Updated 23 October 2026
Wills - Potential Problem #13: Leaving Out a Residual Clause
A will can leave your home to one person and your jewellery to another yet still fail to deal with everything you own. A properly drafted residuary clause distributes the estate remaining after liabilities, administration expenses and other gifts have been dealt with. Often called a residual clause, it helps prevent assets falling outside your intended distribution.
That clause also needs reliable alternatives. Substitute beneficiaries address what happens when an intended recipient cannot inherit under the will. An ultimate beneficiary provision identifies who receives the remaining estate if the earlier arrangements fail. Checking these provisions together helps your executor follow a complete plan.
1. Understand what belongs in the residue
Your residuary estate is the balance available after the estate’s obligations and earlier gifts are satisfied, subject to the will and applicable payment rules. It can include bank balances, investments, personal belongings and assets acquired after you signed the will. A later inheritance may be included if it forms part of your estate when you die.
For example, you might leave a particular property to your daughter and your car to your nephew. A residuary clause can then divide everything else between named beneficiaries in stated percentages. Without it, a subsequently opened investment account could be left without an effective gift. An asset list helps your executor locate property, but does not replace the will’s distribution provisions.
The NSW Government’s guidance on wills stresses the importance of giving away the whole estate. Confirm that the residue includes all relevant estate property, that percentages total 100%, and that trusts or life interests specify who receives the remaining assets when those arrangements end.
A failed gift can also fall into the residue under section 31 of the Succession Act, subject to a contrary intention in the will. The residuary clause therefore needs to work alongside specific gifts and their substitutes.
2. A missing clause can cause partial intestacy
Leaving out an effective residuary gift does not automatically invalidate the whole will. The valid gifts may still operate, while property not effectively disposed of passes under NSW intestacy rules. This is called partial intestacy. The statutory recipients may differ from the people you intended to benefit.
The Supreme Court of NSW explains partial intestacy in its probate guidance. The outcome depends on the will, the assets and whether particular gifts fail. An executor cannot simply distribute the unallocated property according to a family vote or their own view of fairness.
Nor does a court have a general power to invent a missing gift from family recollections. Interpretation, rectification and family provision involve different legal tests. Partial intestacy alone does not necessarily mean letters of administration are required: an available executor may still obtain probate and administer both the testamentary gifts and the intestate portion.
3. Name substitute beneficiaries for failed gifts
A substitute beneficiary is someone identified to receive a gift if the primary beneficiary cannot take it in the circumstances specified. The drafting should address survival requirements and any other intended triggers, such as a beneficiary disclaiming a gift. A clause covering death alone may not cover every form of failure.
Consider a parent leaving the residue equally to two children. If one child dies first, should that child’s share pass to their children, to the surviving sibling, or elsewhere? If grandchildren inherit, should they divide their parent’s share or share equally with all grandchildren? Those choices can produce very different results.
Explain your preferences rather than relying on phrases such as “the family”. Identify the relevant family branches, how shares are calculated, and any age conditions or trusts for younger beneficiaries. Also decide what happens if a beneficiary dies before reaching the specified age.
4. Check the statutory survival and anti lapse rules
Under section 35 of the Succession Act, the usual rule requires a beneficiary to survive the will-maker by 30 days, subject to the will’s contrary intention or specified survival period. This matters when deaths occur close together.
Section 41 can preserve a qualifying gift to a child or other descendant who does not meet the applicable survival period, allowing that beneficiary’s descendants who meet the required survival period to take instead. Conditions and exceptions apply. It is therefore wrong to say grandchildren always miss out unless expressly named as substitutes.
Section 42 can also redirect a failed fractional share of the whole estate or residue proportionally to the other effective shares, unless the will shows a contrary intention. These statutory rules help in some situations, but may produce a different outcome from your preferred family arrangements.
Timing matters after death too. If a beneficiary survives the required period and their entitlement has vested, their later death before payment will generally mean that entitlement passes through their own estate. A substitute does not automatically inherit simply because administration was unfinished.
5. Add an ultimate beneficiary provision
An ultimate beneficiary provision is the final alternative if the earlier gifts and substitutions do not dispose of the relevant estate. Sometimes described as a default or disaster clause, it should clearly state when it operates and what property it covers.
You might nominate your spouse first, children and their descendants next, and named relatives or a charity if none of those earlier beneficiaries qualifies. The appropriate sequence depends on your wishes. Your lawyer should check that no branch of the distribution ends without a recipient.
For a charity, verify the organisation’s legal identity and consider what should happen if it changes name, merges or closes. A vague reference to a favourite cause can create uncertainty. An ultimate clause should also fit with any life interests or testamentary trusts rather than leaving their eventual remainder unallocated.
6. A real NSW case about an ineffective fallback
In Permanent Trustee Co Ltd v The Northcott Society (1999), a will provided accommodation and financial support for a beneficiary during her lifetime. It also contained a charitable gift if specified trusts failed. However, property and invested money remained after the beneficiary died, and the will did not effectively dispose of that surplus.
The Supreme Court found that the circumstances triggering the charitable gift had not occurred. The remaining property therefore passed under intestacy rules. The court’s preference for an interpretation avoiding intestacy could not supply the missing disposition.
Although the decision predates the current Succession Act, it illustrates a continuing drafting problem: including a fallback clause is not enough if its trigger misses the circumstances that actually occur. Check what happens after a lifetime benefit ends, as well as what happens if a beneficiary dies before you.
7. Keep beneficiary and executor substitutions separate
A beneficiary receives an inheritance; an executor administers the estate. Naming someone as substitute executor does not give them a gift. Naming them as an ultimate beneficiary does not appoint them to administer the estate. The same person may hold both roles, but each needs appropriate wording.
Legal Aid NSW recommends considering a substitute executor. Check that the appointment covers the intended circumstances, including the first executor being unable or unwilling to act. A replacement appointed only if the first executor dies before you may not cover a later refusal to take the role.
8. Review the whole estate plan
A residuary clause only distributes assets that fall into your estate. Joint tenancy property usually passes by survivorship. Superannuation death benefits and associated insurance depend on the fund’s rules and nominations; trust and company assets require separate ownership analysis. A broad will clause does not automatically bring those assets into the estate.
Review your arrangements after a death, relationship change, new child or grandchild, substantial acquisition or change in ownership structure. Ask your lawyer to trace each gift through the primary, substitute and ultimate recipients. Keep the signed original accessible to your executor and avoid making informal handwritten changes.
CM Lawyers’ wills and estates team can review these provisions together and identify gaps between your wishes and the document’s effect. Contact CM Lawyers to discuss a will that addresses both your present intentions and the alternatives your family may need.
Key resources
