A pour-over will is beneficial in trust planning.
Estate planning typically involves trust-based or will-based planning.
The distinctions arise from what documents form the foundation of a comprehensive estate plan and how assets are managed and inherited.
Although someone may select a trust-based plan, this does not mean they will necessarily bypass using a last will and testament.
A pour-over will is frequently utilized to support a standalone trust (e.g., a revocable living or irrevocable trust).
What is a pour-over will?
A pour-over will is an estate planning tool with a specific purpose.
It transfers assets left out of a standalone trust and subject to probate, whether unintentionally or intentionally, into a standalone trust after the death of the trustmaker and the probate of such assets.
How is it different from a traditional last will?
At the close of probate, a traditional last will directs the ultimate disposition of estate assets to the decedent’s heirs instead of directing the assets to a standalone trust.
Sometimes, a last will may provide for the disposition to be “outright and free of trust.”
Other times, it may contain provisions establishing a “testamentary trust” to administer the assets.
How do pour-over wills and trusts work together?
The relationship between standalone trusts and pour-over wills resembles peanut butter and jelly.
Peanut butter is savory, while jelly is sweet.
They are distinct and complement each other.
Similarly, a standalone trust controls assets titled to it while the trustmaker is alive or upon their death.
Consequently, such assets are not subject to probate.
But, again, what about assets that are subject to probate?
People can (and do) forget to fund their trust or decide they want to wait to transfer specific assets into the trust.
What if they never get around to it?
A pour-over will works synergistically with a standalone trust by making the trust itself the beneficiary of the pour-over will.
In short, through the pour-over will, even assets subject to probate will eventually be distributed under your standalone trust.
Why else should you create a pour-over will?
Pour-over wills have various benefits.
The most important reason is how they serve as safety nets, as discussed above.
However, if you have minor children, your pour-over will provides the legal means to nominate their guardians if orphaned.
Do pour-over wills operate differently depending on whether a trust is revocable or irrevocable?
Revocable living trusts are more common than irrevocable living trusts.
Revocable trusts provide greater flexibility in estate planning.
Unlike irrevocable living trusts, revocable trusts allow the trustmaker to serve as trustee.
This gives the trustmaker control of assets and the ability to change the document while alive.
With irrevocable trusts, asset funding the trusts are transferred to the trust, and no control is maintained by the trustmaker.
For those needing specific tax benefits and protection from creditors, irrevocable trusts would have greater appeal.
The good news is that pour-over wills work with either form of standalone trust.
What are common misconceptions about pour-over wills?
People often mistakenly believe that having a pour-over will ensures probate will be avoided.
This is false.
A last will only has authority over assets subject to probate.
Nevertheless, the pour-over will can simplify the probate process if required.
Is a pour-over will a good fit for you?
The answer likely depends on your circumstances and the laws of your state.
States vary in their estate planning laws.
While pour-over wills are often effective tools when used with a standalone trust, working with an experienced estate planning attorney in your state of residence is wise.
What are some key considerations regarding pour-over wills in estate planning?
Pour-over wills can provide comprehensive coverage by funneling assets accidentally or purposefully left out of your standalone trust during your lifetime into your trust postmortem.
While the pour-over wills must be filed with the probate courts, the actual distribution of assets is simplified and streamlined in the end.
The pour-over wills can be used with irrevocable and revocable living trusts to supplement their unique benefits.
Because estate planning laws vary among states, it is important to understand how the laws of your state treat pour-over wills.
Like all estate planning matters, you should work with an experienced estate planning attorney to create any standalone rusts and pour-over wills to support them.
Are you ready to take action to protect everyone you love and everything you have?
Contact us to request an initial consultation.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between the Law Offices of Kyle E. Krull, P.A., and the reader.