Pour-Over Will can Play Primary or Backup Role to Trust

Dear Mr. Premack: I am setting up a revocable trust. I have not funded the trust. Is it safe to assume my “Pour-Over Will” is going to automatically transfer the residue of my estate into the trust? If this is so, then I don’t need to transfer all my titles into the trusts name. – DW

A revocable trust that you set up for your own benefit (in case you become disabled) and which specifies how to distribute your assets after you die is often referred to as a “living trust”. When you create it, it must become owner of something in order to have legal existence. You could give it $100, and that is enough for it to become active. The trust cannot stay entirely empty.

When you set up a living trust and leave it mostly empty (that is, you do not fully fund the trust) it is referred to as a “stand by trust”. Your lawyer creates two documents that supplement the trust: 1) a durable power of attorney, and 2) a pour-over Will.

The durable power of attorney appoints an Agent, who should be the same person who will act as Trustee of the trust if you become disabled. Though the trust remains mostly un-funded while you are healthy, if you become disabled the Agent is authorized to transfer the rest of your estate into the trust. Then the Agent’s job is complete, and the Trustee takes over management of the trust assets so that your bills continue to be paid and your accounts are kept up-to-date.

If you remain healthy for years, and then die suddenly (so that the Agent has no time to fund the trust) then your pour-over Will becomes the primary legal tool. When the specific task of the pour-over Will is started by your Executor, its completion is far from “automatic”.  Your Executor must probate the Will before the appropriate court, and upon receiving letters testamentary gains authority to transfer the rest of your estate into the trust. Then the Executor’s job is complete, and the Trustee takes over so that your assets can used to pay your debts or transferred to your designated beneficiaries.

An unfunded living trust thus fails to avoid probate, which may have been one of the prime goals of the person who created the trust. If you want to be certain that the trust will keep your estate out of probate court, you must fully fund it by transferring all of your testamentary property and accounts to the trust as soon as feasible. If so, your pour-over Will remains secondary, playing role of backup to the Trust’s instructions.

Paul Premack is a Certified Elder Law Attorney and a Five Star Wealth Manager (Texas Monthly Magazine 2009-2013) practicing estate planning and probate law in San Antonio.

Original Publication: San Antonio Express News, November 19, 2010

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