What is a Pour-Over Will?
Many of my clients, including those who have had their living trusts set up for years, often do not understand the purpose, effect and limitations of what is known in the estate planning vernacular as the “pour-over will.”
When you did your revocable living trust, your attorney in most cases will have also prepared a will. In most cases, this is a “pour-over will”.
Very simply, such a will provides that on your death, if there is any property under your name which is not already titled in the name of your trust or which does not have beneficiaries designated to take the property on death, such property is controlled by this pour-over will and, as stated in the will, “pours over” into the trust, with the result that any property left out of your trust at your death and which does not have beneficiaries designated, will be transferred into your trust upon your death and will be distributed according to the terms of your trust.
A simple example might help
Let’s say you have a trust in place which provides that on your death, your estate under the trust will pass equally to your two children. Let’s also assume that you have transferred your home into the trust, that is, the home is titled and recorded under the name of the trust on the county records.
But let’s also assume you have a bank account which is titled in your name only, and is not in the trust. If you die, the house, being in the trust, will pass without probate to your two children, but what happens to that bank account? Since the signer on the account, you, is deceased, there is no longer any person who can legally access the account, absent a beneficiary designation on the account.
But your will, which you most likely executed along with your trust, states that any property remaining in your estate (your estate being any assets which are in your name and generally not in your trust) will “pour-over” into your trust at your death.
When this pour-over process is explained, most people assume that the pour-over is automatic; but it is not.
Anything passing into the trust under your pour-over will must go through probate. This is why you want to be sure that all of your real estate and accounts, e.g. bank accounts, brokerage accounts, etc., are titled in your trust so that when death occurs, those accounts are covered by the trust and need not be probated in order to pass such assets into the trust and then among your heirs, as set forth in the trust.
Often we will meet with people who are taking a vacation and wish to get their estate plan in place before they fly away on their vacation. (By the way, we have never lost a client while they were on vacation!)
As is often the case, people wait until the last minute to embark on the estate planning process. In most cases we are able to get the trust, wills, etc. completed before the client flies away; however, it is often not feasible for the client to get all his or her accounts transferred into the trust, although we can usually get most of the deeds prepared to at least get all of the real estate into the trust.
In any event, if the client were to not make it back alive from the vacation, if there are any assets not transferred to the trust, the client can feel comfortable that the estate plan set forth in the trust will be carried out because any assets not already in the trust will pour into the trust at death, to be distributed as provided for in the trust. Hence, with the trust and pour-over will, the estate plan is in place.
The only downside to not transferring some of the accounts to the trust is that those accounts not transferred into the trust prior to death will have to be probated. Aside from the probate fee, which usually runs around 2% to 5% of the value of the assets probated, the distribution of the estate will occur as set forth in the trust, and therefore, the client can be confident that the estate plan established prior to the vacation will be carried out.
In the End
In the end, it is important to understand that the pour-over will ensures that the estate plan will be carried out; but it does not achieve the goal of avoiding probate. For this reason, you should transfer real property, liquid assets, etc. into the trust so that you do not need to rely upon the will to carry out your estate plan.