Estate Planning Advice | Put Your Will in a Trust

by Flanders Law Firm LLC on September 20, 2011

As I discussed in a prior post, many people are not aware of the common differences between a Will and a Trust.  This post offers a discussion of what is known as the “Pour-Over Will.”

The Pour-Over Will is a document that acts as a typical Last Will and Testament in many respects with one key difference:  the Pour-Over-Will dictates that certain assets will be transferred to a Trust upon a person’s death.  The Will may state other things; like what happens to the initial estate assets in terms of payments of estate debts, funeral expenses, taxes, and other fees; however, once those expenses have been deducted from the estate, the rest of the estate assets will be “poured-over” into a Trust.

Why might you create a Pour-Over Will and Trust?

The answer to this question is not simple, but when conducting estate planning you want to think about who your money may be going to upon your death.  Let me offer an example of why a Pour-Over-Will and Trust makes sense for some families.   Let us imagine that an elderly mother or father has five children.  Some of those children are adults.  Some of the children may be minors.  Furthermore, one of those children has a disability or other handicap.

Now, let us imagine that the child with the disability has federal and/or state disability payments being made to him or her.  These payments are made because the child is unable to support themselves due to their disability.  The payments support this person and enable him or her to live a normal life.  However, what if mom or dad dies and leaves this person a substantial sum in their estate?  In this scenario, the disabled child may lose his or her disability because of their new income.

What is the solution?  One is to create a a Pour-Over-Will with a Trust for the disabled child.  A trustee will need to be chosen and appointed.  That Trustee will watch over the Trust property and make financial decisions for the disabled child.  The Trustee may also be able to ensure that the disabled child does not lose his or her disability by giving the child only so much money every month or year – depending on how the Trust is set up.  In this way, the child is benefited by having the Trustee act as a sort of “guardian” over their person.  This gives the child’s parents peace of mind.

But, as with anything, there are drawbacks to a Pour-Over-Will and Trust.  First, they are more expensive to plan and implement.  Working with an trusts and estate planning attorney who is experienced in drafting Trusts will cost and average person more than if a simple Last Will and Testament were drawn up.

Additionally, a Trustee will have to be chosen and the Trustee will have to make decisions after the parent’s death.  This puts a significant burden on the Trustee.  Finally, estate assets will need to be transferred into the Trust either during the estate planner’s life or after their death.  This takes extra work by the person whose estate is being planned, the lawyer, and the Trustee.

Thinking about estate planning is a must.  Having the information to decide what is right for your family is equally important.  Only you can decide what is right for your estate, but you certainly should think about it before it is too late.

For more information about Pour-Over Wills and Trusts, please contact Joseph Flanders at flanderslawfirm.com.

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