What Is A Pour-Over Will
A pour-over will is a legal document ensuring that a given individual’s remaining assets will automatically transfer to an already established trust at the time of their death. But why is this necessary?
What is a Will?
A will is a legal document used to direct how your property will be divided when you die. Without a will, your property is divided according to California’s rules of intestate succession, which might be different from how you would like to divide it.
However, in order to be effective, a will must be admitted to probate, which can be both an expensive and time consuming process. Most Californians prefer to avoid probate completely by combining a living trust with a pour-over will.
What is a Living Trust?
To help avoid the troubles of probate, many opt to use a living trust. A living trust is a legal agreement in which a designated trustee holds legal possession and management of the property and assets of the eventual beneficiary.
In theory a trust is reasonably simple. It is accomplished merely by signing a document creating the trust and naming a trustee–usually yourself during your lifetime. You then transfer property and assets into the trust. It will likely be necessary to sign a new deed for transferring significant property such as a home from you (an individual) to you (the trustee).
Naturally, living trusts are sometimes easier to conceptualize than materialize. It is both easy and normal to forget or neglect to transfer some wanted assets into your living trust. In such a case, a “pour-over” will is your answer. It is essentially a last will and testament that transfers any and all remaining property from your probate estate to your living trust at death.
Pour-Over Will Overview
A pour-over will is like any other will, except that the primary beneficiary of the will is the testator’s living trust. A pour-over will states that some or all of your property will be given to a trust rather than directly to individual heirs.
“Pour-over” means that any remaining property in your estate, after any specific gifts to individuals are made, “pours” directly into the trust.
Even if assets are not transferred to the trust, they still remain in the testator’s estate. However, assets that did not transfer are then subject to probate. Therefore, when a testator does not create a pour-over will, the assets are treated as “intestate” and considered “without a will.” The beneficiaries that receive these assets could differ from those named in the trust.
You may be wondering why there should be a transfer of assets under a pour-over will when there is a living trust. There are several actions that can lead to this route, such as negligence, mistake, and procrastination.
Sometimes the lack of understanding of trusts and how they work contributes to this problem. Confusion might also be a factor, particularly when real property is refinanced. The lender often requires that the property be taken out of the trust when it is refinanced probably won’t remind the owner of the property to transfer it back to the trust afterward.
After the establishment of the living trust and without the presence of a pour-over will, it would be necessary to list any acquired property in the trusts name instead of your name. Failure to do so would mean the property is inherited as determined under state law. In such a case, the recipients may or may not be your intended beneficiaries.
The pour-over will ensures that any such assets are added to your trust upon your death, so they will be ultimately distributed to the beneficiaries you name in your trust.
It is important to note that not all types of assets can be poured over into the trust. The pour- over will controls only probate assets, i.e., assets that are not in a trust, not in joint tenancy, not being inherited by a surviving spouse, and not in an IRA or 401K with named beneficiary(ies).
Furthermore, your pour-over will should contain language explaining your intent that property will pour over.
Advantages of a Pour-Over Will
When combined with a living trust, a pour-over will is a great tool to help you avoid probate. A pour-over will can help prevent the testator from dying intestate (ding without having made a will).
A pour-over will ties up all the loose ends of an estate and makes certain that the testator's property goes to his/her trust beneficiary as designated in their living trust. Choosing to use a will with a pour-over provision assures that any property you did not place into an existing trust during your lifetime ends up in the trust.
Among the reasons you may choose to hand over your property through a pour-over will instead of directly to the beneficiary are saving on taxes or maintaining property in good condition through a managing trustee.
It’s important to be aware that a pour-over will is not a get-out-of-probate-free card. If your assets stated in the will exceed $150,000, it will also be subject to probate.
If the trust includes a list of assets and language that constitutes a conveyance, or if the settlor(s)/trustor(s) signs an agreement stating that they are assigning all of their assets to their trust, a petition can be filed with the court asking that all of the assets be declared to be trust assets. This petition procedure avoids a full probate of the assets that were not transferred to the trust by changing their titles.
Disadvantages of Pour-Over Wills
Pour-over wills carry few disadvantages. Depending on the value of the assets not included in the trust, however, the assets controlled by the pour-over will may or may not have to go through the formal probate proceedings.
As most people create a living trust to avoid the probate process, it is important to make sure all of your assets are transferred into a living trust and the trust is properly funded.
Elements of a Good Pour-Over Will
Personal Assets Only: Due to the nature of a pour-over will, only personal assets not transferred into your living trust are addressed by the document. Before finalizing the will, It is highly recommended that the testator make sure all personal assets are present and included.
Naming and Taxation: Naming a trust as the beneficiary of a pour-over will could be subject to taxes. Assets are, in certain cases, subject to taxation by the state and federal government. An attorney should help identify when this is necessary.
Consistency: Be sure to have your pour-over will done by the same attorney who worked on your estate plan and living trust. Doing so creates consistency, and you can be secure in knowing both your documents do not hold any legal contradictions.
In California, a Pour-Over Will…
...names you as the executor of the will. You will officially receive this title upon acceptance of the will by the probate court.
…“pours” any unaddressed property and assets into the living trust upon death.
...settles any unpaid expenses named in the will. Such expenses may include funeral costs, unpaid taxes, and costs of administering the estate, among others.
...names a guardian for all existing minor children.
...distributes listed personal property not already in the trust or to be poured into the trust. Such property may include clothing, jewelry, furniture, etc.
...lists the powers you hold as an executor.
To make the process of creating a pour-over will even easier, California established a new law allowing a living trust to be created within 60 days after the will is signed (Probate Code section 6300). This differs from the previous arrangement in which both had to be created at the same time or would be invalid.
Both the new and the old law specify that the trust cannot be revoked or terminated before death. If the trust is revoked or terminated, the will’s pour-over provision will not be effective.
Andrea Aston Makes Pour-Over Wills Easy
Creating a pour-over will and a living trust is not complicated, but it does involve a number of technical details. An experienced estate planning lawyer like Andrea Aston can lead you through the process of estate planning so you can feel confident that your assets and property will be handled according to your wishes.
Andrea Aston can help you draft complete estate planning documents including a living trust and a pour-over will to make sure your assets avoid the formal probate process in California.
For more information about estate planning and pour-over wills or to set up an appointment, call Andrea Aston today at (760) 758-1565.
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