Pour-Over Wills

Pour-Over Wills: In this video and in the article below, Allison Lee, an attorney with Freewill, discusses Pour Over Wills.

Article: 4 Concepts You May Be Getting Wrong About Pour-Over Wills

Do you know what a “pour-over will” is? This type of will can ensure your assets go where you want them to. But there are many misconceptions about them. Here are the facts.

By Allison L. Lee

If you’ve discussed estate planning with a qualified professional or even casually perused the internet trying to formulate a game plan for putting your affairs in order, you’ve probably come across the concept of “pour-over wills” alongside revocable living trusts.

When written alongside a revocable living trust, a pour-over will ensures that certain unallocated assets are, in the end, accounted for. The assets that haven’t already been transferred to your trust during your lifetime will be transferred (or “poured over” into your trust) after first going through probate, after you pass away. (Probate, for context, is the court-supervised legal process that officially recognizes your will and appoints your personal representative to handle your estate affairs.)

A pour-over will provides a safety net that corrects for imperfections or oversights during the estate planning process. This function gives pour-over wills their popularity. At the same time, they’re often poorly understood and as a result, underutilized or even incorrectly utilized.

Thinking about creating a pour-over will? Here are four key misconceptions and mistakes estate planning professionals often encounter that you should be aware of:

1. Pour-over wills are unnecessary for those who already have a revocable living trust set up. 
   
   It’s common to assume that pour-over wills are unnecessary for people with revocable living trusts. In practice, however, very few people constantly update their trust, and they tend to pass away before finalizing the transfer of all of their assets into their trust. Individuals also frequently forget to include items in these transfers. Pour-over wills address these challenges in a straightforward way.
2. It doesn’t really matter who the personal representative of my estate is, because I plan to fully fund my revocable living trust. 
   
   You might plan to fully fund your revocable living trust, but life can lead to the best plans not being completely executed – a very common occurrence. Let’s say you have a significant digital asset that you forgot to transfer to the trust – such as crypto (where, notably, prices have recently crept back up). Your personal representative will be in charge of overseeing your probate estate, so choosing the right person for the job is still important.
3. If I have a living trust and a pour-over will, I won’t need to make periodic updates to my plan. The pour-over will takes assets left in your name that aren’t accounted for and moves them into your trust after you pass away. Since important possessions you’ve spent your lifetime acquiring are someday going into your trust, be mindful and make sure that your trust is reflective of your up-to-date wishes. The pour-over is indeed a safety net to make sure assets go to your trust, but if your trust is not current, it’s all for naught.
   
   Estate planning professionals recommend a review of your plan every 3-5 years, or whenever there’s a major life change. However, when you have a trust-based plan, you’ll want to consider the implications of your plan each time you acquire a new asset including if you need to transfer it to or specifically account for it in the trust (or, in some cases, if it makes sense to have the trust buy the asset in the first instance). Also, make sure you pour over your assets into the revocable living trust as amended from time to time.
4. There’s no need to address what to do in the event that the living trust isn’t in existence at the time of my passing in my pour-over will.
   
   It’s always a possibility that the disposition of assets into your trust could be invalid or inoperative. To be safe, name “the same beneficiaries as presently provided in the Trust Agreement” as the contingent beneficiaries in your pour-over will. That way you can help ensure that your objectives are realized even if a defect in the trust instrument invalidates the intended transfer.

A pour-over will can be immensely valuable in completing your estate plan without demanding an unrealistic amount of perfection from you as a planner. At the same time, it’s not a panacea. Be thoughtful about where things can go awry with a pour-over will and deliberate about accounting for these potential pitfalls. If you’re mindful of this in your drafting and planning, then you’ve probably got an estate plan you can feel quite confident in.

About the author: Allison L. Lee