When Should I Include a Pour Over Will in My Estate Plan?

In creating an estate plan, you are proactively taking steps to ensure that your assets will be distributed according to your wishes in the wake of your death. 

One tool available to you in estate planning is known as a trust. There are numerous kinds of trusts. If you wish to maintain control, during your lifetime, over the assets you place in a trust, you may choose to establish a revocable, or “living” trust – most likely, along with a pour over will.

First, What Is a Living Trust?

A living trust is a strategy in estate planning. When you create a living trust, you set certain assets aside within it. This might include things like a vacation home, a bank account, or an art collection.

With a living trust, you have the flexibility to modify or dissolve it at any point in your life.

When you have a Living Trust, it is generally desireable for the Living Trust to hold title to many or all of your assets (excluding retirment accounts and vehicles.) However, you can also name your Living Trust as the “pay on death” beneficiary of some of your assets, such as bank accounts. In this way, you avoid the need to re-title your bank accounts, but at your death, they will pass to your Trust.

How Do Living Trusts Work?

When you place assets into this type of trust, you continue to have access to those assets. You can select a designated individual, called a trustee, who would serve as the manager of your living trust should you pass away or ever become unable to manage your affairs.

For example, you may become incapable of handling your property, finances, and other aspects of your life if you fall ill, suffer from dementia, or endure an injury or accident that renders you unable to communicate. Should you die or become incapacitated, the trustee you have chosen manages the living trust on your behalf, following any terms you have outlined in the trust document.

Assets in your living trust are distributed to your beneficiaries, according to your wishes – typically without having to go through probate. This is often seen as one of the main advantages of a living trust.

For one, depending on  the size of your estate and the type of assets being probated, the probate process can last several months to a year or more.

Avoiding probate also means that information about the distribution of your assets to your loved ones is kept private. This could be helpful if you have people in your life from whom you would prefer to shield the details of your estate, such as children from a previous marriage or estranged or combative family members. 

However, perhaps you acquired new assets, such as an investment property, a bank account, or valuable furniture or jewelry, after setting up your living trust. You may not have transferred them just yet and you may not have named a “pay on death ” beneficiary. This is where establishing what is known as a “pour-over” will can be an important piece of your estate plan.

What Is a Pour Over Will?

A pour-over will is a type of estate planning document. It works in concert with a living trust and goes into effect if you become incapacitated or pass away. In such a scenario, this document ensures that any assets which must go through probate (because  you had not transferred to your existing living trust  and had not named a “pay on death” beneficiary) are directed (or “poured over”) to your trust.

A pour over will ensures that your assets are ultimately passed on to your beneficiaries as you intended. In addition, information about the distribution of any of your remaining assets, once moved to your living trust, will be kept confidential as part of the trust.

Do Pour Over Wills Mean You Avoid Probate?

Not necessarily; while the property controlled by a pour over will eventually goes to your living trust after your death, that does not mean your family avoids probate. Before your assets are owned by the trust, they may first need to pass through the probate process. However, if only a few assets require probate, it may be an expedited process, especially if the value of the assets is low enough to qualify for a small estate proceeding.

If you want to avoid the probate process, you must ensure that your living trust has in it all of the assets that you wish to pass on to your beneficiaries (or that the Trust is named as the pay-on-death beneficiary of your individual assets)  Essentially, a pour over will acts as a kind of backup, which directs all of your assets to be distributed in the same manner through the Trust.

Seek the Advice of an Attorney

Note that laws governing trusts and estates can vary widely by state and can be complex. Living trusts and pour over wills are also not suitable for everyone’s situation. It is important to consult with a qualified estate planner in your area when setting up any estate planning documents.

Please feel free to call Wenzel Bennett & Harris, PC at 989-356-6128 to set up an estate planning consultation. In meeting with you and reviewing your individual situation, we will  review the options which will be most suitable to your needs. If it is a good option for you, we will further explain how a Living Trust with a Pour-Over Will would work in your situation.

If you have specific questions about your situation or would like to learn more, reach out to the team at WBH here.

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