The main component of the estate plan for most people is a revocable living trust that they establish during their lifetime. The terms of the revocable living trust control the disposition of any asset titled in the name of the trust. Trust assets can include real estate, investment accounts, financial accounts, stocks and bonds, certificates of deposit, vehicles and other personal property. The revocable living trust can also be the joint owner of an asset, most commonly with an individual. When the individual dies, the revocable living trust becomes the sole owner of the asset and the asset is subject to the terms of the trust. The revocable living trust can also be the designated beneficiary of an asset such as a life insurance policy, a retirement plan and an annuity. The proceeds are payable to the trustee of the revocable living trust, and again the ultimate disposition of these proceeds are controlled by the terms of the trust. An asset can also contain a payable on death (POD) designation wherein the asset is payable to the trust upon the death of the owner. So why should one have a last will and testament if they have established and funded a revocable living trust?
Even when a person establishes a revocable living trust, unfortunately periodically one or more of the person’s assets such as a vehicle or a bank account or even real estate does not get properly re-titled into the revocable living trust for whatever reason. In this situation, when the trustor dies the vehicle or bank account or real estate is in the name of the deceased trustor alone and the disposition of the asset is controlled by the terms of the last will and testament of the decedent. Accordingly, even an estate plan that has a revocable living trust always includes a last will and testament. The will is oftentimes referred to as a “pourover will”, as it provides that any asset is “poured over” into the revocable living trust to be held in trust and disposed of pursuant to the terms and conditions of the revocable living trust.
In summary, one’s estate plan should always include a last will and testament even though the person has established a revocable living trust. Although the goal is to never have to use the last will and testament, it is a safety net, providing that an asset not properly titled in the name of the revocable living trust at the time of death shall pass to the trust to be disposed of pursuant to the terms and conditions of the revocable living trust.
-Attorney John R. Mugan