An Important Clause in Your Will: How the Remaining Estate Is Distributed

‍When writing a Will, much of the focus often goes to specific gifts. You may choose to leave a particular item, a family heirloom or a set amount of money to someone. However, for many people, the most significant part of their Will is the clause that deals with their remaining estate.

Your remaining estate is everything left after debts, funeral expenses and any specific gifts have been paid. For many estates, this represents the largest portion of assets, understanding this clause is essential to how your estate will ultimately be distributed.

In a Footprint Will, the remaining estate is distributed using a clear, tiered structure.

This article provides general information only. It is intended for educational purposes and does not constitute legal or financial advice.

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What is the remaining estate

The remaining estate, sometimes referred to as the residue of your estate, includes all assets that have not already been dealt with by specific gifts. This may include property, savings, KiwiSaver paid to your estate, investments, vehicles and personal belongings. ‍

Once liabilities are settled and specific gifts are allocated, the balance forms your remaining estate. The Will then directs how that balance is to be distributed.

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Remaining Beneficiaries

Remaining beneficiaries are the first-choice recipients of your remaining estate. They receive what is left after debts and specific gifts are taken into account. Your Will sets out who they are and how their shares are divided, whether equally or in specific percentages. For example, someone may leave their remaining estate equally to their partner and two children.

Substitute Beneficiaries

Substitute beneficiaries form the second tier. This tier becomes relevant only if none of the remaining beneficiaries are alive when the Will comes into effect.

If all first-choice beneficiaries have died before you, or do not meet any required survivorship period stated in the Will, the remaining estate passes to the substitute beneficiaries instead.

This structure provides a clear order of distribution. Rather than leaving uncertainty about what happens if first choice beneficiaries are no longer living, the Will sets out who inherits next.

For example, if someone leaves their remaining estate to their partner but the partner has already passed away, the estate would instead pass to the substitute beneficiaries named in the Will.

Third Tier Beneficiaries

‍The third-tier beneficiary provides an additional safeguard. If both the remaining beneficiaries and the substitute beneficiaries are unable to receive the estate, the third-tier beneficiaries inherit the remaining estate.

This third level accounts for situations where multiple tiers are no longer living at the time the Will comes into effect. It creates a defined flow of distribution and reduces the likelihood of any part of the estate being left without direction.

When does the next tier apply

Under New Zealand law, beneficiary tiers operate based on survivorship. In practical terms, the next tier only receives the estate if the earlier tier fails.

This usually occurs if the beneficiaries in the earlier tier have died before you or do not survive you at the time your Will comes into effect. If that occurs, the gift may fail and pass to the next tier.

The legal framework for Wills in New Zealand is set out in the Wills Act 2007.

If no beneficiaries remain in any tier and no alternative direction is provided, intestacy rules under the Administration Act 1969.

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How This Works In Theory

Consider this example: a person leaves their remaining estate to their husband and two children in equal shares. Once they pass away, if all three survive, each receives their allocated portion. If the husband dies before the Will maker and the Will does not redirect his share elsewhere, his portion may be redistributed among the surviving children, depending on the wording of the Will. If none of the remaining beneficiaries survives, the estate would likely pass to the substitute beneficiaries.

In another scenario, someone in a blended family may leave their remaining estate to their current partner, with their children named as substitute beneficiaries. If the partner survives, they inherit the estate. If the partner has already passed away, the estate passes to the children instead.

The tier structure determines this flow in conjunction with the Administration Act 1969.

Other Laws That May Apply

‍It is also important to recognise that other legislation can influence how an estate is handled.

For example, in marriages, civil unions and qualifying de facto relationships, the Property Relationships Act 1976 may apply when one partner dies. This legislation can affect how relationship property is addressed before the remaining estate is distributed.

In addition, certain family members may be able to bring claims under the Family Protection Act 1955, which forms part of the broader estate framework.

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Bringing It All Together

The remaining estate clause is often the core of a Will. In a Footprint Will, the structure is clear and tiered. Remaining beneficiaries receive the estate first, after debts and specific gifts are allocated. If they are not alive when the Will comes into effect, substitute beneficiaries inherit the estate. If both the first and second tiers fail, the third-tier beneficiaries inherit the estate.

This defined order of distribution provides clarity about how the remaining estate is handled under different scenarios. Within the wider framework of New Zealand estate law, it is this part of the Will that often directs how the majority of assets are ultimately distributed.

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Make Sure Your Remaining Estate Is Clearly Directed

For many people, the remaining estate represents the largest portion of their assets. Making sure your Will clearly sets out who should receive it can help avoid uncertainty for the people you care about.

Footprint’s online Will service guides you through the process of setting up your beneficiaries and estate distribution in a clear, structured way.

You can learn more or start your online Will by visiting Footprint.

Common Questions About the Remaining Estate

What happens if a beneficiary in my Will dies before me?
If a beneficiary dies before you, the distribution of their share depends on the wording of your Will. In a Footprint Will, it could pass to any other first-tier beneficiaries, or the estate typically passes to the next tier of beneficiaries. If you haven’t selected other beneficiaries, the Administration Act 1969 steps in with a predetermined formula to divide your assets.

What if I forget to include a substitute beneficiary?
If a Will does not specify an alternative beneficiary and the original gift fails, that portion of the estate may be distributed according to other clauses in the Will or, in some cases, under intestacy rules, the Administration Act 1969 steps in with a predetermined formula to divide your assets.

Can I change my remaining beneficiaries later?
Yes. You can update your Will at any time. Some common circumstances that people may update their Will is marriage, divorce, new children, changes in relationships, asset changes or purchasing a house. We always recommend reviewing your Will regularly to make sure it is up to date