What does the term residual estate typically refer to in estate planning?

In estate planning, the term residual estate refers specifically to the total value of the assets that remain in an estate after all debts, expenses, and taxes have been paid. This concept highlights the portion of the estate that is left over for distribution to beneficiaries. Once the obligations of the deceased, such as outstanding loans, funeral costs, or estate taxes, are settled from the overall estate, what remains is identified as the residual estate.

This residual estate is critical in determining how the remaining assets will be allocated according to the decedent's will or, in the absence of a will, according to state laws of intestate succession. Understanding this concept is vital for estate planning, as it directly impacts the distribution process among heirs and can influence how an individual decides to structure their estate plan to achieve their desired outcomes for beneficiaries.