Valentine Day's Thought - Yours, Mine and Ours

How Including a Pour-Over Trust Can Simplify Your Planning

Some couples, married and unmarried, think about their accounts and property as “yours, mine, and ours,” especially if one or both of them have been (or will remarry), are coupling  late in life, or have brought (or will bring) significant amounts of money and property into the relationship.

Deciding what should happen to this joint property at death can be an uncomfortable challenge. To alleviate some of the stress that comes from making such decisions, we can make use of an estate planning tool called the pour-over trust.

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​What is a joint pour-over trust?

A joint pour-over trust holds the joint property belonging to the two of you such as your home. You can create the joint trust together and name yourselves as the current trustees. When the first of you passes away, half of the joint trust’s accounts and property is distributed (pours over) to the deceased spouse’s separate trust, and the other half is distributed to the survivor’s separate trust. 

​Does this mean that we will need three trusts?

​For the estate plan to work as intended, you may indeed need three (3) trusts.

Jointly owned property goes into your joint pour-over trust, and separately owned property goes into your own respective separate trust.
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This allows you to provide separate instructions for handling jointly and separately owned accounts and property. 

​However, once the first of you dies and the accounts and property are distributed to the respective individual trusts, there is nothing more for the joint pour-over trust to do. Thus, it will not require a long, ongoing administration after the first death.

What are some other benefits of a joint pour-over trust

Ease in funding the trust. A joint pour-over trust readily reflects the underlying economics of joint accounts and property because both of you own and control it.  While two people as individuals can jointly own an account, some financial institutions may NOT allow those same two people to own the account by means of their separate trusts.  This institutional resistance to two-separate-trusts ownership can derail your planning and leave the survivor of you with all the wealth - which neither of you intended. 

Ease of administration. The joint trust allows for ease of lifetime administration because both of you retain control over your joint property.

Probate avoidance. Avoiding the unnecessary expense and interference of probate courts has fueled the popularity of trust-based planning.  If your joint accounts and property are in the joint trust, probate will absolutely be avoided because the trust instructions will dictate what happens to the accounts and property. Your chosen backup trustee will carry out the instructions without the delay and expense of court supervision. 

Keeping things separate. Allocating your joint property to the joint pour-over trust will serve you well if your priority is to keep your separate accounts and property forever separate.  If your separate accounts and property are titled in your separate individual trust then this framework will increase the likelihood of your trust being administered as you wish after you are gone.  For example, if one of you have children from a prior relationship or are  caring for family members on "your side" then this planning can be vital to ensure your money is there to support them after you are gone.  All too often these accounts are titled jointly for "convenience sake" and result in either disinheriting your children (or dependent family members) or embroiling the survivor of you in protracted disputes and even litigation with the adult children.  Therefore, in these circumstances, you absolutely want to make sure your separate property is titled in your separate individual trust and having your joint property in the joint pour-over trust establishes  a consistency that enables keeping your separate property separate.  

Final thought

If your situation resembles "yours, mine and ours" then the tools of your estate plan should reflect that to ensure that your estate planning goals are achieved.  Working together, we can assess what you own and how you own it and discuss your wishes about what should happen to those accounts and property at your death. Call us today so we can craft a plan that works best for you, your spouse, and the rest of your loved ones.