trust. Some common reasons that you can contest a trust in Florida include:
- Legal formalities were not followed when creating or amending the trust.
- The trust instrument or the grantor’s signature was forged.
- The grantor lacked the mental capacity to create or amend a trust.
- The grantor created or amended the trust as a result of fraud, undue influence, or duress.
While trust contests can be succesful, they are often complex, long-lasting, and costly. When considering a trust contest, it’s essential to consult with a knowledgeable trust litigation attorney about your situation. An experienced lawyer can help you understand whether you have a legal reason to challenge the trust and offer advice about the best way to achieve your objectives.
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About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.