A pour-over will is a will that is used in conjunction with a living trust. It is mostly used to transfer assets into your trust that aren’t already in your there before you die.
In other words, you may need to consider having a pour-over will if you have a living trust and want it to be your principal vehicle for distributing your assets after you die. See it as a “safety net” that catches any assets you didn’t transfer to your trust while you were alive.
Let’s get into more details about what a pour-over is, how it works, practical examples, and all you should know before committing to getting one.
What is a Pour-Over Will?
A pour-over will is a legal document that assures that an individual’s remaining assets are immediately transferred to trust after their death.
It is a type of will that allows assets to be automatically transferred to a living trust that has already been established. It’s excellent for modest assets that you might have forgotten about or that you didn’t want to place into your trust for a variety of reasons.
Let’s find out how this works…
How Does a Pour-Over Work?
A trust works in tandem with a pour-over. Trusts are used in estate planning to avoid probate when transferring assets after the grantor’s death. When the time comes to settle an estate, assets placed in the trust are transferred to beneficiaries according to the grantor’s instructions. A pour-over will protects assets that the grantor did not put into the trust before his or her death. If there are no express instructions in a will, the remaining assets will be subject to the laws of intestate succession in the jurisdiction where the person died.
Pour-over wills serve as a safeguard against difficulties that could stymie a living trust’s smooth operation. They ensure that any assets that a grantor fails to include in a trust, whether by mistake or on purpose, will end up in the trust once the will is executed.
On the other hand, if the trust becomes invalid or, in the case of an unfunded trust, becomes legally difficult or impossible to fund at the time of the grantor’s death, the will can provide additional protection against legal issues with the trust by stipulating that the assets intended for the trust be distributed to the trust’s beneficiaries.
The Benefits of Pour-Over Wills
Many estate planners believe that having all of your assets covered by the terms of just one instrument, the trust document, is a smart idea. This arrangement has a number of benefits.
When everything is governed by a single document, the trust, it’s easy to see who receives what. It also makes things easy for the executor and trustee in charge of your inheritance once you pass away.
You’re not going to put all of your assets into a living trust. (There isn’t anyone who does.) A pour-over will looks after whatever assets you don’t get around to transferring to the trust before you pass away.
Unlike wills, trusts remain private after your death and are not accessible to anyone who wants to look at them. This protects the identity of the person who will inherit your property. (Michael Jackson was one of many celebrities who wrote a will that simply transferred all of his assets to a trust.) When the will was filed with the court, reporters and the inquisitive raced to study it, but they learned nothing about who would inherit.)
Drawbacks of Pour-Over Wills
The fundamental disadvantage of pour-over wills is that the property that goes via them, like other wills, must go through probate. That implies that any property destined for a living trust may become stuck in probate before the trust can distribute it. This could cause the living trust to continue for months after the death of the will and the trust maker. Property bequeathed directly through a living trust, on the other hand, can normally be delivered to beneficiaries within weeks of the trust maker’s death.
For example, Sue establishes a living trust to hold her precious assets. She also creates a pour-over will, which specifies that any property she owns at the time of her death that isn’t specifically named in the pour-over will will be distributed to the living trust.
When Sue dies, the property bequeathed in her will is transferred to the trust and dispersed to the living trust’s residuary beneficiary, her son Dan. The living trust must be maintained until the will’s probate is completed, at which point the property left by the will is transferred to the living trust.
Read Also: TRUSTS ATTORNEY: Roles of Trusts Lawyer
The result would have been the same if Sue had simply listed Dan as the residuary beneficiary of a simple backup will, but the process would have been simpler. Sue’s living trust would have expired a few weeks after she died. After the probate process was completed, Dan would have gotten whatever property Sue’s will had left to him.
Fortunately, only a small amount of property travels through a pour-over will in most cases.
If you perform your estate planning correctly, however, you will be able to transfer all of your valuable assets to the trust while you are still living. Only the leftovers—items of modest value—should be distributed according to the will’s conditions.
Meanwhile, your estate may qualify for special “small estate” probate proceedings if the value of the property that falls under the will (commonly referred to as the “probate estate”) is low enough. These procedures are less time consuming, less complicated, and less expensive than traditional probate. They can be used for any type of property except real estate in most states.
Pour-Over Will Example
The following is an example of a Pour Over Will scenario:
Dan’s assets and property are virtually entirely held in a living trust. To properly secure himself, his wife, and his children, he writes a pour-over will that states;
“Any assets or property not in my trust at the time of my death that are not unambiguously left to a beneficiary of my will, should instantly go into my Living Trust.”
When Dan dies, his will is probated, and all of his property “pours over” to the trust, where it can be given to the trust’s beneficiary (or beneficiaries).
The process will take a little longer in this Pour Over Will sample than it could have if Dan had simply put everything in his trust from the start, or if he had simply let the assets in the will go through probate and then be distributed directly to beneficiaries from there (the latter would have allowed the trust to be distributed faster, rather than having to wait for the Will assets to go through probate first).
What Is the Distinction Between a Will and a Pour-Over Will?
Why use a Pour Over Will instead of just a Will? For starters, it serves as a safety net for any assets that you want to be included in your Trust in the future.
The Pour Over Will can imply a straightforward, full, and private ultimate result (in that the Trust will be the final holding place for all property and assets). Basically, trusts can provide tax advantages, privacy, and a variety of other advantages that estate planning professionals consider desirable and worthwhile.
On the other hand, any assets in a simple Will (rather than a Pour Over Will) will not be able to reap the same benefits as assets in a Living Trust.
Will a Pour Over Prevent Probate?
No, a Pour Over Will does not avoid probate. Because the assets in a Pour Over Will do not yet belong to the Trust, they must go through probate before being passed over, and it is only then that they will be able to take advantage of the Trust’s benefits.
Even while probate is essentially public (unlike a trust, which provides privacy), a pour-over will can nevertheless provide some seclusion. The Will and any assets to be transmitted are both public records, but once assets are moved into the trust, privacy is restored.
In other words, when the assets are finally transferred to the trust, a level of confidentiality is established, and everything that transpires after that is kept private. Asset descriptions and values, as well as beneficiaries and distributions, are all included.
How to Create a Living Trust with Pour Over Will
A Living Trust must be formed before you may draft your Pour Over Will.
In the same vein, you must pick a trustee before you can create a trust. You’ll name beneficiaries and specify how you want the Trust managed once the Trustee takes over once you’ve financed the Trust (by moving assets into it).
You can write your pour-over will after your living trust has been established and funded. The trust, rather than individuals, would be the beneficiaries of your will. This implies that anything in your will is now set up to pass to the trust when you die. Furthermore, any assets or property that are not in the trust at the time of death and do not have a named beneficiary should be transferred to the trust when you die, according to the language in your Pour Over Will.
It’s critical that your pour over will be properly signed and witnessed in order for it to be lawful. When it comes to witnesses, check to see how many are required in your state.
What Should Be Included In A Pour-Over Will?
The pour-over will should be in accordance with the trust’s terms, and the trust may be named as a beneficiary. Discuss your individual scenario with a certified public accountant to ensure that naming the trust as the beneficiary has no negative tax repercussions.
Also keep in mind that the pour-over will only work with personal assets, not trust assets. That means that some assets must not be the trust’s assets when bequeathed in a pour-over will, as this can cause uncertainty about what is a personal asset and what is a trust asset.
The pour-over will name the trust as the remainder beneficiary and/or the trust’s beneficiaries as remainder beneficiaries in the same percentages as specified in the trust.
The Role of the Successor Trustee
Your executor distributes assets to your living trust through your pour-over will after you die. The duty of the successor trustee, on the other hand, is identical to that of the executor, with one important distinction: the trustee solely has power over trust assets. As a result, the trustee will divide the trust assets in accordance with the trust agreement.
If the sole purpose of establishing a living trust is to avoid probate, the trust agreement may simply direct the trustee to release all assets to the beneficiaries as soon as possible. (Trust assets do not require probate.) Conversely, if you intend to leave trust assets to children, young adults, or someone with special needs, your trust agreement may include more complicated instructions.
For example, a trustee might be instructed to hold money for a young beneficiary in trust until the beneficiary reaches a specific age, then distribute it in three installments over ten years. It’s absolutely your decision. And because of this flexibility, a successor trustee may be in charge of money management long after the executor’s duties have been completed.