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What is a Pour-Over Will?

What is a Pour-Over Will?Wikipedia gives this definition of a pour-over will: “A pour-over will is a testamentary device wherein the writer of a will creates a trust, and decrees in the will that the property in his or her estate at the time of his or her death shall be distributed to the Trustee of the trust.”

Huh?

Put simply, a pour-over will is a type of will you need to create if you have a living trust. With a living trust, your assets are held by a trust, rather than by you, although as the named trustee you have complete control. Living trusts were all the rage some years back, and they’re still useful in some cases.

People often think that if they have a living trust they don’t need a will. But that is a big mistake you don’t want to make.

The problem with a living trust is that every single asset in your name has to be transferred into the trust when you create it. And every asset you acquire after you create the trust needs to be held in the trust’s name. But in the real world, things are often missed.

People forget to transfer every asset, so when they pass away, these assets don’t simply pass to the successor trustee the way they’re supposed to.  That’s where the pour-over will comes in.

The will provides direction to “pour over” (hence the name) into your trust any probatable asset that is in your name, outside of the trust, at the time of death. This is important because, without this will, those assets will pass to your heirs according to state law—so your long-estranged husband or child might get an asset you’d prefer goes to someone else.

Unfortunately, because it’s a will, if you do have these assets in your name, your estate will have to be probated—one of the main things people who create a living trust think they’re avoiding.

So it’s not only important to create a pour-over will, it’s important to sit down with your documents once each year and be sure you haven’t acquired any property or other assets that are not in the trust. If there are, move them now.

If you would like more information about estate planning in South Florida, contact the Law Office of Gary Landau for a FREE legal consultation at 954-979-6566 or by email. Attorney Gary Landau personally returns all calls and emails to him.

Is It Necessary to Try to Avoid Probate?

Clients sometimes come to me hoping to set up their estate in a way that will avoid probate after their death. Occasionally, especially if they have limited assets, this can easily be done, such as by created a lady bird deed for a home that adds another person to the deed. Often, though, especially with more complex assets, this would typically involve creating  a revocable living trust. While there are some people who can benefit from doing this, usually people’s fears of probate are way overblown.

the pros and cons of avoiding probate

Here are the major concerns I typically hear and why you shouldn’t worry about them:

  1. Taxes. While there is a federal  estate tax on the books, it applies only to estates worth more than $5 million. If your assets don’t total that amount, your heirs will not pay taxes on what they inherit from you.
  2. Privacy. It is true that wills deposited with the court are public property while trusts don’t need to be filed. In theory, then, anyone can see who you have left your estate to. In reality, though, unless you are a famous person it’s unlikely anyone is going to bother trudging to the courthouse to peek at your file.
  3. Fees. There are costs involved with a probate–court costs, attorney fees, and the like. But setting up a revocable living trust also has fees attached to it, and they are much more than the cost of drafting a will.

Here are the biggest downsides to trying to avoid probate with a revocable living trust:

  1. Documentation. The original trust is not filed with the court, and so can easily be lost over the years. Without that document, proving a person is the successor trustee (and entitled to the deceased person’s assets) is impossible. I have had several clients over the years who swear they are the successor trustee, but since the original trust had been drafted decades earlier and no one could find it they were never able to locate it.
  2. Trust not properly “funded.” After creating the trust, and after each asset purchase thereafter, the trustee’s home, cars, bank accounts, stocks and other assets must be placed into the trust. So many times a trustee passes away and one or more assets is discovered to have remained in their own name. That asset can only be disposed of by–you guessed it–starting a probate.

This is not to say no one should create a revocable living trust. But in my experience most people should instead create a valid will (with an attorney, so there are no mistakes that can’t be corrected after you pass on) and not worry about their heirs needing to go through the process of probate.

For a FREE consultation about a probate or a will, contact the Law Office of Gary M. Landau by email or call 954-979-6566. Attorney Gary Landau personally returns all calls to him.