Trusts are estate planning instruments whereby a property interest is transferred from one party (the “trustor”) to another party (the “trustee”). The property can then be managed and distributed by the trustee on behalf of the beneficiaries of the Trust. Two commonly used estate planning Trusts are Testamentary Trusts and Living Trusts.
A Testamentary Trust is written into a person’s (the “testator’s) Last Will and Testament, and comes into existence only upon the testator’s death. Testamentary Trusts are often included in a Will when a beneficiary is a minor, is at risk for losing public assistance benefits if inheriting assets outright, or is at risk for losing the assets due to poor financial management skills.
A Living Trust, also known as an “Inter Vivos” Trust, is created by the legal transfer of a property interest from the trustor to the trustee during the trustor’s lifetime. A Living Trust can be either revocable or irrevocable. Some benefits of a properly drafted Revocable Living Trust are that it can be amended or even revoked during the lifetime of the trustor, and it can be used to bypass probate proceedings in transferring assets to beneficiaries. An Irrevocable Living Trust, as it’s name indicates, generally cannot be amended or revoked once it is signed. One may set up an Irrevocable Living Trust to protect assets from tax or creditor liabilities.
Some advantages of a Living Trust versus a Will is that a Living Trust can avoid probate and therefore assets can be distributed significantly more quickly than with a Will, and there can be a higher level of privacy since probate proceedings are a matter of public record. Living Trusts can be harder to contest than Wills, they can simplify transfers of title of real property located out of state, and they can create tax benefits to beneficiaries, among other advantages.
There can be disadvantages to a Living Trust as compared to a Will with a Testamentary Trust. A Living Trust takes longer to put together than a Will with a Testamentary Trust, therefore it is more costly to draft. A Living Trust requires more maintenance, which includes titling all assets into the name of the Trust on an ongoing basis as they are acquired. Making changes are more time-consuming and costly for a Living Trust than for a Will with a Testamentary Trust.
In Washington State the costs of a probate proceeding are usually less costly than in states like California and New York. Therefore it may be more cost effective and convenient for you to rely on a Will (with or without a Testamentary Trust) to transfer assets to your beneficiaries.
To avoid unintended complications and costs for your estate and beneficiaries, it is important to consult with an attorney familiar with Washington Trust laws prior to making the decision to create a Trust.