One of the most important steps when creating a trust is properly funding it. People often transfer some of their most valuable resources into a trust. They may do so as they prepare for retirement or even earlier in life to protect their assets from lawsuits and other risks. The resources held by certain trusts aren’t subject to probate claims or creditor lawsuits. They also won’t generally trigger estate taxes.
In some cases, adults with a trust might assume that they do not need a will because their trust will manage the descent of their resources. However, most people have a variety of assets that they will not include when creating a trust. These assets require a will to ensure they pass to the right people. Some people use a special kind of will, known as a pour-over will, to move additional property into their trusts when they die.
What is a pour-over will?
A pour-over will is a document that effectively instructs the representative of an estate to transfer ownership of someone’s residual assets into their trust. Pour-over wills are often useful for those with a variety of personal property that is not valuable enough to move into the trust during their lifetime. Furniture and other household property, as well as personal possessions, can transfer to a trust after someone’s death with the help of a pour-over will.
There are several benefits to using a pour-over will to move property to a trust. The document can use broad language to address the remainder of someone’s property that they did not include by name elsewhere in their estate planning paperwork. It can also help prevent conflict among beneficiaries who might otherwise fight over specific assets.
The drawbacks to pour-over wills include the requirement of probate court involvement. Unlike assets transferred into a trust before someone’s death, the assets transformed using a pour-over will after their passing could be subject to creditor claims or might increase the likelihood of estate taxes if they are particularly valuable.
Making use of the right tools can help people create a positive legacy for themselves while minimizing technical, financial and practical challenges for their loved ones after they die. Seeking legal guidance when estate planning can be a great way to get started in this regard.