Wednesday, July 24, 2013
Incorporate a Pourover Will in Your Living Trust
When preparing your estate planning documents, you may think it’s a choice between a will and a living trust. Not necessarily, though. If you are executing a living trust, you should include a will in your estate plan. A pourover will, that is.
A pourover will is called as such because it is used to “pour over” the assets to the living trust. The only beneficiary in a pourover will is the trust itself. The pourover will does this to guarantee that probate assets will be included in the transfer process.
The pourover will covers only probate assets. These are assets that are not in a trust, joint tenancy, inherited by a surviving spouse and not in an IRA or 401K. These are usually in the name of the decedent only. When the testator passes away, the assets will be transferred to the living trust. The representative simply invokes a declaration under California Probate Code section 13100. The process does not go through probate if the value of the assets in the pourover will is below $150,000.
Besides the transfer of assets to the living trust, a pourover will also allocate tangible property to the decedent’s beneficiaries. The pourover will also stipulates for an executor and a guardian of the children are still of minor age.
Executing aliving trust without a pourover will may have dire consequences for the beneficiaries. If someone dies with a living trust, but without a pourover will, that person might end up with two distribution plans: one plan for assets under the trust and the other one under probate. This will not be a big problem if the beneficiaries of the trust are the decedent’s closest kin, who will also be the beneficiaries if the rules of intestacy were to be applied. However, if the beneficiaries of the living trust are not the decedent’s closest kin, then a problem in distribution will ensue
Why do people neglect to transfer all of their assets in the living trust while they are still alive? The reasons may be human error, negligence or just plain putting it off for another day. It is also possible that the testator does not fully understand how a living trust is set up. (This is precisely the reason why regular consultation with your estate planning lawyer is essential in your estate planning activities.) This possible failure of the testator to transfer all of his assets in the living trust makes it necessary for him to execute the pourover will.
Combining a living trust and a pourover will is a good way to smoothly transfer your assets to your beneficiaries. You transfer your assets t your living trust when you are still alive. Assets that you may have missed out are included in your pourover will. The assets then under both the living trust and the pourover will (assuming the total value is below $150,000.00) will then be distributed to your beneficiaries – all without going through probate.
I help people protect their families through affordable, personalized estate planning. Tompkins-Law.com I am in solo practice in Orange County, California where I focus on estate planning, family trusts, living trusts, wills, corporations and business succession planning. I speak Spanish and serve the latino community. Fideicomisos-Testamentos.com