Understanding Pour-over Wills and Living Trusts
People can place their money or property in a living trust on behalf of a beneficiary while they’re still alive, which they often do to avoid probate and decide what happens to their assets. Even though estate plans are designed in part to help people protect their assets for future generations, only 33% of Americans have made one. When someone creates a living trust, they often pair it with a pour-over will.
What Are Living Trusts?
A living trust is a type of legal arrangement that a person makes while they’re alive to protect their assets. This document also allows the individual to determine how the money will be distributed once they die. This estate planning tool is designed to limit the types of assets that are subject to probate.
All details about the arrangement are written out in the trust document. The grantor is responsible for appointing someone to be the trustee, which is the person or entity that controls the distribution of assets after the grantor’s death. If you’re thinking of making a living trust, one of our New Jersey estate planning lawyers can help.
Before assets are placed in a trust, they have to be re-titled in its name. Many different types of assets can be transferred to a living trust and can include everything from financial accounts and real estate to collectibles.
Living trusts can be either revocable or irrevocable. Revocable trusts can be altered at any time by the grantor. In comparison, it is generally not possible to change an irrevocable trust without first obtaining approval from all beneficiaries or the court.
How a Pour-over Will Works
A pour-over will is a type of legal document that is paired with an existing trust. It ensures that any assets that the grantor didn’t place into their trust while they were alive will be transferred immediately after death. The trust has already been established, which is why this transfer can be made without delay. Grantors can use pour-over wills with irrevocable and revocable trusts.
When a person dies, their estate is often taken through the probate process, which can be time-consuming. Living trusts make it possible to effectively avoid this process. The pour-over will covers assets that were either purposely or accidentally left out of the trust. While these wills must be taken through probate, the process often doesn’t take as long as it otherwise would have.
If a person dies without creating a will that explicitly states what to do with the assets they didn’t place in their trust, the remaining funds or property would fall under intestate succession laws. In this situation, the jurisdiction the decedent lived in at the time of their death determines what happens to these assets.
Even if the decedent had no intention to include someone in their will, the property could be distributed to that person. The pour-over will directs that these assets be sent to the trust before being distributed according to the grantor’s guidelines. Legal issues can be less burdensome with a pour-over will in place.
Characteristics of a Pour-over Will
While a standard will is part of the public record, trusts and pour-over wills are kept private. When someone creates a pour-over will for their living trust, the transfer of assets that occurs upon the grantor’s death isn’t made public. The distribution of these assets to beneficiaries is also kept private.
Once assets are transferred to a living trust, the whole estate is directed by the instructions in a single document. People who have minor children can name a guardian in the pour-over will.
Pour-over Wills and Probate
While many people use a pour-over will to provide more protection for their assets, it isn’t possible to avoid probate altogether. The assets that a grantor places in the living trust are protected from probate; however, any assets in the pour-over are subject to the process.
While this can delay the full distribution of assets for a short period, the money and property that are already in the trust will be distributed immediately. There’s also the potential for delays. If probate is delayed because of a claim or some other issue, the living trust might need to remain open until probate is finished.
Pour-over wills are addendums to living trusts that determine what happens to assets that aren’t placed in the trust before death. If you’re in the process of creating an estate plan, call our New Jersey estate planning lawyer today at (201) 996-1200 to schedule an appointment.