Most people establishing an estate plan choose between using a trust or a will as their primary testamentary instrument. A standard will allows the testator to name candidates to serve as their personal representatives. They can identify their beneficiaries and allocate specific resources to them.
Wills can be effective for those with basic legacy goals and straightforward family circumstances. Other people may need more structure to their estate plans. They may choose to establish and fund a trust. Sometimes, those establishing trusts also create wills.
They might create a specific type of will known as a pour-over will. What separates a pour-over will from a standard will used to provide testamentary instructions?
Pour-over wills can help fund trusts
Generally speaking, the beneficiaries of a standard will are often individuals or sometimes charitable organizations. However, the main recipients of assets addressed in a pour-over will may be the trust previously established by the testator.
A pour-over will can address specific assets or any residual property in the estate. Some of it may go to specific beneficiaries, but much of it may transfer to the trust created by the testator. Pour-over wills are beneficial in scenarios where individuals do not want to give up direct ownership of certain assets while they are alive but do not want to directly transfer those resources to someone else without the support and intervention of a trustee.
There are certain drawbacks to the use of the pour-over will. For example, the assets transferred to the trust have to pass through probate court. If the estate already contains significant, high-value contents, the assets transferred in a pour-over will could increase the value of the estate to a point where it is vulnerable to estate taxes. If the estate must assume responsibility for the decedent’s personal debts, the assets that pass through probate court are potentially vulnerable to creditor claims.
Learning more about pour-over wills and probate rules can help people determine whether transferring assets to the trust during the probate process might be the best option in their situation. Testators who make use of the right documents can enhance their protection and the strength of their estate plans.