Legal Definitions - clear residue

The term clear residue refers to any income generated by the specific portion of a deceased person's estate that was set aside or used to cover their outstanding debts, the costs associated with managing the estate, and general monetary gifts specified in their will. This income arises *before* the remaining assets of the estate are fully distributed to the beneficiaries.

Think of it as the earnings (like interest or dividends) produced by money or assets that were earmarked for specific estate obligations, rather than being part of the main inheritance distributed to heirs.

• Example 1: Interest on a Debt Payment Fund

  When Mr. Henderson passed away, his executor identified several outstanding credit card balances and medical bills. To ensure these debts were paid promptly, the executor placed a sum of money from the estate into a separate, interest-bearing bank account. While the executor was gathering all necessary documentation to pay off these creditors, the money in this account earned a small amount of interest. This interest income is considered clear residue because it was generated by funds specifically designated to pay the decedent's debts.

• Example 2: Dividends from Stocks Held for Administration Expenses

  Ms. Chen's estate included a portfolio of stocks. The executor knew that a portion of these stocks would need to be sold to cover various administration expenses, such as legal fees, appraisal costs for property, and court filing fees. Before these specific stocks were sold, they paid out quarterly dividends. These dividends, earned on the shares that were ultimately used to fund the estate's administrative costs, would be classified as clear residue.

• Example 3: Investment Returns on Funds for General Legacies

  The will of Mr. Davies stipulated several "general legacies," meaning specific cash gifts to individuals and charities (e.g., $10,000 to his alma mater, $5,000 to his nephew). The executor set aside the total amount needed for these legacies in a short-term investment account while the rest of the estate's complex assets were being liquidated. The modest investment returns generated by this specific fund, before the cash gifts were finally disbursed to the beneficiaries, represent clear residue because they are income from funds designated to pay general legacies.