What is a residuary clause in a Will?
A residuary clause in a Will can ensure that any property not mentioned in your Will is properly disposed of without the risk of a partial intestacy arising. A partial intestacy means, that a gift in the Will has failed and that part of the property will be dealt with, in accordance with the intestacy laws set out in the Succession Act.
What are the intestacy laws?
The intestacy laws govern who is entitled to receive property in a deceased Estate, when the deceased has no Will, or has failed to properly dispose of property in their Will. For example, if you are married with no children and you die without a Will, or with a partial intestacy in your Will, then the Intestacy Rules dictate that your spouse will receive the whole of your Estate.
Case Study: Arnott v Leong
An example of the issues that can be caused by residuary clauses can be seen in the New South Wales Supreme Court proceedings Arnott v Leong.
In this case the deceased died in 2007 leaving a Will that left certain shares and funds to his sister and the residue of his Estate to Sue Austin (“Sue”) and Stephen Leong (“Stephen”) in equal shares.
The issue arose when Sue, a professional clinician of the deceased, disclaimed her interest under the deceased’s Will as she deemed it inappropriate to accept a gift from a person with whom she was in a professional relationship.
Following the disclaimer by Sue the Executor of the Estate took the view that there was doubt as to who was entitled to receive Sue’s share of the Estate. Stephen contended that he should take Sue’s share. The deceased’ parents argued that there was a partial intestacy and that meant that Sue’s share should pass to them, in accordance with the Intestacy Rules as the deceased died without a spouse or children.
Stephen argued that the construction of the terms of the Will led to the conclusion, that it was the deceased’s intention that if Sue or Stephen did not take their share, then their share would pass to the other.
After considering the construction of the Will, the Court found Stephen’s interpretation was correct and concluded that Sue’s share passes to Stephen and not to the deceased’s parents under the Intestacy Rules.
The Court proceedings highlight the importance of having an effective residuary clause in your Will, to ensure that there is no partial intestacy and your Estate is distributed in accordance with your wishes and not as set out in the Intestacy Rules.