A Will Is Not Enough
AVOID PROBATE WITH THE RIGHT DOCUMENTS
In the movie “Knives Out” (and probably most movies that involve receiving a significant inheritance), there is a scene where the attorney meets with the family and reads the terms of the decedent’s Last Will and Testament (commonly referred to as the “reading of the Will”). In the movie, during the reading of the Will, the family finds out that the decedent’s nurse has been named as the sole beneficiary of the entire estate, and the decedent’s children receive nothing (which obviously makes them extremely upset). This can create an exciting cinematic experience, but do these “readings of the Will” actually happen in reality? Does the entire family get together with the attorney and find out for the first time who gets what? Is there an ensuing fight among siblings when they discover that the favorite child (or the nurse) inherited everything? The short answer is no. Most of the time, the family members are simply handed (or emailed) a copy of the Will at some point following the testator’s passing (usually within about 30–60 days). Each family member usually reads the Will alone, and the infamous movie scenes where the family finds out together who inherited the assets never actually happens. When a client dies, one of the first questions we often receive is, “How do I get a copy of the Will?” We let them know that the executor of the Will can provide them with a copy. However, because most of our clients have set up a Trust (in addition to the Will), the family members are confused when they receive the Will and it simply says that all of the decedent’s assets are distributed to the Trust. These types of Wills are often referred to as “Pour-Over Wills.”
on who inherits your assets. And third, if you have minor children, it nominates the guardians for your children.
For individuals who don’t own real estate and whose total probate assets are less than $184,500 (subject to change with inflation), a Will may be all that is needed to handle their affairs at death. But when probate assets exceed the $184,500 threshold or real estate is owned, then the Will has a huge problem: It must be probated with the court. Which means that your assets are not distributed to anyone until the probate process has been completed. The probate process generally lasts at least one year (sometimes more) and can cost tens of thousands of dollars. This is why most people who have real estate or assets above the probate limit create a Trust, rather than a Will. When a Trust is created, a common misconception is the Will is no longer necessary. Which is not entirely true: We just need a different type of Will, the Pour-Over Will. The purpose of the Pour-Over Will is to make sure all assets that should be in the Trust make their way into the Trust. This is not a substitute for properly funding your Trust, as the same probate rules still apply. Meaning if there is real estate or assets above the probate limit, then the Pour-Over Will still ends up in probate. The Pour-Over Will is essentially a safety net that catches anything not properly funded into the Trust when the trustor is alive. For most people who have funded their Trust correctly, the only assets that usually get “poured-over” into the Trust at death will be the personal property items that typically don’t trigger a probate (e.g., household furnishings, vehicles, etc.). In summary, even though you have a Trust, you will still have a Pour-Over Will as the safety net to make sure all assets are properly distributed according to your wishes.
So, what is the difference between a “Will” and a “Pour-Over Will,” and do you need both?
The Will is designed to do primarily three things. First, it nominates an executor, which is the person who will be responsible for wrapping up your financial affairs after your passing. Second, it spells out your wishes
2 PrestonEstatePlanning.com
Made with FlippingBook Ebook Creator