In the estate planning world, you’ve likely heard of the Last Will & Testament. It’s a classic component of a comprehensive estate plan. But it isn’t always the main driver of things. Sometimes, a Living Trust may take the lead instead. In such a case, a Pour-Over Will comes into play.
In this article we’ll discuss what the Pour-Over Will is and how it fits into a Trust-based estate plan.
What is a Pour-Over Will?
The Pour-Over Will is just as much a Last Will & Testament as any other. But it’s more of a fallback document instead of the cornerstone.
With a Will-based estate plan, the Will directs how certain types of assets are to be distributed. This generally covers things like vehicles, collectibles, firearms, and other tangible personal property. It can also direct who will receive real estate.
With a Trust-based estate plan, the Trust is generally the main driver. The Trust is an extensive document regarding the powers that the Trustee has and how the Trustee will manage things.
The best way to make a Trust-based plan work is to fund the Trust during life. This means retitling assets into the name of the Trust and creating a formal record of what it holds. But sometimes, certain assets may be forgotten.
This is where the Pour-Over Will goes to work.
How Does It Work?
A Last Will & Testament often directs the Executor to distribute assets to certain people individually. A Will can also create a Testamentary Trust. But a Pour-Over Will directs the Executor to distribute assets to a Living Trust that already exists.
Let’s look at a hypothetical situation to see this in action.
Charlie executed a Trust-based estate plan. Based on his attorney’s advice, he executed a Pour-Over Will alongside the Trust. Charlie transferred most of his assets to the Trust, but he forgot something very important.
At the time he died, he had a $1 million life insurance policy. But he didn’t designate a beneficiary. The death benefit was then payable to his estate instead of directly going to someone.
Now what?
The Pour-Over Will tells the Executor what to do. In that document, there was a provision stating the following:
All of my residuary estate I give to the Successor Trustee of the Charlie Living Trust, a Revocable Living Trust of which I am Settlor and Trustee. I direct that my residuary estate be added to and commingled with the assets of my Living Trust and managed according to the Trust’s terms.
This provision in the Pour-Over Will means that the $1 million goes to the Trust. The Trust’s terms direct what happens next with that money.
The result otherwise would be that Charlie’s heirs-at-law would receive that life insurance money in shares, depending on how many survive him. The heirs-at-law are his next-of-kin as defined by Tennessee’s laws of intestate succession.
Who Needs a Pour-Over Will?
A Last Will & Testament should be a part of all estate plans. But for those who have a Trust-based plan, it is especially important to not forget this fallback document.
The purpose of the Trust is to hold as many assets as possible and provide for efficient and private administration. But it only works for those assets placed into the Trust, during life or at death.
The Pour-Over Will prevents undesired results and acts as a safety net. This way, your legacy wishes are still honored even if you forget to place certain assets into the Trust while you’re living.
So if you have a Trust as part of your estate plan, don’t forget to have a valid Pour-Over Will, too.
Final Thoughts on Pour-Over Wills in Estate Planning
Comprehensive estate planning can feel a bit overwhelming. There are many moving parts and it can be hard to keep track of everything. This is especially so for Trust-based plans.
Having a Pour-Over Will protects your legacy and prevents undesirable results. This document is usually just a few pages, but it is still highly important.
Connell Law, PLLC provides residents of Rutherford County and the surrounding area with estate planning, including Pour-Over Wills for Trust-based estate plans. Reach out to us to request a consultation.
And as always, plan today for a more peaceful tomorrow.
