The most popular estate planning one-two punch combination today is the pour-over will and the revocable living trust. With these two devices, most people can rest assured that their property will pass to their family with as few headaches and difficulties as possible. To learn more about what each of these devices do and why they work so well together, let’s take a more in-depth look at the living trust and pour-over will combination.
Pour-Over Wills and Living Trusts in Colorado
The federal estate tax is a tax that applies to all the property you leave behind after you’re gone, known as your estate. In years past, the estate tax was a significant concern to a lot of people.
However, beginning in 2013, the estate tax exemption limit was set at $5.25 million per person. This number has not changed and means that if you die in 2014 and leave behind property worth less than $5.25 million, your estate wouldn’t have to pay anything in estate taxes.
Because relatively few people have an estate in excess of the exemption limit, the estate tax issue is something most people don’t have to worry about.
Instead, the primary worry that most people creating an estate plan face today is what to do about probate. Probate is a legal process that applies to your estate after you die. This process can be time-consuming, aggravating, and costly.
To avoid probate, people create a revocable living trust and transfer all of their individual property to it. The living trust can survive you after you die, and because it is the legal owner of your property, it can distribute that property without the necessity of having to go through probate.
Trust Safety Net
If you have a revocable living trust and successfully transfer all of your individually owned property to it, you leave nothing behind you that has to be probated. However, this is more easily said than done. In reality, there is usually some property people leave behind that they didn’t remember to transfer into their living trust’s name. To rectify this problem, people create a pour-over will.
You probably know that you can use your will to distribute property after you die. But, if you’ve created revocable living trust, you will use that trust to distribute the property, not your will.
The pour-over will is simply there to transfer any of the property you forgot to transfer into the living trust. It’s a sort of safety net that ensures that all of your property will pass in accordance with the terms of your living trust.
Like all other types of wills, your pour-over will must meet the same legal requirements imposed by the state of Colorado, but it is an essential tool to have if you are creating and using a revocable living trust.
You’ll be able to learn a lot more about wills and living trusts at one of our free upcoming workshop. Our next workshop in Denver will be on January 22nd at 2:00 PM and again at 6:30 PM. Visit our workshop page for details and registration information.