You likely executed a Last Will and Testament as the foundation of your initial estate plan, relying on that Will to distribute your estate assets. Since that time, you may have decided to establish a trust agreement to serve as your primary estate planning document, now relying on that trust to distribute your assets. Nevertheless, you should still have a pour over Will in place. To better explain, the Indianapolis estate planning attorneys at Frank & Kraft discuss why you still need a pour over Will if you are relying on a trust to distribute your estate assets.
Last Will and Testament Basics
Most people are familiar with the basic concept of a Last Will and Testament. A Will is a legal document that allows the Testator (the creator of the Will) to make specific and/or general gifts of estate assets to beneficiaries. Those gifts will be honored at the time of the Testator’s death. A well drafted Will can distribute the Testator’s entire estate. The Testator also names someone to be the Executor of the estate in a Will. The Executor is the individual who is responsible for overseeing the probate of the estate following the death of the decedent. Finally, a Will is the only place where an individual may nominate a Guardian for minor children in the event a Guardian is ever needed.
Trust Basics
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by 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. Like a Will, a trust can be used to distribute your estate assets after your death. In fact, there are several advantages to using a trust to do so, such as:
- Probate avoidance. Assets held in a trust are not required to go through the probate process. Therefore, those assets will bypass probate and can pass directly to beneficiaries much faster.
- Privacy. Because a Will must go through the probate process, the terms of that Will become public record when it is submitted for probate. The terms of a trust agreement, however, remain private because it does not go through probate.
- Protecting the inheritance of a minor child. A minor child cannot inherit directly from your estate. Therefore, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority.
- Incapacity planning. The terms of a Will do not become relevant until the death of the Testator; however, the terms of a trust can apply in the event of incapacity as well as death.
Why You Need a Pour Over Will
A common mistake is to assume that a Will is no longer necessary once you have a trust in place. Because your estate may have some loose ends after your death that can only be taken care of through a Will, however, you should not make that assumption. Instead, a “Pour Over Will” is usually included in an estate plan when a revocable living trust is used as the primary distribution tool.
You may indeed manage to transfer all of your most valuable assets into your trust prior to your death; however, you will almost inevitably leave behind some assets that fail to make it into the trust. Personal items, vehicles, less valuable assets, bank accounts used for day-to-day banking, and even valuable assets purchased just prior to your death are all examples of assets that might be inadvertently left out of your revocable living trust at the time of your death. If they remain unaccounted for, they will create an intestate estate that requires probate – something you are likely trying to avoid by using a trust.
A Pour Over Will can prevent that possibility by directing all assets not already transferred into the trust to be “poured over” into the trust after your death. In essence, a Pour-Over Will serves as a “catch-all” tool that backs up your primary revocable living trust.
Contact Indianapolis Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about including a pour over Will in your estate plan, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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