Pour-Over Wills: The Safety Net for Assets You Forgot to Put in Your Trust

Don’t fall for the misconception that just because you have a trust, you don’t need a will. Even if you have a trust as a part of your estate plan, you may still need to document your wishes in a will. These two legal mechanisms perform different jobs for your estate plan. One of the most important aspects of estate planning is how they work together to ensure all of the assets in your estate are addressed.

Key Takeaways

• Pour-over wills are valid in New Mexico.
• Generally, assets caught in a pour-over will provision must still pass through probate before going to the trust.
• Small, forgotten assets in estates valued at $50,000 or less may skip formal probate.
• New Mexico's small estate affidavit cannot transfer real estate.
• Pour-over wills don’t remove creditor access to revocable trust assets.
• Probate has to be commenced within three years of death.

What a Pour-Over Will Does

A pour-over will is a type of will used in estate planning that names a dedicated trust as a beneficiary for anything left in the individual’s name at death. This type of will is valid in New Mexico under NMSA 1978 § 45-2-511. The named trust doesn’t need to be funded prior to the pour-over action to be valid under Chapter 46A NMSA 1978. If you already have a living trust in place, you may still need a will. Having either a will or trust doesn’t automatically eliminate the need for having the other. The two documents work together to serve different purposes.

Notably, a pour-over will doesn’t mean the assets it’s catching can avoid probate. Instead, the assets go through probate or another qualifying affidavit process. Once that process is complete, the asset would be added to the trust assets. The purpose of a pour-over will is to address assets that weren’t transferred to the trust during the property owner’s lifetime. These could be assets that the owner forgot to address when doing their estate planning, or those they chose not to transfer ownership of during their life.

How Assets End Up Outside the Trust in the First Place

Taking stock of everything in your life can be a complicated process. It’s normal to miss things or think of things later after you’ve completed your estate plan. There are some common assets that people overlook for a variety of reasons. These can include:

• Financial assets: bank, investment, or CD accounts
• Less considered assets: mineral interests, water rights, timeshares
• Out-of-state assets: accounts or property
• Real estate: Land inherited or purchased after the trust was created

There’s nothing to be embarrassed about if you have overlooked assets, as this is normal. However, when you forget to include an asset in your trust, what happens to it will depend on how the asset is titled, your estate plan setup, and if there are any transfer mechanisms in place. Thankfully, forgetting an asset won’t cause your entire estate plan to fail or mean that the asset is lost.

Significantly, if you own real estate, you will need to separately retitle the land because creating a trust doesn’t automatically change the legal title for the property. You typically need to prepare and record a new deed transferring the property to yourself as trustee of your trust. The deed will also need to be recorded with the county clerk in the county where the property is located.

What Happens to a Forgotten Asset After Death

Having a pour-over will won’t mean you can avoid probate for your forgotten assets. Instead, the pour-over will provides directions for what should be done with the overlooked assets. The assets still typically need to go through probate to have those directions followed and performed.

There are exceptions to this rule. For instance, New Mexico’s small estate exception under NMSA 1978 § 45-3-1201 could allow an estate asset to avoid probate. The total estate asset value is capped at $50,000, must consist only of personal property (i.e., bank, investment, retirement accounts, checks payable to the decedent, etc.), and requires a 30-day waiting period. There is also a homestead exception under NMSA 1978 § 45-3-1205 for a surviving spouse that allows the primary residence valued at less than $500,000 to be transferred by affidavit.

One important caveat under New Mexico law is that land can’t be used under the small estate affidavit at all. If real estate such as a farm or ranch is left out of the trust, it will typically need to go through the full probate process. This applies even if there is a pour-over will in place.

Why a Pour-Over Will Isn’t a Substitute for Funding the Trust

Having a pour-over will isn’t enough because it’s only half of the estate plan. It only provides the directions for how the assets should be handled. Funding a trust is also meant to avoid probate, which doesn’t happen if you only have a will.

The assets in a revocable trust are still accessible by creditors after death. Under NMSA 1978 § 46A-5-505, the assets in the revocable trust could still be claimed by creditors and used to cover the cost of administering the estate when the probate estate can’t cover those costs. A pour-over will cannot eliminate either of these.

However, there are limits to this under NMSA 1978 § 45-3-108. Probate must be started within three years of the individual’s death if the estate doesn’t qualify for a listed exception. There are limited exceptions under the statute. However, they may restrict the personal representative's authority to administer assets. This creates an additional risk when someone discovers an unfunded trust asset years after the owner's death. The asset may not have a straightforward path into the trust, even with a pour-over will.

Keeping the Safety Net From Being Needed

One way to avoid forgetting or overlooking assets in your estate is to periodically review your trust, will, and other estate planning documents. Generally, you should check that your trust is fully funded at least once a year or after a major life event. Opening new financial accounts, receiving an inheritance, getting married, or getting divorced all could qualify as significant events that require a review.

A frequent annual review keeps the project manageable, rather than allowing it to turn into a huge project with multiple years of potential asset changes to apply. During a periodic review, be sure to:

• Compare the trust’s listed assets to your account statements.
• Check that deeds are properly recorded.
• Verify that new accounts, vehicles, and property are properly titled in the trust’s name.
• Notify your attorney when you purchase, sell, or inherit a large asset.

The potential benefits are well worth the effort of making the necessary changes. Probate could be more costly when multiple assets that aren’t included must be addressed. There is also an increased risk of conflict, which could potentially delay probate and increase administrative costs.

Contact an Experienced New Mexico Estate Planning Attorney

While a pour-over will can provide an important safety net in estate planning, it should be used mindfully. To have peace of mind, review your trust and will with the assistance of a knowledgeable estate planning attorney. The experienced team at The Law Offices of Dana M. Kyle, P.A. represents clients in preparing their estate documents. This includes reviewing previously drafted documents and checking for overlooked or changed assets. Schedule a consultation today to discuss your estate planning needs.

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