If one of your goals in estate planning is to avoid probate through a revocable living trust, you should also have a "pour over" will. Pour over wills allow certain property that passes through your will at your death to be poured into (or transferred) to a trust. At that point, the property is distributed to your trust beneficiaries.
A revocable living trust only governs the assets that have been transferred under the Trust Agreement. Any assets that are not funded into the trust during someone's life will have to go to probate and administered by the person's will. Most estate planning attorneys believe that handling all of your assets with one document, a trust agreement, is easier than trying to handling the estate through two processes (through both a probate administration and a private trust administration). There are, in fact, several advantages to creating a pour over will. When all of your assets are controlled by one document, there is less room for confusion. Also, a pour over will takes care of those assets that you may have neglected to transfer to the trust, before your death.
Another advantage is the privacy that you can maintain with the trust that a simply will does not provide. Wills become public record with the probate court, which means they are available to everyone who is interested in looking at them. Using a pour over will to transfer your assets to a trust keeps the details of your assets and your beneficiaries private.
The biggest disadvantage to using a pour over will is that the property must still pass through probate. Therefore, the distribution of any property headed toward the trust could be delayed in probate before it can be distributed to the trust. This could take months. On the other hand, if the property is passed on through a living trust directly, without first going through a pour over will, the property are likely to receive their inheritances within a few weeks. A pour over will should be a "backup" method of funding a trust; it is much more efficient to have the trustor(s) transfer assets into the trust while they are still living in order to avoid probate entirely.
Generally, most of your assets will not pass through the pour over will. Instead, if you have a proper estate plan, your most valuable assets will already be transferred to a living trust. Only the property that remains, minor assets and anything unintentionally omitted from the trust, will pass under the terms of the will. As such, the probate procedure will likely be simpler and less time consuming, based on the size of the probate estate.
Just like any other type of will, a pour over will must nominate an executor to wrap up the estate after your death. The duties of the executor often include collecting the assets, satisfying debts and paying taxes, then ultimately distributing the assets to the beneficiaries. These tasks are much simpler for the executor of a pour over will. The only duty is to take all of the assets identified in the pour over will and transfer them to the trust. Generally, the executor of a pour over will is the same person or entity that is the trustee of the trust to which the assets are transferred - that makes it extremely easy for the same person to administer the entire estate.
A trustee is a vital part of every trust. The trustee is the person who must ensure that the terms of your trust are followed. A common choice for trustee is an adult relative or a trusted friend. Selecting someone you know personally has its benefits, of course. You are likely to receive personal attention from someone you know, and they may not be inclined to charge a fee. However, acting as a Trustee is not necessarily a privilege! There is a lot of work in the administration of a trust, and a personal relative or friend might not have the time, energy, or know-how to effectively administer the trust.
Another option is a financial institution. Certainly, financial institutions and trust companies are qualified and capable of serving as trustees. Indeed, these institutions have the knowledge and expertise in managing funds which would provide a sense of comfort. However, financial institutions and trust companies are typically more expensive and charge their fees based upon a percentage of the trust estate. A licensed professional is another option, and their fees are typically lower.
Once the assets have been transferred to the trust, they become the responsibility of the successor trustee (the person you named in your living trust to take over at your death or incapacity). The duties of a successor trustee are similar to that of an executor, except that the trustee has control over the trust assets only and may administer those assets privately outside of court. The successor trustee has no control over property that is part of your probate estate.
If you have questions regarding a pour over will, or any other estate planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.