Everything You Need to Know about a Pour-Over Will
How Pour-Over Wills Work
One of the foremost objectives of estate planning is to bypass the probate process and make it easy for a deceased person’s beneficiaries to assume the legacy preserved for them.
In furtherance of this goal, many people opt to transfer their assets to a trust while still alive. Trusts are considered legal entities that can own property in their own right. But since they are not natural persons and cannot die, probate cannot apply to them, which makes it a great estate planning tool.
However, most people are constantly acquiring property throughout their lifetime. Some people may also deliberately leave some assets out of their trust for ease of management or accessibility. Unless the trust is continuously updated to capture the newer or left-out assets, the settlor may die without transferring the assets that have been left out.
Where one dies with such left-out assets, the assets will be administered under state intestacy law. Through this process, the property may go to people other than those intended by the owner. That is where pour-over wills come into play.
They specify that the remainder of the settlor’s estate, not included in the trust, should transfer to the trust upon their demise. Although pour-over wills work in hand with living trusts, they will not help you avoid probate. This is because all assets covered by the will must go through probate before entering the trust. Still, they can help make the process easier.
Disadvantages of Pour-Over Wills
The main disadvantage of a pour-over will is that it will not avoid probate. Since the property left behind is not yet part of the trust, it is deemed part of the decedent’s estate.
Like a traditional will, it must pass through probate before being transferred to the trust. This could delay the administration of the trust for months.
Fortunately, there are ways around this. If you have purchased significant assets such as real estate after the creation of your trust, you can discuss with your estate planning attorney to ensure that those assets are transferred to the trust as soon as possible.
If you do this consistently, you reduce the risk of your valuable assets remaining unprotected. Any asset left behind would likely be of minimal value.
How does this strategy help you? Colorado probate law provides for certain pathways that allow the beneficiaries of an estate with minimal value, also known as a small estate, to avoid a lengthy probate process. These pathways are explained below.
The executor of your pour-over will can apply for informal probate with the registrar of the relevant Colorado probate court. This process is usually used when a will is uncomplicated and not expected to be contested as with a pour-over will.
The application process involves filing a statement containing details of the estate with the registrar. If the registrar is satisfied that the legal requirements of the probate code have been met, they will issue a written statement of informal probate. Informal probate is final and conclusive unless a formal court order overrides it.
Small Estate Property Collection and Distribution
By the probate code, a decedent’s successor can collect personal property, such as money in the bank, from the person who has custody without going through probate.
All the successor needs to do is present an affidavit showing details of the property, including its fair market value, to the custodian at least ten days after the decedent’s death. Upon receiving the affidavit, the person holding the assets is obligated to transfer them to the decedent’s successor.
This procedure only applies to small estates that fall within certain statutory limits. If you are unsure whether your estate would qualify for this exemption, please discuss the issue with your estate planning attorney in Centennial, CO.