Planning For The ‘What-Ifs’

What is a pour-over trust?

On Behalf of | Jan 18, 2023 | Estate Planning

People in many different personal circumstances decide to add trusts to their estate plans. They may have concerns about the needs of family members, such as a child with a history of substance abuse or a loved one with special needs. On the other hand, people may create trusts to help them qualify for Medicaid when they grow older or to protect their assets from creditors.

Trusts can also help reduce estate taxes. There are many benefits to adding a trust to your estate plan, and each person planning their estate may choose to use different specific terms for their trusts. A pour-over trust is popular among those who want their trust to handle all of their assets, not just their most valuable possessions.

What is a pour-over trust?

Most trusts involve a testator putting documents in place ahead of time to move certain property into the trust while they are still alive. Sometimes, specific assets transfer to the trust at the time of someone’s death. Trusts are often used as an alternative to a will, but in the case of a pour-over trust, you will need both documents.

A pour-over trust involves transfers made when someone dies. You draft a pour-over will that provides instructions to transfer remaining personal assets into a trust. You can use either a revocable or irrevocable trust for this purpose, and you can partially fund the trust prior to your death. The will primarily serves as a safety net for any new or forgotten property.

The trust itself will provide instructions regarding the distribution of assets. Unlike many other kinds of trusts, pour-over trusts will require probate oversight of certain asset transfers.

Who might benefit from a pour-over trust?

Those with numerous assets and many beneficiaries may find that a pour-over trust is a simple way to ensure that all of their possessions transfer to their trust as intended when they die. Married couples who jointly own certain assets and separately own others may use a pour-over trust for mutual protection and smoother estate administration when one spouse dies.

Looking into different estate planning options, including different uses for trusts, can help you create documents that effectively achieve your goals.