Do you need a pour-over will in your estate plan?
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A pour-over will is a specific type of will that is generally created in conjunction with a trust. This can help facilitate the transfer of assets if a trust’s grantor (the person establishing the trust) has neglected to transfer all intended assets into the trust. A pour-over will can be an important part of a person’s estate planning checklist. Here are the basics you need to know.
What is a pour-over will?
This type of will contains a provision that allows the will to “pour-over” any residual assets left in the person’s estate into a living trust that is overseen by a trustee upon the grantor’s death.
A major benefit of this type of arrangement is that it essentially acts as a backstop in the event there were assets that the grantor did not specifically fund into the trust before their death. This allows these assets to avoid the intestate rules (when someone passes away without a valid will) for that state even though they were not specifically part of the living trust.
How a pour-over will works
An individual might designate certain assets to be titled in the name of a living trust they’ve established to facilitate passing these assets to the trust’s designated beneficiaries upon the grantor’s death. The trust avoids probate on these assets. Note that any assets such as an IRA or a life insurance policy that passes on to heirs via a beneficiary designation would not be eligible for inclusion in this type of trust.
The use of a pour-over will allows the grantor to state that any assets that had not previously been included in the trust should be added to the trust upon their death. This means assets that may have been acquired after the trust was established are eligible for the same treatment as the assets that had already been funded to the trust.
Pros and cons of including a pour-over will in your estate plan
There are several pros and cons of setting up a pour-over will.
- Creates a safety net: A pour-over will acts as a safety net to ensure that assets the grantor wishes to pass onto their heirs in the same fashion as those already included in the trust can do so without having to go through the probate process. Assets may have been acquired after the original funding of the trust and for whatever reason were not added to the trust.
- Simplicity: This eliminates the need to decide which heir receives certain assets, everything eventually becomes part of the trust and assets are distributed via the terms of the trust.
- Helps reduce probate complications: A pour-over can help avoid a lengthy probate case due to a significant asset that was not included in the trust or elsewhere. The pour-over will offers a process to get this asset into the trust with relatively little hassle.
- Doesn’t eliminate probate process: Even though the issue of dealing with your state’s intestate statutes is taken care of with the pour-over will, the will still needs to go through the probate process which can take time.
- Possible legal challenges: The will can be challenged, and these objections can be costly to litigate and take time to resolve.
- Laws vary by state: The rules differ from state to state regarding pour-over wills, so consider obtaining expert legal advice before going this route.
A pour-over will can be a key part of your estate plan. It’s a tool that can be used to help ensure that all assets a grantor intended to be part of a trust are included, even if they had neglected to title those assets in the name of the trust during their lifetime.