Some people draft simple wills as the sole testamentary instruments used for their estate plans. Other people who have complex family circumstances, medical challenges or sizable personal holdings may choose to establish trusts. Many people take steps to fund living trusts, in particular, as they prepare for retirement. The goal is to protect themselves and their resources when they are vulnerable and living on a fixed income later in life. The trust can also serve as the primary testamentary instrument for the individual’s estate plan as well.
In some cases, people creating or reviewing estate plans that include trusts may want to draft pour-over wills as a way of limiting conflict and preventing oversights related to personal resources.
What is a pour-over will?
Traditional wills include specific beneficiary designations and other terms intended to guide the distribution of an individual’s property and support their loved ones after their passing. A pour-over will is different.
It includes language that requires the transfer of their remaining assets to the trust that the testator previously established. A pour-over will allows any remaining property not already used to fund the trust or otherwise allocated to specific beneficiaries to transfer directly to the trust during estate administration.
The benefits and drawbacks of pour-over wills
Every estate planning tool offers certain benefits and has practical limitations that the testator must consider carefully. Pour-over wills help prevent scenarios in which people overlook certain resources, such as personal property, when establishing their estate plans.
Those who do not address those remaining assets may unintentionally trigger conflict among their beneficiaries. Loved ones may end up fighting over their residuary estate. Assets transferred to a trust are subject to the management and oversight of a trustee. People can arrange for the long-term support of loved ones and can prevent abuses of inherited resources.
The drawbacks of pour-over wills include the inclusion of the transferred assets in the probated estate. They can contribute to the overall value of the estate, which can affect estate tax liability or make them vulnerable to creditor claims.
Discussing estate planning goals and current documents with a skilled legal team can help testators expand their estate plans to include the best possible legal instruments. Pour-over wills can be useful for people who want to use trusts to manage the majority of their property after they pass.