What is a Pour Over Will and How Does it Operate?

Ideally, the settlor of a trust should transfer the majority of assets to the trust during his lifetime. But if for some reason any assets are deliberately or unintentionally not included in the will, a pour-over-will governs the distribution of assets that the settlor still owned at death by “pouring them over” into the living trust. These assets are then distributed by the trustee pursuant to the trust. It is generally good practice to draft a pour-over-will when a trust is created to ensure all assets are covered.

The assets in a pour-over-will must be dispersed like any form of property that is transferred by will. Therefore, the assets added to the trust after the settlor has died are subject to probate. In some cases, the settlor may choose to deliberately exclude a certain asset from the trust during his lifetime. Certain types of assets, such as stock or real property, may not be ideal property for inclusion in a trust. Or an individual may acquire a particular asset and forget to assign ownership of the asset to the trust. In general, however, the most valuable assets should be placed in the trust and only minor assets should be transferred under the will.   

There are several advantages to executing a pour-over-will in conjunction with a living trust.

Privacy. Wills become public record once a person is deceased and any individual can access these records through public databases. In contrast, trusts remain private. If maintaining discretion about who will inherit your assets and the value of your estate is an important concern, then having a document that simply transfers the property to your trust ensures the privacy of both the settlor and the beneficiaries.

Efficiency. A pour-over-will enables all of an individual’s assets to be controlled by one instrument. This simplifies the estate planning process and also helps the executor and trustee administer the estate relatively simply and efficiently.

Inclusiveness. A pour-over-will addresses the distribution of assets that were not put into the trust so that all assets are accounted for after settlor’s death. This eliminates any confusion as to how to the trustee should handle residual assets. 

Actions that Corporate Officers MUST Avoid

In a sole proprietorship or a partnership, the business entity is comprised of the individuals who form and operate the business.  One cannot exist without the other.  This is not the case for a corporation; an independent entity that is separate from its stockholders.  A corporation considered its own person in the eyes of the law.  It exists for the benefit of its shareholders, and maintaining this core principle is essential for directors and officers to avoid activities and transactions that may result in personal liability.

How can directors and officers properly adhere to corporate governance standards and maintain the personal liability protection that corporations provide? The major tenets of corporate law prohibit transactions and agreements that either evidence self-dealing or fail to maintain an explicit separation between personal and corporate financial matters.  This is because these types of transactions and failures are indications that a conflict of interest or breach of fiduciary duties may exist. 

Failure to act in the corporation’s best interests. If a director makes decisions that do not appear to be in the best interests of the corporation, then they must be able to justify their decisions and substantiate the “entire fairness” of the transaction.  Their ability to do this will help to avoid any appearance that the director is not acting in good faith or in the corporation’s best interests.

Absence of separation between corporation and directors.  Directors should avoid even the appearance of self-dealing in order to preclude any claim that they did not act with an undivided and unselfish loyalty to the corporation. To avoid any appearance of self-dealing, directors must refrain from commingling their personal and corporate assets.  To maintain this distinction between assets, directors should refrain from borrowing corporate funds for personal use or using personal accounts for business purposes. Directors should also decline to act as a personal guarantor for payments to creditors for corporate loans. 

Illegal or fraudulent activity. While directors typically receive the benefit of the business judgment rule, directors that engage in activities that are manifestly illegal or fraudulent will lose protection from liability. These prohibited activities include engaging in transactions that the corporation cannot finance due to insolvency or other reasons, recklessly borrowing funds or squandering corporate assets, and failing to make appropriate disclosures under applicable laws.