Should I have a Pour-Over Will?
A pour-over will is a type of will that’s created in conjunction with a trust. It can help facilitate the transfer of assets, if a trust’s settlor (the person establishing the trust) has failed to transfer all intended assets into the trust. A pour-over will can be an important part of a person’s estate planning checklist. Bankrate’s recent article entitled “Do you need a pour-over will in your estate plan?” gives us more information.
You may ask, “If I have a trust in part to avoid probate, why would I need a will?” That is a good question, especially since a will is meant to be probated. Occassionally (believe it or not), some clients forget that they have a trust. For example, one client of mine whose mother created a trust in California with her then husband, sold her house after her husband’s death to move to Louisiana to be with her daughter here. When the mother purchased a replacement home in Louisiana, she failed to title the new home in the name of the trust (created in California). Because of this, her estate had to go through probate. All that had to be probated was the house becaue her bank accounts remained in the trust.
Luckily, her California attorney did things correctly. That attorney created a “pour-over will” which bequeathed all property outside of the trust to the trust. This is because the trust contained the inheritance provisions of both spouses (both spouses had children from prior marriages). Without the pour-over will, no doubt the succession would have been tied up in litigation for years.
The bottom line is that this type of will has a provision that directs the will to “pour-over” any residual assets left in the person’s estate into a living trust that is overseen by a trustee upon the grantor’s death.
A big benefit of this type of arrangement is that it’s a backstop, in case there were assets the settlor didn’t specifically fund into the trust before their death. This allows these assets to avoid the intestate rules (when someone passes away without a valid will), even though they were not specifically part of the living trust.
A person might designate certain assets to be titled in the name of a living trust they’ve established to facilitate passing these assets to the trust’s designated beneficiaries upon the settlor’s death. The trust avoids probate on these assets. However, any assets, such as an IRA or a life insurance policy, that passes on to heirs via a beneficiary designation wouldn’t be eligible for inclusion in this type of trust.
A pour-over will allows the settlor to state that any assets that had not previously been included in the trust should be added to the trust upon their death. Therefore, assets that may have been acquired after the trust was established are eligible for the same treatment as the assets that had already been funded to the trust.
It’s also simple and eliminates the need to decide which heir receives certain assets because everything eventually becomes part of the trust. These assets are, therefore, distributed via the terms of the trust.
It also helps avoid a lengthy probate case due to a significant asset that wasn’t included in the trust or elsewhere.
However, this type of will doesn’t eliminate the probate process. The will still needs to go through probate, assuming there are assets outside of the trust. There may also be possible legal challenges, which can be costly to litigate and take time to resolve. If there are no assets outside of the trust, the pour-over will is usually not even used. In other words, a pour-over will is a n important component to a trust-based estate plan.
Ask an estate planning attorney about a pour-over will as a part of your estate plan.
BOOK A CALL with me, Ted Vicknair, Board Certified Estate Planning and Administration Specialist, Board Certified Tax Law Specialist, and CPA to learn more about estate planning, incapacity planning, and asset protection.
If you liked this article, “Should I have a Pour-Over Will?” read also these additional articles: How Do I Find a Great Elder Law Attorney? and What Is Cause of Death in Half of Seniors? and Which Supplements Don’t Go Well with Meds? and Tips on Finding the Right In-Home Aide
Reference: Bankrate (April 20, 2022) “Do you need a pour-over will in your estate plan?”
