POUR OVER WILLS
If you have a trust, you probably have a complex estate plan that avoids probate and limits taxes to the extent possible. However, a trust is not usually an independent document. If you have a trust, you still need a will. Everyone needs a will for a number of reasons, but maybe you are wondering, what is a pour over will?
I am an attorney, but I am not your attorney. Nothing in this post creates an attorney-client relationship or should be deemed legal advice. This post is purely educational and informative. Further, this site contains affiliate links from which I may make a commission if you make a purchase.
DO I NEED A WILL IF I HAVE A TRUST?
If you have a revocable living trust, your large assets, your accounts, and possibly even your items of tangible personal property are already titled in the trust.
Then, upon your death, your revocable living trust, having already been funded, can automatically transfer assets to your named beneficiaries without interference of a court.
(TO READ MORE ABOUT THE UNFUNDED TRUST PROBLEM, CLICK HERE)
Finally, your beneficiaries are able to collect, account for, and distribute the assets in your trust without much hassle. They can make agreements among themselves. They alone decide whether or not to sell assets. And, your children could even decide to maintain the trust until a convenient distribution date.
However, if you flip through your revocable living trust binder, you are likely to find a section marked “Will” or “Pour-over will”. Your trust does not work alone.
WHAT IS A POUR OVER WILL?
A Pour-0ver Will is a Last Will and Testament in which, among other provisions, all of your remaining assets that were not titled into the name of the Trust, can pour into the Trust.
A pour-over will is a legal document that ensures an individual’s remaining assets will automatically transfer to a previously established trust upon their death.
(https://www.investopedia.com/terms/p/pour-overwill.asp)
A pour-over will catches all of the leftovers. It recovers all of the forgotten assets, or maybe those assets that were never funded (see the unfunded trust problem above), and turns them over to the Trust to be administered in accordance with the terms of your Trust.
WHY DO I STILL NEED A WILL WITH A TRUST?
A good estate planning attorney is going to complete an estate plan that considers your wishes and your needs. Your attorney is also going to plan for unexpected problems and even user error!
Although you may never need to go through a court administered probate proceeding in your state if you have a funded trust at your death, you may still need a will take care of a number of other issues.
WHY YOU STILL NEED A WILL EVEN IF YOU ALREADY HAVE A TRUST
PRIVACY OF PROBATE
Some estate planners make trusts and pour over wills a regular part of ensuring that testators (people who make wills) retain their privacy.
While a will is public record upon its admission to probate, a trust is not. Most trusts can be kept private and off the record. Therefore, the will only transfers assets to a nondescript entity. The entity (the trust) then transfers the assets to children, charities, or other beneficiaries.
Privacy is especially important for people with a high profile, with unequal divisions among their children, or who want to be able to give anonymous gifts.
LACK OF FUNDING
Another reason to still have a will even though you have a trust is lack of funding. Many estate planners don’t take it upon themselves to research all of your property located throughout the entire world and change the titles.
Regardless of how much time I spend with a client asking him or her about his or her assets, they inevitably forget about something. The time share in Branson, the oil rights in Pennsylvania, the hunting ground in Minnesota…
Clients sometimes forget that these are land or contract interests that have to be divided upon death. If the client has forgotten to include these items in his or her trust, then we have a funding issue.
Enter the pour-over will to sweep up those little forgotten items and toss them into the trust to be administered with all of your other assets.
MINORS
Another extremely important reason to still have a will even if you have a trust is minors. If you have, or might someday have, minor children, it is incredibly important to name a guardian for your minor children.
(To read more about the 4 documents that every parent should have before having a baby, click here.)
A court uses your will to determine who is the best guardian for your child. Without a named guardian, your friends and family must decide among them who will care for your children. Then, they will still have to convince the court.
Naming a guardian is incredibly important to protect your minor children even after your death. Your trust might help you avoid probate and easily transfer your assets, but you must still have a will to name a guardian.
TAXES
Death and taxes –there’s no avoiding them.
Another important reason for having a will or a pour-over will in combination with your trust is TAXES.
A good estate planning attorney will make further provisions in your estate plan that opts you into or opts you out of certain tax treatment. Spousal portability? Lifetime exclusion reporting? GRATs?
All of these provisions and extra planning have tax consequences. Transferring some assets into a trust, while still maintaining some assets in your personal name (and therefore subject to a will) could be a strategic tax plan.
Dividing your assets among different entities might be part of a strategic tax plan. For example, a 401k payable on death to a trust might incur a significant amount of tax more than if it were payable directly to an individual or a beneficiary of an estate.
Further, allocating a specific amount of money or assets to a charity rather than a child might save taxes for both the trust and the beneficiary.
MORE REASONS FOR HAVING A POUR-OVER WILL IN ADDITION TO YOUR TRUST
USER ERROR
Finally, your estate planner might insist that you have a will in addition to your trust simply because he knows that estate planning is subject to user error.
We estate planners do all we can to write out instructions, lecture our clients about probate limits, and convert titles. However, clients sometimes forget or flat out ignore our advice.
In my experience, outside of state and federal tax law changes, cars are the cause of the most failed trust plans. How you ask?
Well, people buy and sell cars with such frequency, especially “car people” that they often sell and re-title cars without thinking about the fact that they have a trust. So, while I have spent a good chunk of time making sure that the titles on all of your vehicles –your collector car at the back of the barn, your work truck, your daily driver, and that convertible you bought on a whim—are titled in your trust name, you went and traded one in and forgot to change the title.
I see this frequently. Many of my clients acquire collector cars in their retirement, buy and sell cars with frequency, or even accumulate cars for children or grandchildren in their personal names.
At a certain point, the accumulation of these vehicles pushes my client above the probate limit. But, no worries, once these assets are submitted to probate, then the will can easily pour them into the trust.
An additional step?, yes. But, no problem for a well-rounded estate plan with both a will and a trust!.
YOU NEED A WILL EVEN IF YOU HAVE A TRUST
Even though you have paid your money to pass probate and proceed directly to trust administration, you still need a will.
A pour-over will is like a cleanup estate planning tool that not only protects you, your taxes, and your stuff but also protects your children.
An estate plan is not a single document but is a complex assortment of documents working together to achieve your goals.
To ensure that you achieve your estate planning goals and protect your family, be certain to meet with a respected estate planning attorney in your area.