Under a living trust arrangement, you place your assets under the care of a trustee, and the trustee distributes them to your beneficiaries, according to your wishes, after your death. The creation of a trust offers certain legal benefits, such as tax exemptions and probate avoidance. In the state of Washington, trusts are created and governed by Chapter 11.98 of the Revised Code of Washington.
The main benefit of a revocable living trust is that its assets are not subject to the probate process -- the trustee can distribute assets at any time before or after death, as long as distribution is authorized by the trust document. This benefit often saves your heirs time and money after you die because probate administration can be expensive and take months or years to complete. Washington offers an inexpensive, expedited probate process for estates worth less than $100,000, which may be an alternative to creating a trust.
A trust can be either revocable or irrevocable. You can dissolve or amend a revocable trust at any time before you die, but irrevocable trusts cannot be dissolved or amended. Unlike some states, Washington considers a trust to be irrevocable unless the trust document specifically states otherwise. The main advantage of an irrevocable trust is that the trust assets are normally protected from creditors and are not counted as part of your probate estate for estate tax purposes. This is important if the value of your estate would otherwise exceed the estate tax exemption -- $5,120,000 in 2012 and set to fall to one million dollars in 2013.
In the state of Washington, you must be at least 18 to establish a trust. Create the trust by drafting a document that specifically states its purpose is to create a trust; names the beneficiaries; names a trustee who lives in Washington; and instructs the trustee in how to distribute the assets. Under Washington law, the same person cannot be the sole trustee and the sole beneficiary. Although not required by law, carefully listing trust assets in the trust document helps to prevent disputes concerning the identities of the assets that belong to the trust. Signing and dating the trust document in front of a notary public prevents questions about its authenticity.
Transferring title of your assets to the name of your trustee prevents the court from considering these assets as part of your probate estate. If the trust assets include cash, the trustee should establish a bank account in the name of the trust using the trust instrument as proof of his authority to open the account. Title to real estate and automobiles should also be transferred into the trust. When you add property to the trust, always amend the trust document to include the new property and, if it is titled property such as real estate, change the title to the name of your trustee.
Read More: Transferring Property From a Living Trust to a Successor Trustee
- Estate Planning Council of Seattle: The Truth About Revocable Living Trusts in Washington State
- Kiplinger: Living Trust FAQs
- Jennifer C. Rydberg: Living Trusts
- Washington State Legislature: Trust Code
- Bay Financial Associates: The Irrevocable Trust
- Bloomberg: Wealthy Take Estate-Tax Exemptions Beyond Grave Until 2013
- David Sacks/Lifesize/Getty Images