What is a Pour-Over Will?

fountain pen and documents and notary stamp - pour over will concept

In a nutshell, a pour-over will is a tool to make sure that everything in your estate passes according to the terms of your estate plan. In recent years, trusts have become an increasingly popular way to avoid probate and ensure that inherited assets are managed for beneficiaries, like children and young adults, who may not be ready to manage an inheritance.

There are many different types of trusts designed to achieve these and other estate planning goals, such as protecting assets from creditors, minimizing taxes, and ensuring that someone with special needs can receive an inheritance and still remain eligible for government benefits.

Pour Over Wills and Trusts

One thing all trusts have in common is that they must be funded. You cannot simply create a trust and have it provide the protections you are looking for. In order to be protected, assets must be placed in the trust. How that happens depends on the nature of the asset. Real estate can be deeded to the trust. Vehicles and boats can be re-titled in the name of the trust. Bank and investment accounts can be transferred to the trust using forms provided by the financial institution.

Most people transfer the assets they own at the time of creating a trust into the trust shortly thereafter. The trouble is, life goes on. People are always acquiring new assets, from stocks and bonds to household collectibles. It’s not realistic to imagine that a person is going to title every new acquisition in the name of their trust. So what happens to those assets when the creator of the trust dies? Enter the pour-over will.

How Does a Pour Over Will Work?

As the name suggests, a pour-over will takes all the assets you own in your sole name at the time of your death and “pours” them into the trust you have created. Essentially, these straightforward documents leave all of your assets to your trust to be distributed according to the terms of your trust.

Let’s say you have two children and four grandchildren to whom you want to leave all of your assets after you are gone. You decide to create a living trust with a pour-over will. During your life you will serve as both trustee (manager) and beneficiary of the trust. Essentially, you can use, enjoy, and transfer trust assets just as if they were still in your name. Upon your death, a successor trustee you have named takes over administering the trust for your children and grandchildren’s benefit.

Between the time you create the trust and your passing, you acquire some artwork, inherit a parcel of land and some stock, and buy a new car, all in your own name. After your death, your pour-over will funnels these assets into your trust, where your successor trustee can manage and distribute them for the benefit of your children and grandchildren.

Does a Pour Over Will Avoid Probate?

No. Although the reason many people create living trusts is to keep their assets from having to go through probate, pour-over wills, like all wills, must go through the probate process. However, that doesn’t mean that creating a trust for probate avoidance is pointless.

There are many advantages to a trust besides avoiding probate, and the assets that are already in the trust at your death will avoid probate. It is only those assets that need to be distributed via the pour-over will that will have to go through probate. The probate process used for a given estate depends on the size and complexity of the estate. If your pour-over will needs to transfer only a small amount of property to one beneficiary (the trust), a simplified probate process is probably all that will be required, with little or no court involvement.

It’s best not to use your pour-over will to fully fund your trust at the time of your death, since then all of your assets would have to go through probate before being placed in the trust. Rather, you should fund your trust as fully as possible during your lifetime, and use your pour-over will as a backstop to make sure that nothing remains outside of your trust.

What Happens to Assets Outside a Trust Without a Pour Over Will?

If you have assets outside of your trust at the time of your death, one of two things will happen. If you have a last will and testament, the non-trust assets will be distributed according to the provisions of that document. If you do not have a last will and testament, your non-trust assets will be distributed according to the laws of intestate succession in your state.

In Michigan and most other states, these laws distribute property as most people would wish: first to a surviving spouse, then children, parents, siblings, and more distant relatives if there are no closer relatives surviving. If you would prefer to leave your property to someone other than your nearest relatives, you need to ensure that it is distributed according to a valid estate plan.

It’s worth pointing out that whether property is distributed through a pour-over will, a regular last will and testament, or the laws of intestate succession, it will need to go through probate. Keeping your trust funding up-to-date is the best way to minimize probate involvement in your estate.

To learn more about pour-over wills in Michigan, contact The Law Office of Suzanne R. Fanning, PLLC to schedule an appointment.

Categories: Estate planning