Do You Need a Pour Over Will?
A pour over Will is an important estate planning document. A Last Will and Testament (“Will”) is a legal document that specifies, in writing, what you want to happen to your assets upon your death, which assets you want to leave to whom, who you want to manage those assets, and any other “restrictions” you may want to place on the funds or your beneficiaries.
(Without a Will, the law (EPTL 4-1.1) determines what will happen to your assets. This is called intestacy. Your assets will pass to your heirs in accordance with these statutes. Sometimes, these rules are in line with your wishes, and other times not. With intestay, the decision is made for you instead of by you. The rulemakers have decided what they think the majority of people in varying circumstances would want to happen to their money when they pass away.)
For those of us who choose to execute Wills, sometimes Wills are just one piece of the overall estate plan. There are times when you may need a “Pour Over Will”
What is a Pour Over Will?
A pour-over will is a Will that is used together with a trust document. The trust, at times, becomes your primary vehicle for disposing of your assets and choosing your fiduciaries.
The purpose of the Pour Over Will is to direct that all assets that remain in your individual name that do not pass by operation law then go to your Trust and be disposed of in accordance with the terms of the Trust. Indeed, a Pour Over Will is highly recommended as a catch-all mechanism for any assets that are not funded into the trust.
For example, Sally created a Revocable Trust because she wanted her heirs to get their assets quickly. She put her house and brokerage account into the Trust. She also designated her Trust as the beneficiary of her IRA. However, Sally did not transfer her checking into the Trust. When died, she had $100,000 in her checking account. With a Pour Over Will, Sally was able to have the $100,000 allocated to her Revocable Trust and, after probate, was able to have the $100,000 distributed in accordance with the Terms of her Trust.
Without the Pour Over Will, the $100,000 would pass by intestacy, which, may not be the result that Sally was looking for.
Why do you Need a Pour Over Will?
Assets can remain outside the trust for a variety of reasons . For example:
- You forgot to transfer an account
- You were not able to transfer the account before death
- You acquired assets after you set up the Trust but did not place them into the Trust
- You inherited assets and the manner in which you originally inherited them did not direct them to go to your Trust.
By having a pour-over will, the assets that remain in your individual name will be transferred to your trust upon your death, through the pour-over will. They will “pour-over” into your trust. These assets will be managed by your trustee and governed by the provisions of your trust. The pour-over will is executed with the same formalities as other wills.
Another benefit to having a pour-over will is that if there are assets, not transferred (funded) into your trust, you can still get the benefit of the plan set out in your trust for your beneficiaries as opposed to the assets passing without a will, in accordance with the intestacy rules. The intestacy rules may direct that your assets be distributed to beneficiaries who differ from those listed in your trust and even more, these beneficiaries (heirs) may be relatives you would never have meant to leave your assets to.
What if you Do not Have a POW?
If you do not have a pour-over will, any assets in your individual name at the time of your death will be subject to an administration proceeding and the intestacy laws. Those assets will be distributed to your next of kin, in accordance with the guidelines set forth in the statute. The distribution schedule set out under the default rules may not be what you want.
For example, you have three (3) children and all are in agreement that all of your assets should pass to 1 of the children because that one child needs those assets more. If you create a Trust designating your 1 child as the beneficiary but then fail to fully fund the Trust, then, in the absence of a pour over Will, the assets not in your trust will be distributed evenly to the three children, which will be contrary to your wishes.
We can help you plan your estate and ensure that your pour over will is in accordance with your wishes.
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