The last few articles have covered a memorandum used to leave specific personal property to specific people, the Last Will and Testament, and very generally -the Power of Appointment.
There are a lot of points that can overlap in an estate plan that includes both a Will and a Trust, but let’s build on how a Will works if you have a trust.
A Will that works in conjunction with a Trust is often referred to as a “Pour Over Will”. I use as an example in my seminars a simple pitcher and a glass. The pitcher is your Will, the glass is your Trust.
Imagine for a moment that you have created a will and everything you own (or did not put in your trust) is now controlled by the container called a “Will”. The Will may include instructions that say, “upon my death, everything I own should be placed in my trust”. So basically, everything that is in the container (Will) as a result of your death, is poured over into the trust, like a pitcher pours its contents into a glass. You remain in control all of the time, remember the pitcher, its contents and the glass are yours. The will, its contents and the trust are yours. The transfer from the will to the trust makes certain you maintain control, but once the property arrives in the new container, the trust is in control. Just like the glass now holds the contents you poured from the pitcher.
So why does this matter. I have a trust, why do I need a will? Or I have a will, why do I need a trust? I hear that all the time.
So lets tackle the example of “I have a will, why do I need a trust”?
So you had your trust prepared, you placed all the assets you owned AT THAT TIME into the trust, just like you were instructed. Then, 10 years later, you inherit a piece of property or a security. That property is probably going to be placed in your name as the beneficiary, not in the name of your trust. If you don’t change the title, that asset ends up being controlled by your Will because it was never put into the trust container.
If you have a properly drafted trust and will, your will is probably a “pour over will”, and those assets that were not transferred into your trust while you were living should end up being “poured over” into your trust, putting you and your trust back in control.
The goal for most people is to maintain control, maintain privacy and maintain costs. The fewer assets your Will controls, the less likely your information becomes public. But that Pour Over Will sure can be valuable if you fail to transfer assets into you trust.
If someone tells you “once you have a trust you don’t need a will”, just reconsider. We can rarely predict the future and it is a lot easier to maintain control with a plan than without one.