Q: I have a Living Trust, prepared some time ago. I recently heard that it was a good idea to also have a Will. However, I thought the trust took the place of a will. Can you clarify this?
A. Sure. Attorneys who prepare trusts generally also prepare a backup will to coordinate with the trust. The companion will is designed to “catch” assets that were inadvertently left out of the trust. The will then typically directs that these omitted assets be “poured back” into the trust and be distributed according to the terms of the trust. Attorneys often refer to these wills as “Pour Over” Wills, which accurately describes their purpose. Ideally, you would never need to use the “Pour Over” Will, because all assets would be part of your trust.
However, in the real world, we find that clients often neglect to take proper steps to retitle assets into their trust. Remember, in order to transfer assets into your trust, you generally have to sign a formal document, such as a deed in the case of real property, which formally re-titles assets into the name of the trustee of the trust. By the way, in most cases the trustee is the same person who created the trust (the trustor), but the trustor still must observe the formality of retaking title in his own name “as trustee”.
The assets omitted from the trust and “captured” by the Pour-Over Will still have to go through probate. However, the advantage of having a Pour-Over Will is that the omitted assets will ultimately go to your designated trust beneficiaries as part of a coordinated plan. Without the Pour-Over Will, the omitted assets would be distributed to your heirs-at-law as identified by statute, which could be different persons.
A related problem arises where a trustor has clearly identified assets on a schedule attached to his trust, but neglects to formally re-title the assets into his name “as trustee”. This happens fairly frequently. Here, the law provides a quicker remedy, which attorneys often refer to as a “Heggstad Petition”, so named because of the 1993 court decision which approved this remedy. In these situations, where the trustor’s intent to include an asset in his trust is clear, it is possible to petition the court for an order immediately transferring the assets into the trust, so that they are not subject to probate and the possibility that they may go to unintended individuals.
For the above reasons, we always recommend that a trust contain a detailed Schedule of Assets, that upon creation of the trust the client take immediate steps to retitle those assets into the trust, and that the trust be accompanied by a companion “Pour-Over Will”. Caution: some assets, such as retirement accounts, should never be re-titled into the name of the trust, as that could trigger an adverse tax result.
References: Ukestad v. RBS Asset Finance Inc. (03/16/2015); (Estate of Heggstad (1993) 16 Cal.App.4th 943, 947–950, 20 Cal.Rptr.2d 433 (Heggstad ); California Probate Code § 850