A pour-over will ensure that specified assets are transferred to a predetermined trust immediately upon your demise. Say you have a trust fund, but you still retain control over some real estate properties that are not in the trust. You can craft a pour-over will such that the real estate properties are automatically transferred to the trust if you die so that you can avoid the intestate succession laws of your state.
How It Works
A pour-over will works in conjunction with a living trust. A living trust is a trust that you create for another person to manage on your behalf with the agreement that the trust will be transferred to a designated beneficiary upon your passing.
However, you may die without transferring all of your assets into the living trust. This can happen accidentally, for example, if you have diversified assets and you fail to account for all of them when crafting the living trust. More often, however, it is by design if you don't want to subject your entire assets to the stringent rules of a living trust.
There are several benefits of a pour-over will. For one, it streamlines the estate planning process, specifically the distribution of assets after death. Instead of dealing with the trust and the rest of the estate separately, the remaining assets are converted into the trust so that your beneficiaries only have to deal with the trust.
Another benefit of the will is that it takes care of any assets that you might have forgotten to account for when creating the trust. The will also takes care of any assets you may acquire after the creation of the will. Lastly, it allows you to keep your estate issues private since details of living trusts are not publicized.
Things to Remember
There are many things to remember when crafting a pour-over will. Here are just a few considerations.
Consistency: All your estate planning documents should be consistent. Do not confuse assets in the pour-over will with assets in the living trust or other estate planning documents. Otherwise, you will confuse your beneficiaries and give room for inheritance challenges.
Tax Implications: Taxation laws vary by state and can be pretty complicated. Consult estate planning or financial professionals to help you understand the tax implication of your pour-over will and trust arrangement before crafting the documents.
Probate: Assets in the pour-over will do not avoid probate; they must still go through probate before being included in the trust. Therefore, look for other estate planning strategies if your main aim is to avoid probate.
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