A sound Estate Plan can help you protect your loved ones, preserve your legacy, and formalize your end-of-life wishes. It can also help you minimize potential tax burdens and time spent by your family in probate court. If this sounds appealing, consider how a Living Trust with a Pour Over Will can help you plan for the future.
This Estate Planning strategy allows you to create somewhat of a safety net for your assets, while also guaranteeing a portion of your property avoids probate altogether. This combination is a great way to bolster your Estate Plan and add protections for assets you acquire after the Trust is created. Keep reading to learn how to use a Pour Over Will and Trust to avoid probate:
What is a Pour-Over Will With a Living Trust?
A Pour Over Will is a specific type of Will that directs a decedent’s property to automatically transfer into an existing Living Trust once it goes into effect. Living Trusts are legal instruments that allow an individual to determine how their property and assets will be distributed to heirs after death. These Trusts are then funded with said assets, though the grantor can still use and control them while they are alive.
Pour Over Wills must always be used in conjunction with Living Trusts and can be thought of as an extra layer of protection for assets not included in the Trust. Essentially, if an individual forgets or doesn’t want to transfer newly acquired property into the Living Trust, a Pour Over Will can eventually ensure the property is moved over.
How Does It Work?
Pour Over Wills work by directing property into a previously established Living Trust, which should be named as a residual beneficiary within the document. Pour Over Wills go into effect during the probate process after the grantor’s death. The Executor of the Will will then transfer said assets. In some cases, this may be the same person as the Trustee but it is not required.
The language of a Pour Over Will must be precise to ensure the smooth transfer of assets. In many cases they are worded to explicitly state any assets not already included in the Trust should be moved after the grantor’s death. If the language is not written correctly, assets could mistakenly transfer to a beneficiary (often the Trustee) instead. It would then be their personal, and not legal, responsibility to transfer the assets.
It is typically recommended to avoid mentioning assets already included in the Living Trust when writing a Pour Over Will. It can create confusion to have assets named more than once.
Note that Pour Over Wills can also include information that is not necessary for the Living Trust or other financial affairs. For example, parents may want to nominate a guardian for their children within their Will. This information, and other Estate Planning components, can still be specified when using a Pour Over Will.
Do Assets in a Pour-Over Will Avoid Probate?
Assets in a Pour Over Will do not avoid probate, but the assets previously placed in a Living Trust do. For this reason, a Pour Over Will can be thought of as a “backup plan” for the existing Living Trust. Any assets left out of the Trust will be subject to probate, but they will still be distributed as the decedent wanted.
There is one caveat that could permit assets in a Pour Over Will to avoid probate: the size of the Estate. Many states have small Estate laws that allow property to skip aspects of the probate process, resulting in much less time and money spent. The dollar limit for a small Estate varies, but for the most part assets already placed in a Trust will be exempt from the total value.
Overall, to avoid having your assets pass through probate you need to ensure everything is transferred into a Living Trust. While this is often the goal, life happens and as things change it is entirely possible to leave something out here and there – that’s where the Pour Over Will comes in.
The probate process can be lengthy and complicated, especially during a time of grief. If this is something you don't want to go through alone, If you prefer not to navigate this alone, consider seeking assistance from our Probate specialist at Trust & Will
What are the Advantages & Disadvantages of a Pour Over Will?
The potential to avoid probate is the main reason why many individuals choose to create a Living Trust with a Pour Over Will. However, there are a few other advantages and disadvantages to be aware of before you begin this Estate Planning strategy.
Security: A Pour Over Will with a Living Trust is a double-layer of protection for your Estate Plan and assets. This type of security can provide you and your family with peace of mind, as no assets or property can fall through the cracks.
Privacy: Living Trusts are private entities, although Wills are part of public record. The language used in a Pour Over Will, however, will direct the remainder of your assets into the Living Trust. This allows you to avoid listing assets or property in your Will, and helps maintain the privacy established by the Trust.
Clarity: An Estate Plan with a Pour Over Will and Living Trust can provide invaluable clarity on how you want your assets managed and distributed in the future. This comprehensive strategy will leave nothing out and can help make probate run more smoothly.
Leftover Property: Any property that is not already included in a Living Trust could be subject to probate (with some exceptions for small Estates). The best way to avoid this is to update your Estate Plan regularly and think of the Pour Over Will only as a safety net and not your main approach.
Timing: The assets that do pass through a Pour Over Will can take time to get through Probate. At that point the assets need to be transferred into the Trust, which can add additional time before they are ultimately distributed to heirs. While the process is relatively streamlined it will not happen overnight.
Do I Need a Will If I Have a Living Trust?
You do need a Will even if you have a Living Trust, and there are a few reasons why. Most notably, a Will does things that cannot be established by a Trust. For example, a Will can nominate a guardian for minor children or establish a medical Power of Attorney. These responsibilities will not be delegated in the creation of a Trust, but they are still crucial components of the Estate Planning process.
In terms of finances, it is entirely possible to leave assets or property out of a Living Trust. Even with your best effort, there may be assets or property that are not transferred into the Trust – without a Will those items would be delegated according to your state’s succession laws.
Who Carries Out the Duties in a Pour-Over Will?
The Executor of a Pour Over Will is the person who will carry out the duties specified in the document. In many cases, this means arranging for the cremation or burial, organizing the funeral or memorial ceremony, filing final tax paperwork, and transferring assets into the Living Trust. The Executor will also handle any other necessary administrative affairs.
The Trustee, who is named when the Living Trust is created, will manage the distribution of assets within the Trust as specified. In some cases, the Executor and the Trustee will be the same person but not always. For example, parents may place one child in charge of each role or some other arrangement. It is recommended that the Trustee and Executor are aware of each other’s responsibilities, and that they understand they will be working together in the future.
Create Your Trust & Pour Over Will Today
The creation of a Living Trust with a Pour Over Will is a great way to help ensure all of your assets are properly managed in the future. These documents work together to delegate assets and administrative responsibilities. This comprehensive Estate Planning strategy can help you bypass many portions of the probate process, saving your loved ones time and money in the future.
There are numerous benefits associated with Living Trusts, and a Pour Over Will can provide an additional layer of protection. This can help create a sense of clarity and security, giving you and your family peace of mind for the future. If you are interested in learning how to create a Living Trust or Pour Over Will, reach out to our team to get started
The right Estate Plan looks different for everyone, and it can be challenging to know where to start. A Living Trust with a Pour Over Will is one option for ensuring your end-of-life wishes are followed and your assets are correctly distributed – with the added bonus of being a tax-forward Estate Planning strategy. Consider how these benefits might help you plan for the future.
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