If you are beginning to think about making an estate plan, you may wonder why some people have both a will and a revocable living trust. These two different estate planning structures serve different purposes but work together to give you peace of mind.
How a Pour-Over Will Works
People who set up both a will and a revocable living trust often use a device called a “pour-over will”. The will contains specific language indicating that some or all of the person’s assets will go straight into a trust upon his or her death. This trust is revocable (can be changed to some extent) during the person’s lifetime, and it becomes irrevocable upon death.
Since the person’s assets pour over into the trust upon death, the estate will not have to go through probate for them. Placing the assets in trust removes them from the probate estate. (Any assets that the person did not leave to the trust may need to go through probate, though.) In addition, the estate may realize tax benefits, such as lower estate taxes, because the assets are not part of the estate.
Other Benefits of Both a Will and a Revocable Living Trust
Further, having both a will and a revocable living trust may provide additional benefits. A will allows you to leave specific gifts outright to any people or organizations you choose. In other words, you can give cash or real estate directly to whomever you want upon your death. You also can specify that the estate should pay for certain funeral arrangements or other end-of-life wishes. Once you have legally executed a will, it remains in place for your entire life unless you revoke it or make a newer will.
In contrast, a trust allows you to give more slowly over time to a select group of beneficiaries. A trustee (often you during your lifetime) manages and controls the trust property for the beneficiaries’ benefit. When you pass away, a successor trustee takes over to continue managing the property. You can customize a trust to require distributions at certain times or on a discretionary basis.
During your lifetime, you can make changes to a revocable trust such as adding or removing assets, changing the trust language, or adding beneficiaries. Once a trust becomes irrevocable, no one can take property out of it (unless the trustee decides prudently to sell trust assets and reinvest the money).
In sum, wills and revocable living trusts provide different kinds of benefits for disposition of your estate. Consider using both as part of your estate planning structure.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.