Chances are that you’ve read or heard about the benefits of using trusts to handle your estate planning needs. A living trust can be a great way to accomplish a wide variety of goals, from inheritance distribution to asset protection, and can provide benefits that a will simply cannot match. Too often, however, grantors create their trusts and then assume that their inheritance planning challenges have been met. The problem with that is that few of us ever die without at least some loose ends that can create problems for our surviving heirs. To make your trust more efficient and avoid any unforeseen problems, you should include a pour over will as part of your estate plan.
When Trusts Don’t Cover Everything
As important as trusts can be for ensuring that you avoid probate and get your assets distributed to heirs in an orderly manner, they’re not always foolproof. The fact is that they will only take care of the assets that they own, and those assets are only owned by a trust if you intentionally transfer ownership. On the surface, that would seem to be an ideal setup; you create the trust and transfer all your assets to it, ensuring that it’s fully-funded. You might even think that’s the end of the process – but is it?
The problem many people experience is that they then go about the process of living their lives, secure in the delusion that their assets are all properly protected by the trust. However, how many of those people go on to accumulate more wealth over the course of their lives? How many buy another property, start a business, or open new backing, checking, or investment accounts? More importantly, how many of them acquire those assets without taking the action necessary to ensure that the trust owns them?
If you set up your trust and then fail to give it ownership of assets that you acquire later in life, those assets won’t be managed by the trust when you die. Unfortunately, that can be a real surprise for your heirs if you don’t have a will in place when your life comes to an end. For those assets that are not covered by either a will or your trust, there is only distribution option remaining: the state’s laws on intestate succession. Under the terms of Georgia’s intestacy laws, your assets will be divided up in accordance with statutory requirements rather than as directed by you.
What is a Pour-Over Will?
A pour-over will can be invaluable for dealing with these types of assets. It’s not the typical all-encompassing Last Will and Testament that many families use to manage their estates, but is instead a specific type of will designed to work in collaboration with your trust. The pour-over will is a simple document that instructs your non-trust assets to be transferred into the trust when you pass away. The provisions basically direct that your trust serve as the beneficiary for any assets that are outside the trust’s ownership at your death.
As you might expect, the pour-over will won’t protect assets outside the trust from going through probate. That process may still be needed to formally settle that portion of the estate, in accordance with the established probate process – which means that the ordinary rules of probate will apply. Once that process is complete, however, the assets will be formally transferred to the trust, where they can then be managed by the trustee as directed by the terms laid out in the grantor’s trust document.
Why You Need a Pour-Over Will
In an ideal world, you would never need a pour-over will. Instead, you’d have taken the time to ensure that every asset you own gets properly transferred to your trust. We don’t live in an ideal world, however, and the odds are that at least some of your wealth will be owned in your name when you pass away. That’s not a reflection on your commitment to estate planning or your family’s future; it’s just a simple fact of life that none of us can really avoid. The important thing is that we understand how this can impact our estate planning efforts, and take the right steps to address any potential problems.
Without a pour-over will, you could have assets that end up being distributed to heirs you never intended to recognize in your will. For example, you may have a close relative who’s wanted nothing to do with you for many years. Perhaps you had no intention of including that relative as a beneficiary in your trust. If the law recognizes him as an heir, however, assets that are distributed by the provisions of the intestate laws could end up going to that estranged loved one – regardless of your personal wishes.
To avoid this, everyone who has a trust should also have a pour-over will. You should also review your trust document on a regular basis – preferably at least once each year- and take note of any new assets or properties that you’ve bought since the last review. Get that asset retitled so that the trust takes ownership, and then include a new provision in the trust to ensure that the property is directed to go to the right heir when you die. That will help to ensure that you don’t have loose assets floating around outside your trust where they might be subject to probate and those pesky intestacy laws.
The important thing to remember is that the creation of your trust is never the end of your estate planning efforts. Your life’s path is almost certain to bring you into contact with new asset acquisitions that will need to be added to your trust. At the Fouts Law Group, LLC, our trust and probate experts can help you to make sense of your estate planning needs so that you have the trust and pour over will you need to ensure that your estate settlement is as trouble-free as possible. To learn more about how the right set of estate planning tools can simplify your end-of-life and legacy planning efforts, contact us online or give us a call at (404) 596-7520.
