What’s the definition of "pour-over will"? A pour-over will is a last will and testament that serves as a safety device to capture any assets that are not transferred to or included in a living trust. An important part of creating a living trust is that it needs to be “funded,” meaning that your personal assets must be transferred into the trust document via the trust document and/or retitling the assets in to the trust’s name. While “funding” a living trust can be an easy process, sometimes assets don’t always make it to the trust for a variety of reasons. This article will discuss the advantages of having and the possible consequences of not having a pour-over will.
I have a revocable trust, I thought that is all I need?
To avoid probate, you may opt to create a living trust to easily pass assets on to your heirs. These trusts are commonly known as inter vivos or revocable living trusts. The living trust creates a separate legal entity that allows the trust’s assets to be distributed outside the probate process. Because the living trust is a separate legal entity, the trust has its own assets, separate from your personal assets. In order to become trust assets, your personal assets need to be transferred into the trust via the trust document or retitling. Assets that do not get transferred stay personal assets.
Your assets vs. trust assets
Creating a living trust therefore creates two types of assets, the trust’s assets and your assets. This is a very important distinction for purposes of the pour-over will and probate avoidance. If you still have personal assets, they are subject to the pour-over will. There are three general ways that assets don’t end up in the trust:
(1) the assets are acquired personally after the trust is executed
(2) assets are excluded from the trust intentionally or by mistake; and/or
(3) assets are not retitled due to delay or timing of acquisition. For instance, if you do not retitle your car into the trust, it could be seen as part of your personal assets rather than a trust asset.
Do I need a pour-over will?
Short answer is “probably” as assets not transferred to the trust at the time of your passing become part of the your “estate.” Regardless of the trust’s existence, these assets still belong to the estate if not transferred to the trust. So, if you don’t create a pour-over will, those assets will be treated as if the person had died “intestate,” that is, without a will, so assets will pass to certain heirs by law. These heirs may differ from the trust beneficiaries, meaning that your assets could go to someone that you never intended.
Like mentioned above, the pour-over will is a safety device to ensure your assets flow to your intended beneficiaries.
Does the pour-over will need to go through probate?
The short answer is “maybe.” The pour-over will deals with personal, not trust assets. Depending on your state’s probate laws, your estate—meaning the assets not transferred to the trust—maybe subject to probate. For instance, many states require probate for estates that have over a certain dollar amount in assets or any real estate. Many states also have small estate carve outs so estates under a certain value do not need to go through probate.
What should be included in a pour-over will?
The pour-over will form should be consistent with the trust and may name the trust as a beneficiary. Ensure that naming the trust as the beneficiary has no negative tax implications by discussing your specific situation with a certified public accountant.
Also, know that the pour-over will only deals with personal, not trust assets. That means that when bequeathing certain assets in a pour-over will, they must not be the trust’s assets as it can create confusion from what is a personal asset and what is a trust asset. In the most simple circumstances, the pour-over will names the trust as remainder beneficiary and/or the trust’s beneficiaries as remainder beneficiaries in the same percentages as detailed in the trust.
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