When you create an estate plan, you might decide that a trust is the best way to pass some or all of your valuables and personal assets to your heirs. But a trust is only helpful if you actually transfer your property into it, and if you forget to do that a pour-over will can come in handy.
A pour-over will allows the testator (will creator) to direct any remaining assets into their living trust that they hadn't already transferred or retitled during their lifetime. For example, if you purchased a new car and died before you could move it into the trust, a pour-over will can help direct or "pour over" the asset into the trust. Trusts often work in conjunction with wills, and pour-over wills are no exception. They are especially an important estate planning document for people with a living trust.
How does a pour-over will work?
A standard last will and testament dictates who should you receive your assets when you die, and a pour-over will is just a type of will that includes language covering any assets and you didn't get to transfer into your trust — one that you already created during your life time, which is called a living or inter vivos trust. (A trust created upon your death is called a testamentary trust.)
The way a pour-over will works is that after you die, specific bequests are distributed to the beneficiaries named in your will, and any remaining assets that you didn't explicitly mention in the will — the residue of your estate — goes to the trust. A pour-over will can account for personal assets as well as high-value assets like real estate.
After the trust receives the assets, your successor trustee takes over and manages according to the terms you established when you set up the trust. This might include when and how often a beneficiary receives trust property. For example, you could manage a spendthrift beneficiary's finances from afar by making sure they only receive a set amount of funds every few months.
Trust assets that have already been funded or titled into the trust should not be included in your will, since they're separately governed by the trust document.
Do I need a pour-over will?
The main benefit of a pour-over will is to create a safety net or back stop measure to ensure anything you asset you forgot to account for gets to your intended beneficiary. It can be helpful if you routinely acquire new trust assets and don’t have time to go through the retitling process. (Learn how to fund a trust.)
The court will decide what happens to any remaining assets that aren't in the trust or accounted for in the terms of your will according to intestacy laws — so a pour-over will is necessary to make sure your assets go to the right people. Intestate succession typically distributes assets to your next of kin, and it's possible your loved ones won't receive their inheritance exactly how you wanted.
While a trust only deals with the distribution of assets, a will offers a few additional features. The pour-over will also lets you do other things you can do with a regular will, like choosing a guardian for your minor children and naming an executor — the person responsible for overseeing probate and the distribution of your assets after you die.
Does a pour-over will avoid probate?
Probate is the legal process of settling your estate, which can include filing paperwork with the court and and even appearing before the judge or clerk. Avoiding probate is one of the significant advantages of passing along an inheritance through a trust instead of a will. A trust operates as a separate entity, so there’s usually no need for a probate court's involvement regarding trust assets.
However, it's likely that a pour-over will needs to be probated since the assets covered by the will haven't actually transferred into the trust. Property distributed by a will — whether they are directed to a human beneficiary or into a trust — is typically subject to probate.
If the value of your probate property is worth less than a certain amount though, there may be shortcuts your executor can use to cut down on how long probate takes. On the other hand, some states may also require your assets to go through the probate process any time your assets or property are over a certain value. (That might be one reason to put your house in a trust before you die.)
Even though pour-over wills don’t avoid probate, they do retain a measure of privacy. The will becomes part of the public record eventually, but public knowledge ends the deceased person giving assets to the trust; how the trust distributes assets to beneficiaries remains confidential if the trust has already been established.
If you have questions about your estate plan or need legal advice, contact a local estate planning attorney.