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Trusts can play an important role in estate planning. The most common type of trust created in connection with a Washington estate plan is a revocable living trust. Revocable living trusts are often used to smoothly pass property to beneficiaries after the grantor’s passing.
What is a Trust?
A trust is created by a grantor for the benefit of beneficiaries, and a trustee is appointed to manage the trust on behalf of the beneficiaries. For example, a grandfather who created a trust for his grandchildren’s education would be the grantor. The grandchildren would be the beneficiaries. And, the person appointed to maintain the trust and make payments on behalf of the grandchildren–perhaps one of their parents–would be the trustee.
How Does a Revocable Living Trust Work?
A revocable living trust is unique in that when the trust is created, the grantor typically plays all three roles. Property is transferred into the trust, meaning that the trust and not the grantor becomes the legal owner of the property. But, in practical terms, not much changes.
The grantor may transfer vehicles, bank accounts, investments, real estate and other property to the trust. Since the grantor also acts as the trustee and beneficiary, he is managing the property he placed in the trust for his own benefit. The grantor/trustee is free to use, acquire, and sell property just as he would have before, except that those transactions occur in the name of the trust. The grantor is free to terminate the trust at any time and take the property back.
A living trust serves its intended purpose when the grantor passes away. Then, those he has appointed as successor trustee and beneficiaries are substituted in. The trust still owns all of the property, and the successor trustee manages the property and makes distributions to the beneficiaries as the terms of the trust direct.
One significant benefit of using a living trust to pass property is that it avoids probate. Some of the benefits of avoiding probate with a living trust include:
- Beneficiaries may receive and benefit from the property much sooner than they would through the probate process
- The details of a trust are private, whereas a will that has been submitted to probate is public record
- Administration of an estate in probate can be costly compared with a trust
Do You Still Need a Will if You Have a Trust?
While a living trust is an alternate means of transferring property that would otherwise pass through probate, it’s generally a good idea to pair it with a will. That’s because it’s common for some property to get left out of the trust, especially if the trust is maintained for many years during the grantor’s lifetime.
If there’s no will, a vehicle registered in the deceased’s name or a bank account in the deceased’s name with no listed beneficiary will pass according to Washington’s intestate succession law, which may not have the desired result. The most common way to protect against this is with a pourover will–a will that directs that any property held in the deceased’s name and not passing directly to a beneficiary be transferred into the trust.
What is a Testamentory Trust?
Another type of trust that often plays a role in a comprehensive estate plan is a testamentary trust. While a revocable living trust is created during the grantor’s lifetime, a testamentary trust is created by the terms of the will.
Creation of a testamentary trust gives the deceased greater control over how the property may be used. Some reasons people choose to create a testamentary trust rather than leaving money and property directly to the heir include:
- Concerns about management of the assets, particularly if the beneficiary is young or has issues like a gambling or addiction problem
- Protection of assets from creditors of the beneficiary
- Prevention of assets leaving the family through divorce or death of a beneficiary
The terms of the trust may dictate that a certain amount of money is paid to the beneficiary monthly, annually, or upon certain landmarks like college graduation or a specific birthday. The trust may also be established for specific purposes, such as to pay for education or medical care. In contrast, the beneficiary of a will is free to do whatever he or she chooses with the bequest.
The two trusts described above are specifically designed for estate planning. But, other types of trusts can play an important role in providing for your family, managing tax obligations, protecting assets and more. Some examples include charitable trusts and special needs trusts. Depending on your circumstances and goals, your estate planning attorney may suggest other types of trusts.
Choose The Right Estate Planning Tools for You
Some Washington residents choose a will to pass property after their deaths, while others choose a revocable living trust or a combination of will and trust. The best way to find the right solution for you is to talk with an experienced Washington estate planning attorney.
At Harbor Law Firm, we make estate planning as simple and stress-free as possible. That means:
- Knowledgeable guidance customized to your circumstances and your goals
- A fully remote process that never requires you to leave home
- Early morning, evening, and weekend hours to fit your schedule
- An adaptable process for exchanging documents and collaborating
- Flat-rate pricing that ensures you’ll never be surprised by a legal bill
We also offer free consultations. Schedule yours right now.
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