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ESTATE PLANNING: Pour-Over Will & Trust Combo (Part IV)

This is a continuation of our discussion regarding estate planning strategies and techniques. In Part I, we emphazed the importance of having a will as the launching point for effective estate planning.  In Part II, we explored the many advantages of a trust. In Part III, we talked about what it means to put assets into a trust and exactly how to do that for different categories of assets. We left of with personal property, which can be listed item by item in the trust document or, incorporated into the trust through what is often called a “pour-over will.”  This article discusses one common estate planning technique that rather nicely combines the use of a will and a trust.

 

As explained in Part I of this series, having a will is pretty much the first step in estate planning. Perhaps, after reading Part II, you were left with the impression that a trust really solves all your problems—to the point where it does not matter whether you have a will or not. That is not entirely true.

Putting your assets “into the trust” requires certain measures. It is not difficult, but it doesn’t happen by itself. As explained in Part II, you can make the large, important transfers yourself during your lifetime–usually, those items that come with titles. However, what about the smaller items that are owned by you personally when you die?

To address that problem, asset protection attorneys have devised the pour-over will. A pour-over will has all the regular things a will has, with the addition of a special “pour-over clause.”

Simply put the “pour-over clause” says that whatever you own in your own name will transfer to your trust automatically—and without order of a court—from your personal estate to the trust upon your death (or any other contingency you wish to stipulate).

This clever idea saves you the trouble of having to amend your trust periodically to include new personal property you acquire from time to time. So, if you buy a new watch, there is no need to call your lawyer to have him/her draft an addendum to your trust. Of course, if that watch is a Rolex, you might decide it is worth the attorney fees to make the amendment. That’s your call.

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Now, once your trust has been established, if you buy a new boat, classic car, investment home or other significant asset, you can include the asset in the trust by simply making the trust the purchaser of the asset. In other words, you could buy the item in your personal name and then call your estate planning lawyer to help you transfer the item to the trust and make the necessary amendment to the trust document . . . but why bother?

Just acquire the new item in the name of the trust and save the extra steps.  And, at the same time, give yourself the benefit of the asset protection you get by putting the item in the trust.

So, that is it in a nutshell. The Pour-Over Will—Trust combination has become rather standard estate planning technique, and for good reason. The technique is effective, convenient and cost-effective.

What else could you ask for?

~ Jeff Harrington, Esq.