If I leave the residue of my estate to charity, does it get reduced by debts and expenses first?
Yes. The residue of an estate is whatever is left after everything else has been paid: debts, funeral costs, taxes, administration expenses, and any specific gifts or legacies named in the will. A residuary gift to charity is calculated after all of that, not before. This is true whether the residue goes to a charity, a family member, or a mix of beneficiaries, since a residuary gift is always what's left, by definition.
This matters because if an estate turns out to have more debt or higher expenses than expected, for example unpaid taxes discovered after death, or Estate Administration Tax owed on the value of the estate, the charity, like any residuary beneficiary, simply receives a smaller amount rather than a fixed sum. If you want the charity to receive a guaranteed amount regardless of how the rest of the estate plays out, a specific dollar gift, rather than a share of residue, achieves that, though it carries its own trade-offs if the estate turns out to be smaller than expected.
Talk to your lawyer about whether a fixed gift, a percentage of residue, or some combination best reflects what you actually want the charity to receive.
Key takeaways
- A residuary gift is calculated only after debts, taxes, and expenses are paid.
- This applies equally whether the residuary beneficiary is a charity or a person.
- A specific dollar gift, not residue, guarantees a fixed amount regardless of estate size.
- Consider mixing specific gifts and residue if you want more predictable outcomes.