By working on your asset protection strategy, you shield your assets from avoidable expenses. Costs such as long-term care, Medicaid recovery, probate courts, taxes, and creditors, cut into your estate without proper planning. A pour-over will keeps your estate intact by letting any assets flow into a trust upon your death. Let’s look at how a pour-over will protects your assets. 

How a Pour-Over Will Works

Using an asset protection plan usually involves creating a trust to safely shield your assets. A trust is simply a legal framework that shelters your assets from civil lawsuits and other expenses. Depending on who you want to protect your money from, your attorney may draw up one or more types of trusts. You may place all or some of your assets into your trust.

However, after you place your assets in a trust, you live your life and may buy new items titled in your own name. What happens to these assets when you die?

According to Investopedia, “Absent explicit directions provided via a will, remaining assets would instead be subject to laws of intestate succession as established by the jurisdiction in which the individual died.”

To avoid assets getting left out of your trust and facing intestate law or probate court, it is crucial to write your last will and testament and make it a pour-over will. With a pour-over will, the assets that you never place in a trust while alive are still protected. They never count as part of a probatable estate and immediately upon your death flow into your trust.

A pour-over will immediately adds any assets you own to the trust of your choice at the moment you die. 

Do I Need a Pour-Over Will?

If you own assets in a trust, a pour-over will makes sense. A trust cannot protect assets left out at the time of your death. A pour-over will may protect your assets in many situations. Two of the most popular types of trusts that benefit from a pour-over will include revocable living trusts and Medicaid trusts.

Pour-Over Wills & Revocable Living Trusts

You may opt for a popular type of trust called a “living trust” where you place assets into the trust or remove them as you choose. This type of trust is called “revocable” because you may directly control what is in the trust while you are living. 

Many individuals opt for living wills to avoid probate for their estate. With a living will, your assets never see a probate court. Instead, the trustee you appoint distributes your assets as you describe in your trust documents. There is no wasted time or expense with the court system in North Carolina. 

However, if you buy a new car, you may title it in your name. Because the car title is in your name, it is part of your probatable estate and not part of the trust. If the car is worth more than $20,000 ($30,000 for a couple), it could send your estate to probate court. 

However, if you work with your attorney to draw up a pour-over will, your car or any other assets titled in your name may directly pour into your trust upon your death.

Pour-Over Wills & Medicaid Trusts

A Medicaid trust is a type of irrevocable trust. Your assets no longer exist as “your own” assets in an irrevocable trust. Instead, they fully and irrevocably belong to the trust. However, you set up the terms of the trust and name the trustee to that position. In effect, you decide how the trust works and who it benefits. The trust by law must operate according to the trust agreement that you draw up with your attorney.

A Medicaid Trust protects your assets from the costs of long-term care. These costs run up to $7,000 or more per month in NC. If you open a Medicaid Trust before the 5-year look-back period, your assets do not count against you for Medicaid eligibility. In that way, Medicaid pays your long-term care expenses while your trust holds your assets safely shielded from those expenses. 

Another way that a Medicaid trust protects your assets is by shielding them from Medicaid Recovery in NC. After you pass away, Medicaid by law must try to recover their expenses for your care from your estate. This bill can cause your estate to sell the family home to cover the expense! 

However, your estate does not exist if your Medicaid trust owns all of your assets. Medicaid Recovery cannot send a bill to a non-existent estate. With a pour-over will, even if you still own your home or other allowable assets (Medicaid allows home equity of up to $603,000) Medicaid Recovery can’t touch your assets. The reason is that upon your death, your home and any other assets titled in your name immediately pour into your trust. There is nothing left in your probatable estate.

Pour Over Wills and Other Types of Trusts

Whether you choose to keep your assets in a type of revocable or irrevocable trust, with a pour-over will, you can rest knowing that any new assets you acquire will also flow into your trust upon your death. A pour-over will may benefit your estate no matter the purpose of your trust. 

We Can Help

At Vail Gardner Law, we understand the need to care for yourself and your family by planning your asset strategy. Our experienced preparation plan often includes a pour-over will, trust establishment, and probate court avoidance. We work with you to establish a trust while also drawing up a pour-over will that protects your assets even after you are gone.

Contact us today and find out how we can help you optimize your assets for today and the future.