Understanding a Living Trust With Pour Over Will
A living trust is designed to circumvent the lengthy and expensive legal process of probate. Living trust agreements name a trustee as the legal owner of the trust's assets. In this article, we will go over living trusts and pour-over wills!
Living Trust — The Basics
A trustee oversees a living trust and has a fiduciary duty to act in the best interests of the trust's beneficiary or beneficiaries. When the settlor dies, the assets are transferred to the beneficiaries according to the trust arrangement.
Unlike a will, a living trust is effective while the grantor is living and does not need to go through probate court to distribute assets and properties to the beneficiaries. Typically, a living trust can cost anywhere from $1,200 — $2,000 if you are counting on legal representation.
The Difference Between Trusts and Wills
- Wills and trusts are both estate planning tools that may help ensure your assets are protected and handed on to your descendants, excluding your spouse.
- In the United States, the unlimited marital deduction allows money to be transferred to a surviving spouse without incurring gift or estate tax liabilities.
- You may have both a will and a trust.
- There are irrevocable trusts, which cannot be changed once created, and living trusts, which may be changed by the grantor.
- Wills must go through probate, a legal process where a court administrator examines them.
- If family members contest the will, the process may be lengthy and contentious. Trusts are not subject to probate and cannot be contested after the grantor's death.
Understanding a Pour Over Will
A pour-over will guarantee that an individual's remaining assets are automatically transferred to a trust following death.
Using a Pour-Over Will
- A pour-over will can be used with a trust.
- Trusts are used in estate planning to avoid probate when transferring assets after the grantor's death.
- When an estate is settled, the grantor distributes assets to beneficiaries as intended.
- A pour-over will cover assets not paid into the trust when the grantor dies. In the absence of a will, residual assets are subject to the rules of intestate succession in the jurisdiction where the person died.
What Does a Pour-Over Will Protect?
A pour-over will protects a living trust from problems that might disrupt its ability to function. If a grantor accidentally or purposefully leaves assets in a trust, they will be added after the will is executed. A trust's assets may be transferred to its beneficiaries if the trust is declared illegal or, in the event of an unfilled trust, becomes legally difficult or impossible to finance after the grantor's death.
How to Set Up a Living Trust
|Determine who will get your trust property||
|Appoint someone as your replacement trustee.||
|Appoint someone to handle property for minors||
|Create the trust agreement||
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