Tightrope walkers need a safety net. Fire fighters also may use them when rescuing people from a burning building. It may surprise you to learn that even your estate planning may benefit from a safety net of sorts. A pour-over Will may prevent your assets from falling into the probate abyss or being devoured by estate taxes.
People often transfer their assets to a trust, intending that the property will pass automatically to their beneficiaries. The assets don’t become part of their probate estate, which can lead to tax savings and easier transfer. An additional bonus is that the terms of a trust remain confidential, while the terms of a Will become public record.
Despite their best intentions, sometimes people forget to transfer some of their assets to the trust or they acquire new assets that are never transferred. Those assets likely become part of the probate estate. It’s impossible to keep our Wills updated through the exact moment of death, so you need a backup plan.
A pour-over Will is designed to trap any assets that, for whatever reason, never made it to the trust. Instead of becoming part of the probate estate, those neglected assets are transferred to a trust. A pour-over Will names the trust as beneficiary, leaving the trustee to distribute property according to the terms of the trust.
For example, maybe your Grandfather Wally created a living trust as part of his estate plan. He carefully transferred his assets to fund the trust but then amassed more property before his death. Since Wally had not signed a pour-over Will, his new acquisitions passed to his heirs at law. That’s not what he intended, though. He had set up the trust so his property would pass automatically to his trust beneficiaries, who are not necessarily the same as his heirs at law. Had he signed a pour-over Will, his probate estate would have eventually transferred to his trust and its beneficiaries, and his heirs may have received their inheritance more quickly and efficiently.
Property passing through the pour-over Will still has to go through probate before transferring to the trust. Keeping your trust current is the best way to avoid this.