As we’ve noted before, wills and trusts are both valuable estate planning documents, but they’re not one and the same. With that being said, though, there is a special type of last will and testament that can be put to work in conjunction with a trust-based estate plan.
This special document is known as a pour-over will, and it may be a useful tool for certain individuals to consider for their estate plan, depending on their unique needs.
What Is a Pour-Over Will?
Put most simply, a pour-over will puts all of your remaining assets into a living trust when you pass away.
Rather than dictating individual disbursements to various beneficiaries, a pour-over will, in essence, names your existing revocable living trust as the beneficiary of any property or assets that it does not already contain, or which do not automatically pass to another beneficiary outside of probate (such as designating a beneficiary on a financial account or insurance policy).
From there, your named successor trustee will act as an executor of sorts; they will be responsible for collecting all trust assets, including those transferred via the pour-over will, and properly distributing them to the trust’s beneficiaries.
Why Have a Pour-Over Will?
Trusts need to be funded with personal assets, as named by the signing of a trust document, or else by some other mechanism (such as retitling the assets to be in the trust’s name). There may be any number of reasons why assets aren’t funded to a trust over time – perhaps the owner wants to maintain greater control of their property. In many cases, individuals simply overlook or neglect an asset by mistake.
Should a person pass away without a pour-over will, their remaining assets, not explicitly funded to the trust, become part of their estate.
If there isn’t any other valid will in place, the state will functionally consider this person as dying intestate – meaning that this property will pass to their heirs according to their state’s law of intestate succession.
When this occurs, an individual’s property and other assets are likely to pass on to their nearest blood relatives, even if the decedent had no relationship with them. Many people prefer to have a greater level of control over their property, rather than allowing rigid state laws to make these vital decisions on their behalf.
Does a Pour-Over Will Avoid Probate?
For most people, the key advantage of a living trust is that it avoids the probate process, which may help ensure their family’s privacy and financial stability in a trying time.
With that said, though, it’s important to recognize that a pour-over will specifically deals with personal assets, rather than trust assets. In Illinois, pour-over wills, like other wills, do not avoid probate if they pass assets with an aggregate value exceeding $100,000, or if there is any real estate involved.
Still, the probate process may be more streamlined and speedy with a pour-over will in place (particularly compared to the proceedings that will occur if any of your assets are left up to intestacy laws), and many deal only with minor assets, meaning that they do manage to avoid probate altogether.
The Bottom Line
While pour-over wills are a useful estate planning device, it’s important to bear in mind that they should probably be thought of as a last resort, or safety net, rather than as a primary part of your estate plan.
Whether or not you have a pour-over will in place, it’s important to remember that estate planning is an ongoing process, and not a “one and done” event. It’s important to regularly revisit your will(s) and your trust documents, to help ensure that you don’t overlook any new property that should be funded to the trust, or to update any of the provisions in your trust agreement.
Have any further questions about pour-over wills, trusts, or any other aspect of estate planning and administration in the Chicagoland area? Don’t hesitate to drop us a line today to continue the conversation.
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