Protecting Your Assets With a Pour-Over Will

It’s never too soon to look into creating a will to protect your estate. A will can streamline the distribution process of your assets after your death and help your loved ones avoid probate.

One way to do this is to make a pour-over will.

This type of will often goes hand-in-hand with a living trust. It gets its name from the fact that the terms state that your property transfers — or “pours into” — your trust upon your death. From there, it’s distributed to your chosen beneficiaries.

Is a pour-over will the right choice for your estate planning purposes?

This guide will walk you through how it protects your assets, what other options you might have, and how to create a legal pour-over will yourself.

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What’s the Difference Between a Will and a Trust?

 

Before digging deeper into a pour-over will, let’s look into what wills and trusts are. After all, the two work together in this type of asset distribution.

These arrangements are part of estate planning and protect the owner’s assets. You’ll often see a will or a trust, but you can use them in conjunction.

 

How Do Wills Work?

 

When you create a will, you’re building a document that tells who your heirs and beneficiaries are after your death. It spells out where your assets go, who gets to execute your will, and other important decisions.

Wills can include legally binding directions about burial arrangements. They can also detail who becomes the guardian of your minor children and who is in charge of said minor’s assets until they reach a specified age. Then, this person puts those assets into a trust and becomes the trustee.

The will must be signed and witnessed according to the state’s laws to be “wholly legal.” Then, you’ll file it with the probate court. Upon your death, the designated executor carries out your wishes.

Remember that a will is part of the probate court’s public records.

 

Trusts vs. Wills: The Real Differences

 

Trusts are also part of legally arranging for your estate plans. They delineate how your assets will transfer from you (the grantor or trustor) to a trustee. The instructions clarify how the trustee must manage those assets and how they will be distributed to the designated heirs.

Trustees are fiduciaries acting on behalf of and in the best interest of the beneficiaries.

You appoint your trustee as someone you believe will handle your assets as you would. However, trusts are effective as soon as the assets are transferred into them.

They can be living trusts created during your lifetime. Or, they could be testamentary trusts created after your death following the instructions in your will.

 

Revocable vs. Irrevocable Trusts

 

One more key point about trusts:

They can be revocable or irrevocable.

Revocable trusts are handled during the grantor’s lifetime and can be altered or amended. As the grantor, you can be the trustee to reduce your tax burden. When your assets are held in trust, they fall into a different tax bracket.

Money in a trust accumulates interest taxable as income, but the amount in the trust is not taxable.

Revocable trust assets don’t go through probate upon your death but do become part of the taxable estate.

Irrevocable trusts are documents that transfer ownership of assets to a trustee. In this legal agreement, the grantor gives up all ownership rights and control and can’t alter or amend this at any time.

The income from the trust and any interest isn’t included in the taxable income, and the assets are no longer part of the estate. Instead, they will go to the trust beneficiaries at the designated time.

 

Do You Need a Will, an Irrevocable Trust, or a Pour-Over Will?

 

You may wonder why someone would give up control of their assets irrevocably.

There are various reasons, such as too much debt.

For example, a person may feel concerned that all of their estate would go to creditors upon their death. In that situation, they could transfer a portion of their assets to the irrevocable trust.

At that point, it would remain in trust until their death but no longer be part of their estate. Since they wouldn’t technically “own” the assets any longer, the creditors would not be entitled to the funds.

It’s a safety net that covers the grantor and their heirs if they can’t pay off their debt before their death.

You may consider documents like wills and irrevocable trusts to protect your assets. However, you may not have a particular, extreme need for either. In that case, a pour-over will could be the ideal compromise.

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How Does a Pour-Over Will Work?

 

There are other advantages to wills and trusts, and merging the two is often beneficial for you and your heirs. When you do this, the resulting document becomes the pour-over will you’re researching now.

The design of this legal document ensures that, upon death, the grantor’s assets move from their account to a trust they’ve already established. It works hand-in-hand with a trust.

Because trusts help the beneficiaries avoid probate, they’re wise estate planning documents. The estate is settled, the assets are funded into the trust, and then they’re distributed as per the grantor’s instructions.

Now, let’s discuss the pros and cons of pour-over wills.

 

Advantages of Pour-Over Wills

 

Pour-over wills step in to cover any assets not included in the trust before the grantor passes. Any remaining assets then automatically become part of the trust. They still have to go through a probate process, but it’s usually smoother because everything is already accounted for.

Per the pour-over will, all assets that weren’t included, either purposely or inadvertently, would be covered.

What happens without these explicit instructions?

The distribution of the remaining assets depends on the laws of intestate succession. This would be according to the state law where the death occurred.

With a pour-over will, the document is read and executed, and all assets are now included in the estate through the terms of the trust.

This will is another barrier protecting your decisions from legal issues. You aren’t around to fight them, so it’s a smart idea to ensure you account for as many potential problems as possible.

The pour-over will allows you to stipulate what happens to your assets if the trust is invalid or unfunded at the time of the grantor’s death.

And, unlike a basic will, pour-over wills ensure you and your beneficiaries have privacy. Because the pour-over will puts your assets into the trust, none of it is public record.

 

Drawbacks of Pour-Over Wills

 

When a pour-over will is executed, it still abides by the laws of a will. In that regard, any property not included in the trust has to go through a probate proceeding before it can “pour over” into a trust account.

This can delay distribution of the assets for months after the grantor’s death. However, if the grantor was able to transfer property to the living trust in time, it may only take a few weeks for full distribution to occur.

A pour-over will is a great estate planning tool.

However, it’s important to have a close relationship with your law office to keep your trust’s terms updated as often as possible. But, of course, you can skip the expensive lawyer’s fees by creating this document online and adjusting the terms yourself, as long as you do so legally.

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Are Pour-Over Wills Legal?

 

Pour-over wills have one beneficiary:

The living trust.

The trust then distributes those assets to various heirs and organizations. The pour-over will must abide by certain guidelines to be legally binding.

An estate planning lawyer can give you the specifics of your particular state’s rules. But in general, some basic structures make this document simple to design.

 

How To Create a Pour-Over Will

 

Every will includes certain aspects that show it contains the willing and legal wishes of the writer, referred to as the testator.

In your pour-over will, you must declare that you have the capacity to know what you’re writing. The will must be in written format, signed by you, and witnessed.

Sounds pretty basic, right?

Indeed, wills don’t have to be overly complicated. Remember, they date back to Ancient Grecian and Roman eras. So they don’t have to be complex, but they do have to abide by today’s legal standards.

The Uniform Testamentary Additions to Trust Act (UTATA) adds a new layer to a pour-over will.

Your document has to indicate that you planned to incorporate the trust. The trust must recognize the pour-over will and be executed before or along with the will. This way, each document points back to the other as valid and part of your plans.

As long as these factors are in your document and you feel comfortable doing so, you can use online programs like LawAssure to design your pour-over will.

 

How LawAssure Works

 

LawAssure is a legal assistance service. In short, it lets you protect yourself and any personal and business interests without the expense of an attorney.

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You can create important legal documents like wills, power of attorneys, and healthcare directives for free. If you own a business, you can also design your own non-disclosure and service agreements, job proposals, contracts, and more.

Because you can store your documents, they’re easily editable when you want to amend your pour-over will or share them with others.

The process is straightforward. So you don’t need a legal background to create your legal documents, and you’re not paying anyone by the hour to write and file your forms.

Each form is customizable as you answer questions that “fill in the blanks” of the final document. Save, edit, and amend as often as you want, and share them with your witness to ensure they’re legally binding.

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Other Types of Estate Planning

 

A pour-over will mixes a will and trust and isn’t the only type of estate planning available. Many other forms might work better for your situation.

Because they’re all wills, you can use LawAssure to create your own legally binding document.

Below are summaries of some of the most common types of wills.

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Living Will

 

Living wills are documents that spell out how you want your end-of-life medical care handled. We don’t want to consider this option, but accidents and illnesses happen.

This type typically applies when you’re terminally ill or seriously injured. A living will lets you continue to control your life by listing things like resuscitation orders and organ donor wishes.

 

Simple Will

 

Most of us don’t have millions of dollars in assets to pass out or a large estate to distribute. If you don’t have clauses and stipulations determining who gets what, you may be able to use a simple will.

In this document, you state who gets possession of your assets. You’ll also decide who’s appointed the guardian of your minor children and pets and who will execute your will.

 

Joint Will

 

A joint will does its job in a unique scenario when you want to transfer assets to another person. More specifically, when you’re in a partnership with someone, whether it’s your spouse or not.

In the document, you each sign it and agree that upon one party’s death, the other person inherits the entire estate. Upon the second decedent, a mutually agreed upon beneficiary receives the assets.

 

Holographic and Deathbed Wills

 

A holographic will is a type of Last Will and Testament written and signed by hand. These were the original wills, but people still use them as a “last resort” protection. For instance, if a person is in a life-threatening situation, they may pen a holographic will if they don’t think they’ll make it home.

These are similar to deathbed wills, created when a person is near death due to an illness or injury.

The creation of holographic and deathbed wills happens under the pressure of time and stress. They also usually won’t include everything. Anything left out goes through the courts to decide what happens to it.

Holographic and deathbed wills are almost always handwritten, and not all states accept these.

Remember: you have the opportunity to make a free will with LawAssure. So consider taking advantage of it now to ease the pressure of a last-minute list of wishes.

 

Nuncupative Will

 

The opposite of holographic, a nuncupative will is an oral declaration of your wishes. It’s necessary when the person making the will is about to pass away and doesn’t have the time or resources to write a document.

The laws regarding nuncupative wills vary by state — if they’re recognized. Most states that allow this type of estate planning require at least three witnesses to verify the testator’s wishes.

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Conclusion

 

Everyone’s situation is different. That’s why there are so many things to consider before you decide which type of document to use when planning your last wishes.

An estate planning attorney can give you the state’s laws on complicated things; to name a few:

• Joint real estate
• Estate taxes
• Other confusing legalities

But what if you have a free consultation with a law firm and decide that what you need is easily done with a legal document?

Easy — Selfgood’s LawAssure service is available for you.

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