Dynamic and Creative Estate Planning Strategies

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 the most common type of trust used in Washington State. This trust is unique in that when the trust is created, the grantor initially 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 else 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 also 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. The successor trustee and beneficiaries come into play. 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. Other 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 State’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. Please visit our page on Wills for more information. 

What is a Testamentary 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 a 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, and
  • 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.

Other Trusts

The two trusts described above are specifically designed for estate planning. However, other types of trusts can play an important role in providing for your family, managing tax obligations, protecting assets, and more. Some examples include irrevocable life insurance trusts, charitable trusts, and special needs trusts. Depending on your circumstances and goals, your estate planning attorney may suggest other types of trusts.

Work With an Experienced Wills and Estates Lawyer

When you’re planning for the future security of your family, it’s in your best interests to have knowledgeable guidance every step of the way. That guidance doesn’t have to be painful or prohibitively expensive. 

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 and can speak with you outside regular business hours. For more on our remote estate planning process, visit this page on our website. Schedule your free consultation today.