Understanding Pour-Over Wills: A Key Part of Your Estate Plan

A pour-over will is a special type of will designed to work alongside a revocable living trust. It acts as a safety net, catching any assets that weren’t placed in the trust during your lifetime and “pouring” them into the trust after you pass away. This strategy helps ensure your estate is distributed according to your wishes—even if you missed a few things while setting up your trust.

Think of the pour-over will as a safety net for a person who didn’t get around to placing all of their assets into the trust before they died. It is also a good tool to avoid the intestate rules that come into play when someone dies without a valid will. Even if assets were not specifically part of the living trust, they can be moved into the living trust after the death of the grantor.

How does the pour-over will work? When the estate plan is created, the grantor may designate certain assets to be titled in the name of a living trust established to own the assets which will pass to designated beneficiaries of the trust after the grantor dies. Assets owned in a trust are outside of the estate and don’t go through probate.

Why Might You Need a Pour-Over Will?

It’s more common than you might think for people to forget to transfer all of their assets into a living trust. A pour-over will is useful in these situations. Without it, any assets not titled in the name of the trust may be subject to state intestacy laws, meaning the court could distribute them based on a default legal formula rather than your personal wishes.

This tool is often recommended by estate planning attorneys as part of a comprehensive estate plan. A pour-over will helps to streamline asset distribution, maintain privacy, and provide peace of mind.

How Does a Pour-Over Will Work?

When you create a living trust, you typically re-title certain assets—like bank accounts or real estate—so the trust owns them. These trust-owned assets avoid probate and are distributed to your chosen beneficiaries directly by the trustee.

However, not all assets can be or are placed into a trust. Some, like IRAs or other retirement accounts, pass directly to beneficiaries through a designation form, and others might be overlooked or acquired after the trust is created.

That’s where a pour-over will comes in. It directs any remaining, non-trust assets to be transferred into your living trust upon your death. The assets are then distributed according to the trust terms, even if they weren’t specifically listed in it during your lifetime.

Real-Life Example of a Pour-Over Will

Imagine Betty creates a living trust and diligently moves her assets into it, naming her husband and sister as beneficiaries. However, she forgets about a pension account from a job she held decades ago. Because she included a pour-over will in her estate plan, that pension is still caught and transferred into her trust, where it’s distributed to her intended heirs. Without the pour-over provision, that asset could have been distributed under default probate laws.

Benefits of Using a Pour-Over Will

Using a pour-over will with a living trust can offer several important advantages:

• Completeness: Ensures all assets—especially those forgotten or newly acquired—are covered.
• Simplified estate management: Your assets ultimately end up under one legal structure, the trust.
• Privacy: Trusts are private documents, unlike wills which become public through probate.
• Guardian designation: Pour-over wills allow you to name a guardian for minor children, which a trust alone cannot do.

Potential Drawbacks to Consider

Pour-over wills are not without downsides. For example:

• Probate is still required: Unlike assets already in a trust, those that “pour over” through the will must go through probate before being transferred.
• Delays: The probate process can delay the administration of the trust until the assets officially transfer.
• State laws vary: Each state has different rules around how pour-over wills are handled, so it’s crucial to consult with an experienced estate planning attorney.

Is a Pour-Over Will Right for You?

If you have or are considering a living trust, a pour-over will is worth discussing with a qualified estate planning attorney. It’s a simple way to add an extra layer of protection and ensure that all your assets, even those you might overlook, are handled according to your wishes.

Want to learn more? Read the full NerdWallet article: What Is a Pour-Over Will and How Does It Work?

Reference: Bankrate (April 20, 2022) “Do you need a pour-over will in your estate plan?”