Pour-Over Wills

Suppose a wealthy California businessman is sitting in his lawyer’s office discussing how to structure his will. He recognizes that there are different factions in his family (he was married twice with children from both marriages). Though during his lifetime the animosity stayed under the rug, he has serious concerns that the animosity will percolate when he passes, especially when money will be at issue. Therefore, he is searching for a way that his children will not argue after his passing. The solution, his lawyer says, is creating a pour-over will.

Trusts, Wills, and Probate

A will and a trust are not the same. A will is an instrument that is drafted during the testator’s (person who passes) lifetime and is activated upon death, whereas a trust is an instrument that is in force during the trust creator’s lifetime. There is also a significant legal difference between the two: A will is subject to probate, which means that it must be approved in a California probate court; a trust is not subject to probate and therefore does not need court approval.

Pour-Over Will

A pour-over will is a will that “pours” its assets into a trust. The assets that are in and subject to the will go through the California Probate Court. Once approved, they are then legally assets of the trust. The trust instrument must exist either prior to the testator’s death or concurrent with the creation of the trust. The trust can be an existing trust that has other assets. A trustee would be the caretaker of the trust. Often, the will designates a trustee of the trust.

Common Law

In Common Law, which is the body of law transported from England and is a significant basis for much of American law, pour-over wills were outlawed. This is because it allowed wills to basically circumvent the probate system and instead go into a trust.

Using a Pour-Over Will

In contrast to Common Law, California recognizes pour-over wills. As mentioned, a pour-over will pours assets into a pre-existing or concurrently-created trust. The relevant parties will take the will to California Probate Court. The Probate Court will hear any issues related to what assets are subject to the will and then stamp the will as probated. This is generally a simple process because, unlike a garden variety will, the pour-over will only has one beneficiary – the trust.

At this point, the assets will pour into the trust. The rules of the trust, created by the testator, will determine who gets what. This avoids probate issues, especially with complicated family dynamics, because the assets are distributed based in the rules of the trust, not the California Probate Code.

What is more, a pour-over will is only subject to probate if the assets subject to the will are valued at $150,000 or above. Wills valued at lesser amounts will pour immediately into the trust without the probate process.

For your trust and estates needs, contact the Bay-area firm of Melanie Tavare.