James was a hardworking, middle-aged man with no wife, no serious love interests, and no biological children. His absolute “pride and joy” were his three godchildren whom he loved as his own. So naturally, when James created his estate plan, he felt honored to leave everything to them.
James’ father had divorced his mother when he was young and had never been an active part of his life. James’ mother, on the other hand, was one of James’ closest companions. While driving his mother home after visiting extended family one night, James and his mother were in a terrible car accident. Tragically, James’ mother died at the scene and James was pronounced dead four hours later at the hospital; they never got a chance to say any goodbyes.
In her estate plan, James’ mother had left all she had to her only child, James. And James, fortunately, had been wise in establishing his estate plan with both a revocable living trust and a pour-over will. He did this to ensure that all of his assets would go to his godchildren.
A pour-over will is not a traditional, stand-alone will used to direct distribution of property after death. It is designed to go “hand and glove” with a trust, acting as a safety net in the event that someone having a trust passes away with assets not under the umbrella of the trust. This can be because of an unanticipated windfall or simply an account standing in the deceased person’s name without a beneficiary designation.
Generally, when someone passes away with property in his or her name alone valued over $166,250 ($184,500 for deaths after April 1, 2022), the property must go through probate. If there is no will, by default the property will be subject to the laws of intestate succession. (Intestate succession is the “next of kin” method used to distribute assets that do not have designated beneficiaries). Thus, if James had only a trust but no pour-over will, his inheritance from his mother would have been distributed to his father since that inheritance was not part of James’ trust and his father is his legal next of kin. The provisions of his trust directing that his estate go to his godchildren would have been irrelevant since a trust can only control assets that have been transferred to it. Since James had a pour-over will, however, the assets he inherited from his mother will go to probate and then be distributed to his godchildren in accordance with the terms of his trust. This concept is best understood visually: picture a glass full of fluid (assets that were acquired but never added to the trust) “pouring” into a pitcher (the trust). The pour-over will provides that if an asset must go through probate, when probate is over the asset will be distributed according to the terms of the trust.
James’ story represents one of many. If you have a living trust, it is important that you also have a pour-over will because there are many scenarios whereby you may pass away with a trust but have assets that are not in the trust when you pass away. It is always smart to have a safety net.
(You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).