ESTATE PLANNING: Pour over wills direct estate assets into trust

2013-08-31T12:48:00Z ESTATE PLANNING: Pour over wills direct estate assets into trustChristopher W. Yugo Times Business Columnist nwitimes.com
August 31, 2013 12:48 pm  • 

Q: My parents and I met with an attorney to discuss creating a trust. The attorney said even if they had a trust, they would still need wills. He tried to explain why the wills would need to be probated. If they have a trust why do they need wills? I thought the trust would eliminate probate.

A: I'm with your attorney on this one. A complete trust estate plan will, among other documents, include a will to support the estate plan. It sounds sort of unnecessary to have a will in a trust estate plan but trust me, it's an important piece of the estate planning puzzle.

A will that supports a trust is known as a pour over will. It's main purpose is to direct estate assets into the trust. It's sort of the safety net to catch assets that may not have been funded into the trust. Remember for a trust to work effectively, the settlor's assets need to be funded into it. The trust will only control trust assets. If an asset isn't funded into the trust, it is outside the trust's control and it is potentially a probate asset.

That's where the pour over will comes into play. The pour over will gets the probate assets into the trust postmortem.

Now you may be thinking, "do I really need the pour over will if I promise to fully fund the trust?" I still think so. In the 20 years I've been doing this, I've only seen a handful of trust administrations that didn't include at least a few probate assets.

In addition, I have seen more than one administration that included inherited property that hadn't yet been distributed. In those cases, the settlor survived a deceased loved one and was to receive a share of their estate but died before receiving it. The pour over will was able to direct the inherited property into the trust for distribution.

Without a will, probate assets wouldn't make it into the trust and would transfer under the intestate code. It's possible that the assets would get where the settlor wanted them to be, but it's just as likely that they wouldn't.

I agree a properly funded trust shouldn't require probate as a component of its administration. However, I think what the attorney was trying to explain was that the will would be "spread of record". By spreading a will, the court accepts the will into probate but doesn't appoint a personal representative.

Spreading a will preserves it past the three-year statute of limitation period that could keep a will out of probate. If assets of the decedent were discovered five years after death and the will wasn't spread, chances are the decedent would be treated as if he died without a will and the assets would be distributed under the intestate statutes.

Opinions are solely the writer's. Christopher W. Yugo is a Crown Point attorney. Address questions to Yugo in care of The Times, 601 W. 45th Ave., Munster, IN, 46321 or to chrisyugolaw@gmail.com. Yugo's information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant or estate-planning specialist.

Copyright 2014 nwitimes.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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