When people create a revocable living trust, it's also common for them to create what's called a "pour-over will." As its name suggests, a pour-over will is very similar to a simple will, but it works in conjunction with a revocable living trust to ensure assets are distributed as per your wishes.
If you have a revocable living trust or are considering one for your estate planning, it's important to understand what a pour-over will is, how it works, and whether you need one.
What is a Pour-Over Will?
A pour-over will is a special type of last will and testament. Unlike a simple will, a pour-over will does not govern the distribution of your property. Instead, it directs any assets that haven't been funded into your revocable living trust into a separate trust.
Simply put, the pour-over will directs property passing through the will to be "poured into" the trust where it can then be distributed to the trust's beneficiaries.
These assets can be transferred to a trust that you've already created, or you can have a trust created upon your death (i.e. a testamentary trust).
No matter what type of trust you choose, the pour-over will must list the assets that you wish to have moved into the trust.
How Does a Pour-Over Will Work?
One of the primary reasons people create living trusts is to save their family the time and expense of having to go through probate. However, any property that isn't funded into a living trust before death will still be subject to probate, even if there's a pour-over will.
That being said, a pour-over will still has value and is an important estate planning tool.
Still, in most cases, all valuable assets will have been transferred to the trust before death. If the remaining items are of minor value, the estate may be able to go through summary probate, which is much quicker, easier, and less costly than traditional probate procedures.
Once the estate's executor has transferred the assets to the trust, it's the successor trustee's job to distribute the trust's assets according to its terms. This may mean a simple distribution of your assets, or you may have specific instructions or terms for inheriting assets.
Do I Need a Pour-Over Will?
If you have a revocable living trust, a pour-over will can act as a safeguard to ensure that your assets reach their intended heirs. There may be assets that, intentionally or unintentionally, were not transferred to the trust before your death. Covering these assets in your pour-over will ensures that your intended heirs receive them upon your death.
Without a pour-over will, your state laws will determine who inherits your assets – not you.
A pour-over will gives you peace of mind that your assets will be distributed as per your wishes. Having a will also offers other benefits, such as:
- Naming an executor to handle probate proceedings and the distribution of your assets
- Being able to designate a guardian for children
- Leaving lesser valuable items to the people of your choosing (e.g. your collection of baseball cards)
Now, you may be wondering why someone would intentionally leave assets out of a trust. Some types of assets, like certain types of real estate and motor vehicles, should not be transferred to a trust. Insurance costs may be higher for trust-owned vehicles, and there may be other complications. In some states, probate isn't required to transfer ownership of motor vehicles.
For real estate, some lenders are reluctant to offer mortgages or refinancing for real estate that is owned by a trust. Other complications can make it difficult to transfer real estate to trusts. The lender may not consent to the trust transfer. If you decide to remove the property from the trust for the purpose of mortgaging or refinancing, you may forget to transfer it back to the trust afterwards.
How Can an Estate Planning Attorney Help with a Pour-Over Will?
As a general rule of thumb, it's a good idea to review your assets and your estate plan annually to ensure that your documents cover all of your assets and needs. During this review process, you may wonder whether a pour-over will is appropriate for your estate.
An estate planning attorney can help you determine whether a pour-over will is appropriate for your estate and that your document is properly crafted. Additionally, your attorney can help ensure that your pour-over will carries out your last wishes. Without a will, any assets outside of your trust will be distributed based on state laws and not necessarily what you would have wanted.
Estate planning is a complex process and one that requires the help of an experienced estate planning attorney. Along with eliminating headaches and saving you time, working with an estate planning attorney will ensure that your assets are covered.