3 Common Mistakes in Estate Planning: #1 Failure To Include A Residuary Clause

Estate Planning

Mario A. Godoy

3 Common Mistakes in Estate Planning: #1 Failure To Include A Residuary Clause

While navigating the estate planning process in Illinois, many individuals encounter complications. Listen to experienced estate and probate attorneys Mario Godoy and Steven Novak talk about one of the most common estate planning mistakes, failure to include a residuary clause.

Watch: What Happens If You Fail To Include a Residuary Clause In Your Estate Plan

Transcript

Let’s talk about mistake number one.

We have mistake number one, failure to include a residuary clause. Anyone that has any type of background in estate planning or anything like that, this may shock them. But there are a lot of people out there that go ahead and create their own wills. They basically make a list of, okay this is everything I own and this is who I want to give it to. And then they type it up, you know they get it online, they get it witnessed, they get it properly signed. Maybe they print out a form. But it’s basically just a series of specific requests of all their assets.

What they forget is what happens if I get something else – what happens if I acquire something else? So they don’t include a residuary clause. The residuary clause is basically it can be a simple statement that says any other property I may have out there that hasn’t already been given away, I give to so and so. I give to my kids in equal shares, I give to my spouse, I give to my nieces and nephews. Whatever the case may be, if it doesn’t include that simple sentence… all it basically does is it effectively gives a snapshot in time, and so any property that’s acquired after.

A lot of people think, I can give a specific bank account so they list out all their bank accounts, they list out all their cars and then all of a sudden further on down the road there’s a new bank account that crops up. Maybe they forgot to roll over an account and they meant to consolidate everything but they kept pushing it off and pushing it off and now there are all these assets that are outside of what the will says.

If there’s no residuary clause then basically all you’ve done is you’ve given that property away to just your heirs – it’s almost as if you didn’t have a will with respect to that property.

You’ll kind of see a theme throughout these different mistakes. The main kind of idea running through them is that the result

is essentially you’ve spent the time to create an estate plan but these mistakes can defeat your intent.

Intestacy is what happens when someone dies without a will. Intestacy is literally just the Illinois legislature’s best guess as to where you would want your property to go. It’s all based on family relationships, it’s all based on the proximity of those family relationships and there is no wiggle room when it comes to that. You can get get a harsh result where if you’ve acquired property that isn’t given away in your will and you don’t have a residuary clause. Then you’ve basically given up the right to select where that goes, it goes to your heirs whoever that heir might be, no matter if you want your heirs to get anything whatsoever.

The example I like to use in this type of situation is someone who wins the lottery and then basically dies of excitement, right then and there once they find out they won the lottery. So now you’ve got a large pot of money that basically is not going to go to who you want to go. It’s going to go to where the Illinois State Legislature thinks you may have wanted it to go. Sometimes that may work for people, but for a lot of people that’s that’s not the case.

We’ve actually seen where you run into a situation where there are gifts to certain people, but now those people are dead. If there’s no residuary clause, essentially the entire estate is going to intestacy. I’m thinking that got right now this person has 22 heirs, so their property is basically being divided up into 22 shares of different sizes purely based on the intestate statute. They did everything – they created a will, they signed it – they died thinking they had a will but it is essentially worthless and their entire estate is being distributed to people who aren’t listed there.

It’s very important to make sure that that your will has a residual clause because essentially anything that’s not gifted is not going to be carried out with respect to your wishes.

And for those Adam Sandler fans, in the movie Mr. Deeds, that’s kind of what happened. They find this heir and that’s kind of how you run into those situations. The same case I’m thinking of is there are 22 heirs and you’re trying to get in touch with them and you’ll call up an heir on the phone and they’ll be like, Who? and then you’ll be like, You know Aunt Wilma? She died with some money and you’re in there.

You run into those types of situations when someone dies without a will and that’s what happens.

But this is another way where even if you do have a will, that’s the scenario we’re talking about. Once you get this estate plan in place, it’s something that you need to revisit. It’s worth revisiting because as time progresses, as kids grow up, as you gain more assets, as your life situation changes – in some cases spouses also change over the course of time.

This estate plan needs to be updated so if you have one already, take a look for this residuary clause and if you don’t see it or maybe you need help identifying it, it’s a good opportunity to reach out to the firm. We’re happy to help you see if you’re protected.

Learn More:

Overview of Estate Planning and Probate Process In Illinois

DuPage County Estate Planning Attorneys

One of the most common estate planning mistakes is the failure to include a residuary clause. Creating and updating your estate plan to make sure your assets are distributed according to your wishes is an essential part of your estate plans. By working with an attorney, you could draft a will or trust that fits your goals now and in the future. To find out the best solution for your personal situation, contact one of our lawyers today and schedule an appointment at 630-864-5835.

AREAS WE SERVE: Cook, Dupage, Kane, Lake, and Will counties