A pour-over will is an estate planning document that you would include in your plan if you utilize a living trust as the centerpiece of your estate plan. Before we get into the details, we have to set the stage appropriately with some relevant background information.

Last Will Alternative

People that have not looked into the subject often go forward with a widely embraced misconception. The idea is that a person of relatively ordinary means would have no use for a trust. They have heard that you should definitely use a will to state your final wishes if you are not quite wealthy.

High net worth individuals often do have some estate planning concerns that would definitely not be well served through the execution of a last will. One of them is potential estate tax exposure. The tax carries a 40% rate, and it can be applied on the portion of an estate that exceeds $11.4 million.

Certain types of trusts are used to gain estate tax efficiency. Depending on the family dynamic and the financial profile of the person in question, there can be other objectives that call for the utilization of a trust of some kind.

The trusts that are used by people that essentially want to get the assets out of their own names for estate tax purposes or for some other reason are irrevocable trusts. When you establish this type of trust, generally speaking, you can’t revoke it. For this reason, you are surrendering incidents of ownership.

In addition to irrevocable trusts, there are also revocable living trusts. As the name would indicate, you maintain the power of revocation, so you are not surrendering incidents of ownership. You can dissolve the trust if you ever choose to do so and take back direct personal possession of the property.

Why would you want to use this type of trust as an alternative to a last will as an asset transfer vehicle? Let’s look at some of the reasons why a living trust could be far more effective.

Revocable Living Trust Benefits

A last will cannot be administered by the executor independently. Under state laws, it would be admitted to probate, and the court would supervise the process. There are drawbacks that go along with probate, but they are all avoided when a revocable living trust is utilized.

The trustee is the administrator for living trust, and the duties are similar to that of an executor, but there are some differences. When a living trust is used instead of a will, the trustee would be empowered to distribute assets to the beneficiaries free of the probate process, so the pitfalls are avoided.

Getting back to the subject of control of the assets, if you establish a living trust, you can act as the trustee and the beneficiary while you are alive and well. You name a successor trustee to administer the trust after you are gone, and your heirs would be the successor beneficiaries.

In the trust declaration, you record instructions with regard to the way that you want the assets to be transferred to the beneficiaries after your passing. If you have concerns about a spendthrift, you could allow the trustee to distribute limited assets over an extended period of time.

Incapacity is not uncommon among people that reach an advanced age. You can empower a disability trustee to administer the trust if you ever become unable to make sound decisions.

Pour-Over Will

Now we can get to the point of this blog post. Throughout the course of your life after you have funded the trust, you may acquire additional property that you never convey into the trust. A pour-over will can be added to allow the trust to assume ownership of these assets after your death.

As a result, the property that comprises your estate would ultimately be consolidated, and this makes the estate administration process more streamlined and efficient.

Attend a Free Seminar!

We are holding a number of estate planning seminars around the Cincinnati area in the near future, and we urge you to attend the session that fits into your schedule. There is no charge to attend the semianr, but we do ask that you register in advance, and you can do just that if you click the link for our seminar page.