In addition to a living trust, a comprehensive estate plan will also include a pour-over will. In a pour-over will, an individual provides that the trust shall receive all of his or her assets that are not already in the trust. Although a trust explains how property should be distributed, assets have to be placed into the trust before the trust can control what happens to them. The pour-over will makes sure that any property not specifically named in the trust will be included in and administered as part of the trust through the pour-over will. Hence, the assets of the will “pour over” into the trust.
For example, suppose a couple had just bought a new house, and had not yet transferred it into the trust, when one of the spouses died unexpectedly. The pour-over will would make sure the trust still controlled what happened to the house.
In a pour-over will, an individual designates an executor to oversee the distribution of the assets included in the will. The executor may be the same person as the successor trustee.The probate court would review the pour-over will and trust, and then administer the distribution of the forgotten assets that were outside the trust.
Durable Power of Attorney for Finances (DPAF)
A power of attorney is a document in which an individual appoints another person, an agent, or attorney-in-fact, to act on his or her behalf. A Durable Power of Attorney for Finances (DPAF), allows the principal to appoint an agent to manage the financial affairs of the principal. This document is particularly useful in the event that an individual becomes incapacitated and is unable to manage his or her own financial affairs. Through a DPAF, the principal’s financial affairs will be managed in the interests of the principal by the agent. The agent’s authority to act on behalf of the principal can be effective either immediately or upon the incapacity of the principal.
Advance Health Care Directive
An Advance Health Care Directive allows individuals to indicate their health care wishes in case they become incapacitated. Through this document people appoint agents to make medical decisions on their behalf. Individuals can also specify directly what decisions they would like to have made in their medical treatment. One decision frequently made ahead of time is whether, in the event of a terminal illness, an individual would prefer to be kept on life support systems or would rather have treatment be discontinued.
A deed should be drafted for each piece of real property (land or a building) that is added to a trust. The deed transfers the property from the name of the current owner to the name of the owner as “trustee” of the trust (the trustee is the person who manages the trust assets). Although the owner is still the same person, drafting a deed is a necessary procedure because any transfer of real property requires the drafting of a new deed. Since the property is to be conveyed from the individual acting as an individual, to the individual acting as trustee of a trust, a deed is required. If the trust is revocable, and if the same person is the creator of the trust, the initial trustee of the trust, and the owner of the property to be transferred, then that individual retains all the power over the property that he or she had before the trust was drafted.
Whenever a trust is established, in order to obtain the benefits of a trust, the assets of the owner must be transferred to the trust. This is done by transferring the property ownership from the name of the owner, to the owner as trustee of the trust. Some types of assets that are transferred include bank accounts, stocks, and mutual funds. The funding letters are accompanied by a certification of trust and the relevant provisions of the trust that stipulate the power of the settlor to manage those assets.
Certification of Trust
The certification of trust is a shorthand version of the trust that makes it easier to shift bank and investment accounts into the trust without submitting a thick stack of paperwork or disclosing family details unnecessarily. Banks and investment companies should accept a certification of trust instead of the whole trust document. The certification summarizes significant information regarding the trust and attaches important sections of the trust such as the first and last pages, the trustee powers, and the page identifying the current trustee(s).