When Pennsylvania residents include living trusts in their estate plans, they often also draft pour-over wills. When an individual with a living trust and pour-over will passes away, all of their unallocated assets are placed or “poured” into the living trust. Pour-over wills ensure that assets will be distributed in accordance with the decedent’s wishes, and they may also allow the estate to avoid the probate process.
Probate
Living trusts, if prepared and funded correctly, are popular estate planning tools because they allow assets to be distributed without first going through probate. When an individual with a living trust passes away, their unallocated assets will be subject to probate even if a pour-over will is in place. However, this is usually a quick and straightforward process when few assets are involved. In Pennsylvania, estates worth not more than $50,000 qualify for simplified probate, which allows executors to distribute assets almost immediately. Therefore, to make the plan work it is essential to properly title assets to the trust before death.
Pour-over wills
If a person with a living trust dies without a will or a pour-over will, their unallocated assets would be distributed under intestacy laws. A traditional will can be used to deal with unallocated assets, but the document would have to be revised when assets are acquired or sold. Pour-over wills deal with all unallocated assets, so they only have to be written once.
A powerful estate planning combination
Living trusts and pour-over wills are a powerful estate planning combination. When individuals with these documents in place die, the living trust allows their assets to be distributed outside probate and in accordance with their wishes, and the pour-over will makes sure that their unallocated assets are added to the living trust automatically. The assets in a pour-over wills are subject to probate, but the process is usually simplified. Either way, inheritance tax is due, so make sure to speak with an experienced estate planning attorney to craft a plan which best meets your needs.