A “pour-over” will is a special kind of will used in conjunction with a trust. Assets owned by the individual who creates the will (the testator) are automatically “poured” into a trust that is executed prior to, or at the same time as, execution of the will.
The pour-over will contains provisions that allows any assets the testator failed to transfer into the trust during their lifetime, to automatically pass into (pour over into) the trust when the testator dies.
- What Kind of Trust do Pour-Over Will Assets “Pour Into”?
- What Kind of Assets can be Transferred Using a Pour-Over Will?
- What Language Must be in a “Pour-Over” Will?
- What are the Responsibilities of the Executor?
- What are the Advantage of a Pour-Over Will?
- What are the Disadvantages of a Pour-Over Will?
- Do I Need the Help of an Estate Planning Lawyer?
Pour-over assets pour into a specific kind of trust known as a lifetime revocable trust. This kind of trust is created by an individual known as a settlor. The trust is a “lifetime” trust because it is set up during the lifetime of the settlor. The trust is “revocable” because the terms of the trust can be changed by the settlor during the settlor’s lifetime. The settlor may, if they choose, add or remove beneficiaries to the trust, or change the amount and type of assets to be placed into the trust.
For the trust to be valid, the trust must be in existence before, or must be executed concurrently with, execution of the will. The trust need not be already funded before assets can pour into it; the trust can be “empty” before assets are poured in.
Most types of assets can be poured over into the trust. These assets include real property (houses, land) as well as personal property (jewelry, cash, cars). Certain assets cannot be “poured over.” These assets can include 401k proceeds as well as assets held in joint tenancy. These are assets that, by operation of the law, must go to a specific person (i.e. joint tenancy assets, by law, go to the surviving joint tenant).
Certain language must be included in a pour-over will for the will to be a valid pour-over will. The will must specify that property in the decedent’s estate will be distributed to the trustees of the revocable lifetime trust. The will typically names an individual referred to as an executor, to be the person responsible for making the transfers to the trust.
Both the executor of the will and the trustee of the trust are under an obligation, known as a fiduciary obligation, to ensure that the testator/settlor’s intentions as to who is to receive property, are honored.
The pour-over will is administered by the executor’s taking the assets that pass under the will, and placing them into the living trust. Once this placement is made, the trustee collects the trust assets, then distributes them to beneficiaries.
There are several advantages to using a pour-over will. These include:
- A pour-over will is a suitable vehicle for transfers of assets to minors. Assets are transferred to the trust, which is managed by the trustee. The trustee can be charged with ensuring minors do not actually receive the assets until they reach the age of majority, or ensuring that minors do not spend assets beyond a certain dollar amount;
- Any assets the testator may have neglected to put in the trust during their lifetime, will automatically be transferred into the trust at the testator’s death. The testator need not constantly update the trust to add or replace assets. In addition, if a change to the trust does need to be made, the change is generally easier to make than is a change to a will. A change to a will must be accomplished by observing specific formalities (i.e., the testator must sign the will; sign in the presence of each witness; there must usually be two witnesses, etc.);
- Trust documents, unlike will documents, do not become public records upon a testator’s death. The identity of who inherits what property, therefore, is kept private; and
- A pour-over gift may be to a revocable living trust created by someone other than the settlor. In other words, asset “pour-over” is not limited to trusts created by the settlor. The “pour-over” can be into any existing trust, including those executed by other persons.
A main disadvantage of such wills is that the property that passes to the trust is subject to probate. Probate is the process of proving a will, or having it declared valid and effective following the death of the testator. Probate can be a time-consuming and expensive process. Until probate administration is complete, the beneficiaries may not receive the property transferred to the living trust.
If you are contemplating creating a pour-over will, you should contact an experienced estate planning attorney. This attorney can guide you through what is required to create both the will and the revocable lifetime trust. The attorney can prepare the necessary documents to ensure your wishes regarding asset distribution are honored.