- Asset Protection Planning
- Business Succession Planning
- Charitable Giving
- Disability and Special Needs
- Elder Law
- Executor and Trustee Responsibilities
- Financial Powers of Attorney
- Inheritance Planning
- Lifetime Gifts
- Medical Directives
- Planning for Minors
- Retirement Accounts
The Need for a Pour-Over Will
In putting together your estate plan, one option you may pursue is establishing a revocable living trust. During your lifetime, you can access the assets in this type of trust and also make updates to it as needed. A revocable living trust also helps your loved ones avoid the time-consuming process of probate when you pass away. Should you go this route, you may consider setting up a related document known as a pour-over will as well.
What Is a Pour-Over Will?
A pour-over will is another type of estate planning document. It is necessary in the event that you have not fully or properly funded your trust.
To "fund" a trust, signing a trust agreement is not the only step you need to take. You must update the titles or beneficiary designations on your assets in order to transfer them to your trust. Your trust agreement can only control the assets that the trust owns.
However, an asset may have been left out of the trust. You may have forgotten to move the asset to the trust. Perhaps you acquired an asset after you completed the initial funding process for the trust. Or, you could have left an asset out of the trust on purpose.
If these cases, your pour-over will serves as a safety net that “catches” the outstanding asset. It instructs your personal representative to distribute the asset to your living trust once the probate proceeding is complete.
Omitting Certain Assets From a Trust
If your goal is to avoid probate, you may wonder why you might purposely leave an asset out of your trust. Certain assets, such as motor vehicles and specific types of real estate, should not be put into a trust. Here are some reasons why that is:
- Sometimes insurance companies charge higher premiums to insure trust-owned motor vehicles.
- Keeping your automobile or boat out of a trust can be helpful when it comes to creditors. For instance, let's say your vehicle was involved in an accident for which you are liable. The damage exceeds the coverage limits of your insurance policy. If that vehicle remains in your individual name, it is more difficult for a creditor to attach it to your trust.
- In some states, probate may not be required to transfer the ownership of a motor vehicle upon the owner’s death. The decedent's personal representative can take the owner’s death certificate and a copy of the will to the appropriate government agency. They can then transfer the motor vehicle's title to the owner's trust. The pour-over will shows that the personal representative has the authority to transfer the motor vehicle to the trust.
- In addition, some financial institutions are reluctant to offer or refinance mortgages on trust-owned real estate. A borrower might therefore leave property outside of a trust in order to refinance a mortgage. However, they may later forget to transfer the property into their trust. If the borrower dies while the property is still outside the trust, the pour-over will is used to transfer the property to the trust through probate.
Pour-Over Wills and Inheritance
You may not realize that you have inherited assets from a deceased family member. If you die before funding inherited assets into your trust, a pour-over will can be helpful. It catches the assets from the estate of your deceased relative. It then directs your personal representative to transfer them from your estate into your trust.
If you have established your living trust and started the funding process, find out whether you have any abandoned and unclaimed property. You can do this by checking the division in every state where you or your relatives have lived. You may find unclaimed refunds from utility companies if you have changed residences. Or, you may discover assets from deceased relatives’ estates that have yet to be distributed to you.
In many states, your will must be deposited with your state court clerk's office within a certain timeframe following your death. That way, your will is already on file and with the the clerk if it's later discovered that you have assets requiring probate.
For these reasons, you may need a pour-over will in addition to your living trust. Consult with an experienced local attorney about these important documents.