The trust document
A pour-over will is normally created in combination with a trust agreement. An experienced estate planning lawyer can explain how these documents work and the pros and cons of each document. A trust agreement is used by a senior or the person planning his/her estate. The creator of the trust places assets such as bank accounts into the trust to be used for a named beneficiary, often a spouse, according to the terms of the trust.
The pour-over will
The pour-over will is essentially a catch-all. It works with the trust document. Any assets of the settlor of the trust that are not in the trust when the settlor dies are put into the trust after death. In this way, the trustee for the trust can manage all of the decedent’s assets – unless the decedent transfers specific assets in other ways.
Distribution of the pour-over assets
When the settlor creates the original trust, he/she often provides that on the death of the settlor, the beneficiaries of the trust will receive their fair share. If there is a pour-over will, the beneficiaries of the will also get any assets under the control of the pour-over will. Without the pour-over provision, the assets not in the trust would go to the beneficiaries after the appointment of an executor. And after, the executor complies will all the legal requirements such as paying off any creditors. If there is no will, the assets not in a trust are under the control of the Florida intestate laws. These laws provide for the distribution of assets when there is no will.
Revocable versus irrevocable trusts
If the original trust is revocable, then the settlor can change the terms of the trust at any time. Otherwise, the trust is irrevocable. The settlor/grantor cannot change the terms of an irrevocable trust.
In most trust and pour-over will estate planning packages, the trust is a revocable trust.
A common trust and pour-over will example
Pour-over wills are often used by spouses with children. In a typical example, each spouse prepares a revocable trust which names the other spouse as the beneficiary of the trust/ The spouse is also the trustee. The spouses also prepare wills which each have a pour-over will provision that provides that any assets in possession of the spouse who dies first will go to the existing trust of the survivor.
The first spouse dies
In the example, the spouses could place their homes and bank accounts into the revocable trust. If the husband has a vehicle in her own name and dies first, the pour-over will catch the vehicle and transfer it to the existing trust in the name of the wife. In this way, the wife (as trustee) can use the vehicle.
The second spouse dies
When the wife dies, then all of the assets that she has including any she acquired since her husband passed away, would also be distributed through her pour-over will to her trust. A successor trustee will handle the trust. The successor will likely then distribute the assets to the couple’s children.
Advantages of pour-over wills
One of the initial advantages is that the extra assets, the ones that are not part of the initial trust, do not need to go through probate. Essentially, all the grantors will do is transfer the assets to the new trust.
Pour-over wills are very simple – even though they sound complex. The executor of the will does need to probate the will itself. Normally, there is not a danger of a contest because the spouse is often the recipient. The executor does not need to collect and distribute the assets. Instead, the trustee takes possession of the assets.
Pour-over will make sure the decedents transfer everything they own including anything new they have since the creation of the trust.
Trusts are private. Wills are public. Since the assets under the control of the pour-over provision go to the trust, nobody can see a record of your assets and a record of which heirs are getting the assets. The public also cannot see the share each heir gets.
Some of the disadvantages of a pour-over will
The assets that go through the trust do not need to go through probate. The pour-over assets do need to go through probate. The main problem here is one of time. Until there is the probate of the will, the assets are essentially in limbo - on hold. They are not under anyone’s control. Probate is normally fairly quick but if there is a contest, for example, a child says the first spouse to die had dementia at the creation of the will, the distribution of the assets is subject to delay until the court decides on the will's validity.
There are other ways to avoid having to wait for the assets to go through probate. One is to title the assets in the name of both the husband and the wife.
The successor trustee
In many cases, a spouse is an original trustee. On the death of the second spouse, the successor trustee takes over the duties of managing the trust and distribution of the trust assets. The original trust document should always identify a successor trustee – such as a child.