Although most people start with a Last Will and Testament when they create their initial estate plan, it is not uncommon to add to that Will as a family and/or estate grows. In fact, many people eventually choose to use a trust agreement as the primary method for distributing their estate after they pass away because of the numerous advantages a trust offers. If you choose to use a trust to distribute your estate, the Los Angeles attorneys at Schomer Estate & Wealth Advisors explain why you should also keep a Pour-Over Will in place.
What Is a Last Will and Testament?
A Will is a legal document that allows the Testator (the person creating the Will) to make specific and/or general gifts of estate assets to a variety of beneficiaries. At the time of the Testator’s death, the law requires that those gifts be honored. A Will can distribute the Testator’s entire estate.
What Is a Trust?
A trust is a relationship whereby assets originally owned by one party is held by a Trustee for the benefit of third-party or parties. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to the Trustee. All trusts are first divided into one of two categories – testamentary or living trusts. A testamentary trust is a trust that arises upon the death of the Settlor, and which is activated through a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place. A trust can also be used to distribute your entire estate after your death. Among the many benefits to using a trust are:
- Avoiding probate. Unlike assets distributed via a Will, assets held in a trust are not required to go through the probate process before they can be distributed to the beneficiaries.
- Incapacity planning. A Will is only applicable upon the death of the Testator, A trust, however, can be used to protect assets and loved ones in the event of incapacity as well.
- Privacy. The terms of a Will become public record when it is submitted for probate. Conversely, the terms of a trust agreement remain private because it does not go through probate.
- Protecting the inheritance of a minor child. A minor child cannot legally inherit directly from your estate, making a Will a poor choice to use when assets are designated for minor children. A trust, however, allows you to decide who will manage your child’s inheritance until he/she reaches the age of majority.
Why Is a Pour-Over Will Necessary If You Have a Trust?
One common misconception is assuming that a Will becomes obsolete once a trust is established. It is crucial to recognize that certain aspects of your estate may still necessitate attention through a Will after your passing. To address potential loose ends, a “Pour Over Will” is typically incorporated into an estate plan when relying on a revocable living trust for primary asset distribution.
While you may successfully transfer your most significant assets into the trust before you pass away, there is always a likelihood of overlooking some assets. Personal items, vehicles, less valuable holdings, day-to-day banking accounts, and even valuable assets acquired shortly before death might inadvertently remain outside the trust. These unaccounted-for assets could lead to an intestate estate, triggering the need to probate your estate, precisely what you hoped to avoid by utilizing a trust.
To mitigate this risk, a Pour-Over Will can be instrumental. It instructs that all assets not previously moved into the trust be “poured over” into the trust posthumously. Essentially, the Pour-Over Will functions as a comprehensive tool that supplements your primary revocable living trust.
Do You Need to Create a Pour-Over Will?
For more information, please join us for an upcoming FREE seminar. If you need to get started creating a Pour-Over Will, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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