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In estate planning a pour-over will transfers a testator's assets into a trust.
When you're estate planning you might decide to create a living trust. That means you transferred your property and personal assets into a legal entity to be used by your future heirs. A trust, like a last will and testament, has rules about who receives what assets, and how they can be used. But only a trust has tax advantages and can more fully protect the wishes of the grantor, or trust creator.
But what if you die before getting the chance to add your newly purchased car or vacation home into the trust? A pour-over will can ensure that any assets you left out get placed into the trust.
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In both cases the will must state which assets you want to put into the trust, turning them into trust assets. You typically only need to direct high-value property into the trust.
The benefit of having your assets transfer or pour over into a living trust is that they will be governed by the terms that you the grantor set, and enforced like a contract. Upon your death, your appointed successor trustee will step in to administer the trust assets to your beneficiaries.
The benefits of having a trust include:
Payable- or transferable-on-death accounts — like your savings account account — allow you to add a beneficiary. You’re not required to and if you don’t, the money becomes part of your estate. If you accidentally list a beneficiary for a trust asset, but also separately name a different beneficiary for the same asset (like a life insurance policy or the savings account we just mentioned), then who receives the asset will be determined by the probate court.
Read more about how wills and trusts work with life insurance.
Wills and living trusts are not mutually exclusive. In fact, they are a common combination in estate planning.
Even if you already have a living trust, you may still want to create a will, especially if you have young children. A will provides instructions as to who gets your belongings and lesser valuables, and who becomes the guardian of your minor children. The trust, on the other hand, only deals with the distribution of assets.
A pour-over will is a good safety net to ensure anything left of your trust, whether intentionally or by accident, gets to your proper heirs. It can be helpful, for example, if you frequently buy and sell property and don’t have time to remember to remove or replace trust assets.
Without a pour-over will or any document stating who gets your stuff, your assets will follow the laws of intestate succession. Each state has different rules dictating who has a claim to your assets when you die. In most common circumstances, your property will be distributed to your next of kin.
If your trustee is an institution or charity, or anyone other than your immediate family, it’s especially important to properly direct your assets with a pour-over will to prevent any estranged relatives from receiving the inheritance you set aside for someone else.
Thinking about retirement?
A will is the best way to ensure your property goes to your loved ones after you die.
Trust assets, including those in a revocable living trust, are usually not subject to probate, or the process of proving and executing a will. The trust is like its own private contract where the assets go to the beneficiaries so there’s no need for a court to determine who gets what.
However, any assets not placed into the trust prior to your death, including those pouring over from your will, may be subject to probate. Assets distributed by a will are subject to probate, whether they are directed to a beneficiary or into a trust.
Additionally, some states will require your assets to go through the probate process regardless if any assets or real estate is over a certain dollar amount. It’s important to talk with an estate lawyer about the specific laws in your state.
You're creating an estate plan. Make sure life insurance is a part of it.
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Policygenius’ editorial content is not written by a certified financial planner or advisor. It’s intended for informational purposes only and should not be considered legal, financial, or investment advice. Consult a professional to learn what financial products are right for you.
This post contains references to products or services from one or more of Policygenius' advertisers or partners. While these codes earn us a small fee at no additional cost to you, they do not influence editorial content and we only refer products we love.
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