Why a 'pour over' will can be a good idea
Dear Jonathan: My husband and I recently completed our estate planning. We were able to save a lot of money by downloading forms off the Internet. The forms were pretty straightforward and after doing our own research we feel very comfortable with what we did. One thing we chose not to do, however, was to prepare wills which we didn’t feel were necessary because we created a trust. It is our understanding that if we have a trust, our assets are protected from probate and a will isn’t necessary. Are we on the right track?
Jonathan Says: First of all, although this is self-serving, I never recommend that people engage in do-it-yourself estate planning. Estate planning can be a complicated process and the documents used to create an estate plan can also be quite complicated. Trying to prepare estate planning documents on your own will most likely lead to mistakes and sometimes serious mistakes.
Further, estate planning forms you find on the Internet cannot be relied upon to address your specific concerns, are oftentimes poorly drafted, and may not even comply with the laws of your state. I would encourage you to consult an estate planning attorney in your area to make sure that whatever documents you prepared are sufficient for your purposes and are valid under the laws of your state.
As for your specific question, you should always have a last will and testament regardless of whether you have a trust. Having a trust allows you to retitle assets to that trust during lifetime and if you do that, those assets avoid probate at your death. However, if, at the time of your death, you have any assets titled in your name alone, then those assets will need to be probated, and if you don’t have a will, upon the completion of probate, those assets will pass pursuant to state law and not to the beneficiaries of your own choosing. This is because when you die without a will you are deemed to have died “intestate” and the state gets to decide who receives your assets.
If you want to make sure that all of your assets eventually pass into your trust, each of you will need to prepare wills naming your trust as the beneficiary of any assets that need to be probated. This type of will is known as a “pour over will,” which means that upon the completion of probate those assets will pour over, i.e., be distributed, to your trust to be held, administered and distributed to the beneficiaries named in the trust pursuant to the terms of that trust.
If you have minor children, a will is also important to have because it allows you to name who you want to be their guardian while they are under age 18.
I also want to be clear that simply creating a trust alone does not by itself protect your assets from probate. Creating the trust is simply the first step. Once you have created the trust, the next step is for you to make sure that assets are retitled in the trust name. Also, for those assets which allow a beneficiary to be named such as life insurance, you might want to consider having the trust named as either the primary or contingent beneficiary. Because retitling assets can be complicated, especially when real estate is involved, I suggest that you consult with an estate planning attorney to help you make sure that your assets have been properly retitled and/or beneficiary designations have been properly made (or changed) naming the trust as a beneficiary.
Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, P.C., in Grand Rapids, Mich.