What is an installment will and how does it work?

A pour-over will is a type of will that provides for “paying” all remaining or unallocated assets of a person’s estate into an inter-vivos trust upon the person’s death. The idea is to minimize the probate process and ensure that assets are distributed as the deceased wishes.

If your estate plan includes a trusted salonyou might want to consider pairing it trust with a willingness to pay. A payment will help ensure that your residual estate and any assets you neglected to include in your living trust will be automatically transferred to that trust after your death (literally paid into the trust), so that your estate can be distributed as you wish.

Here’s everything you need to know about installment wills so you can decide if this option is right for you.

How installment wills work with living trusts

Unlike a traditional Last will and testament, a pouring will is not a stand-alone document, and that’s because it needs something to pour into. Pour-over wills are designed to work in conjunction with inter vivos trusts, also known as inter vivos trusts, as an added measure of security.

• A living trust allows you to retain full ownership of the assets in it for as long as you are alive. Then, when you pass, any assets you’ve transferred into your trust are distributed as you wish – without having to go through approval.

• A willingness to pay provides important additional protection to your existing living trust by instructing the court that any assets you forgot (or were unable) to include in your trust must be immediately transferred to that trust upon your death so that they can be distributed to your chosen heirs. Without a will (unless you also have a traditional will and a will detailing the assets not included in your trust), any assets you neglected to include in your trust would be treated as if you died without a will, also known under the name of death. intestate. The court may divide the assets according to state law, which could produce results that are very different from what you intended.^[0]

Betty establishes a living trust and takes a careful inventory of her financial assets. She dutifully transfers all her investments and bank accounts she can think of into her living trust. Betty names her husband, Joe, and younger sister, Lisa, as the only beneficiarieswith Joe as Trustee/executor. She feels comfortable knowing that her assets will only go to the people she loves the most.

Betty was careful, but forgot to include an old retirement plan account from a job she held briefly in her twenties, which grew quietly over the decades and became a huge asset. Because she only receives quarterly statements from this account and does not actively work there, the pension was completely out of her hands when setting up her living trust.

Luckily, Betty has covered her bases by also creating a will of installment which states that the remainder of her estate should be transferred to her living trust upon her death. When Betty dies, the retirement account is transferred to the trust so that Joe and Lisa can inherit Betty’s entire estate smoothly and in accordance with her wishes.

Advantages of Single Payment Wills

Using an installment will with an inter vivos trust has some distinct advantages:

• Privacy. Unlike wills, trusts are private and do not become public. When your installment will (which only states that the rest of your estate should go to the trust) transfers your assets into your trust upon your death, the distribution of your estate remains private and no one can simply track down who inherited what.

• Completeness. Hardly anyone knows so much about things that they can transfer every one of their assets into their living trust before they die. There is almost always a forgotten account or a valuable personal asset that is forgotten. A will will cover you so that nothing is left out.

• Simplicity. Once the rest of your assets are transferred to your living trust, your entire estate is controlled by one document, making the distribution of your assets clear and easy for your executor.

• Ability to appoint a guardian. A pourer will allow you to appoint a guardian for your minor children, which is generally not something you can accomplish with a living trust.

Disadvantages of For-Over Wills

However, a pour-over will have some drawbacks:

• This does not completely avoid probate. The main disadvantage of pour-over wills is that, unlike inter vivos trusts, all assets that pass through wills of any kind can be subject to approval. This means that using a payout will make at least part of your estate susceptible to requiring the very same probate you tried to avoid when you created an inter vivos trust. (Any assets already in your living trust at the time of your death will not have to go through probate and can be distributed immediately.)

• It has potential delays. When the assets to be transferred to your living trust are delayed in probate, the living trust itself may be forced to remain active until probate is complete and the assets covered by the will can be distributed.