Earlier in this series, we examined the differences between wills and trusts. Though these estate planning tools can be used to achieve very different objectives, they are often used together to give a person the best of both worlds. To enjoy the benefits of both a will and a trust, a person executes a “pour-over will.”
The key distinction between a traditional will and a pour-over will is what happens to the property upon the death of the person creating the will. As noted in a previous post, a will is used to determine “who gets what” from a person’s estate; with a traditional will, the testator names the persons or institutions that will receive his property upon his death. A will must be administered through the probate court, which can take a significant amount of time.
In contrast, a pour-over will takes all of the person’s property at death and “pours it” over into a trust. With this estate planning tool, the executor does not need to determine “who gets what” under the terms of the will because the trust gets everything, and the property will be managed in accordance with the terms of the trust. Note, however, that the terms of the trust specify “who gets what” with the same level of detail one might find in a will.
To illustrate this concept in action, consider the following example:
In 2012, Karen executed a trust and pour-over will. She served as the sole trustee of the trust and transferred all of her assets—including her home, bank accounts, car, and other personal property—into the trust. Under the terms of the will, all of her assets which are not already in the trust will be “poured” into the trust upon her death. In 2013, Karen purchased a vacation home in her individual name but did not transfer it into her trust.As demonstrated by the example above, the pour-over will acts like a “fail-safe” to ensure that assets not yet transferred into the trust will find their way to the trust upon death. If you would like to learn more about pour-over wills and how this instrument might satisfy your estate planning needs, please contact me or any of the other estate planning attorneys at Cleveland, Waters and Bass.
Karen passed away in 2014. Her pour-over will was filed with the probate court, and under the terms of the will, her vacation home was automatically “poured over” into the trust to be distributed according to its terms. Thus, although probate was required to transfer Karen’s vacation home to her trust, her other assets escaped probate and the time and expense associated with the probate process.
See all posts in the Estate Planning 101 series.