The Need for a Pour-Over Will

Why Do I Need a Pour-Over Will if I Have a Living Trust?

After reading about the benefits of a revocable living trust, you may wonder, “Why do I need a pour-over will if I have a living trust?” A pour-over will is necessary in the event that you do not fully or properly fund your trust. Signing a trust agreement does not mean that your estate will avoid the court-supervised processes of guardianship if you become incapacitated or probate upon your death. You must also update the titles or beneficiary designations on your assets to transfer them to your trust. Your trust agreement can only control the assets that the trust owns.

However, an asset may be left out of the trust. You may have forgotten the asset accidentally, acquired it after you completed the initial funding process, or left it out of the trust on purpose. If this happens, the asset may require probate first, and your pour-over will serve as a safety net that “catches” the asset and instructs your personal representative to distribute the asset to your living trust upon the conclusion of the probate proceeding.

You may now wonder, “Why would I intentionally leave an asset out of my trust if it is my goal to avoid probate?” Certain assets, such as motor vehicles and certain real estate, should not be put into a trust. Sometimes insurance companies charge higher premiums to insure trust-owned motor vehicles. In addition, owning an automobile or boat in your individual name may make it more difficult for a judgment creditor to attach your trust assets if the automobile or boat is involved in an accident for which you are liable and the damage exceeds the coverage limits of your insurance policy. Finally, in some states, a probate may not be required to transfer the ownership of a motor vehicle upon the owner’s death. Instead, the personal representative nominated in the pour-over will may transfer the motor vehicle’s title to the owner’s trust by taking the owner’s death certificate and a copy of the will to the appropriate government agency. The pour-over will shows that the nominated personal representative has the authority to transfer the motor vehicle to the trust upon the owner’s death. In addition, some financial institutions are reluctant to offer or refinance mortgages on trust-owned real estate. A borrower who leaves property outside or transfers property out of a trust to obtain or refinance a mortgage may accidentally forget to later transfer the property into the trust. Similarly, a lender may not consent to the transfer of the property into the 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.

Finally, you may not realize that you have inherited assets from a deceased family member. If your deceased relative leaves assets to you and you subsequently die without funding the inherited assets into your trust, the pour-over will catches the assets from the estate of your deceased relative and directs your personal representative to transfer them from your estate into your trust. This is one reason why, once you have established your living trust and started the funding process, you should check the division for abandoned and unclaimed property in every state where you or your relatives have lived. You may find unclaimed refunds from utility companies if you have changed residences or undistributed assets from deceased relatives’ estates.

Even if a probate is not required, many states require the custodian of a testator’s will to deposit the will with the clerk of the court having venue of the testator’s estate within a certain number of days after receiving notice of the testator’s death. If assets of or due to the testator are later discovered and require a probate, the will is already on file and maintained by the clerk.

For these reasons, you need a pour-over will in addition to your living trust. To consult with an experienced local attorney about these important documents, click here.