Revocable Living Trusts
Washington individuals and families concerned with managing assets and wealth and passing them on to succeeding generations may turn to revocable living trusts as an estate planning tool. Revocable living trusts offer various advantages and benefits for an estate plan, including passing on inheritances without the need for a public probate, ensuring the continued supervision and management of assets in the event of incapacity, and offering privacy in managing family financial affairs.
Let an experienced trusts attorney serving Spokane, Seattle, and the Tri-Cities from ELG Estate Planning help you learn more about revocable living trusts. Contact our firm today for an initial case review to discuss whether you should incorporate revocable living trusts into your comprehensive estate plan.
Understanding Revocable Living Trusts
A revocable living trust is a legal structure that allows people to manage their money and property. In a revocable living trust, a person (called a grantor or settlor) nominates another individual or organization (such as a financial institution) to serve as a trustee to manage the property the grantor places into the trust. The grantor can also determine how the trustee manages the trust by establishing terms in the document.
The trust document can identify one or more beneficiaries who can receive income and/or principal payments from trust assets and set the terms under which the trustee must manage trust assets and pay principal or income to beneficiaries. The trustee will hold and manage assets in the trust, such as by putting cash into investments, managing stock portfolios, or operating income properties.
A revocable living trust affords a grantor greater flexibility and control than an irrevocable trust. With a revocable living trust, the grantor retains the right to amend the trust document’s terms, including changing trustees, adding or removing beneficiaries, or changing how the trustee must manage the trust. A grantor can also dissolve the trust and regain ownership and control of its assets.
Advantages and Disadvantages of a Revocable Living Trust
Revocable living trusts offer individuals and families a variety of estate planning benefits, including:
Advantage – Avoiding Probate – Families frequently use revocable living trusts to facilitate inheritances while avoiding the probate process. Rather than passing assets through a will, an individual can place those assets in a revocable living trust, allowing them to continue using and enjoying those assets during their life and designating loved ones or other beneficiaries who will receive those assets from the trust after their death.
Disadvantage – No Long-Term Care Protections – In Washington State, a revocable living trust cannot be used to protect assets for a surviving spouse against Medicaid spend down should long-term care benefits be needed. A will is needed and that means probate. Fortunately, the probate process in Washington is relatively straightforward.
Advantage – Privacy – Trusts allow individuals and families to keep their financial affairs private, as trust administration does not involve a public court process like probate.
Disadvantage – No Creditor Protections – Revocable living trusts do not protect assets in the trust from creditor claims.
Advantage – Flexibility and Control – Revocable living trusts allow individuals to retain some control over the assets placed in the trust. They can amend the trust’s terms or dissolve it and regain ownership of the assets if necessary.
Disadvantage – Ongoing Maintenance – Revocable living trusts must be funded and managed for the trust to control the assets. That means, for example, that when a new bank account is opened, the account must be titled in the name of the trust. Not uncommonly, the trustee fails to properly manage and fund the trust, resulting in both a trust administration and a probate.
Advantage – Incapacity Planning – People can use revocable living trusts to empower a trusted loved one or advisor to manage their affairs should they become incapacitated. A person can place their assets in a revocable living trust and name a family member or advisor to serve as the trustee or successor trustee to manage their assets if they cannot do so themselves due to disability, illness, or advanced age.
Revocable living trusts are an excellent estate planning option but come with advantages and disadvantages. Individuals and families considering using a revocable living trust in their estate plan should evaluate factors that may weigh against their suitability. These may include the additional costs involved with creation of the trust, ongoing professional guidance for proper maintenance of the trust, legal services for amendments to the trust, possible use of professional trustees, unsuitability for long-term care benefits eligibility. Alternate estate planning options, like wills may better serve. Or with a complex and taxable estate, an irrevocable trust should be considered.
How to Create a Revocable Living Trust
Creating a revocable living trust involves several steps. First, a grantor can best protect their rights and interests when setting up a revocable living trust by working with an experienced Washington estate planning attorney. A lawyer can help the grantor determine the suitability of a revocable living trust, structure it to meet their specific needs and goals, and ensure that it complies with applicable laws.
The next step in creating a revocable living trust involves drafting a document identifying the trust as a revocable living trust and designating a person or organization to serve as the trustee. A grantor can designate themselves as the trustee and others as successor trustees if they can no longer hold the role. Alternatively, though not commonly, they may designate another party as the initial trustee. The trust document will also establish the terms by which the trustee must manage the trust, including how they should handle trust assets in compliance with state laws, and when they should pay income or principal to the designated beneficiary or beneficiaries.
After creating the trust document, the grantor must fund the revocable living trust by transferring assets to the trust. Depending on the asset type, transferring them to a revocable living trust may require retitling them, changing ownership designation, or transferring funds into the trust’s bank accounts. The trust can only operate once the grantor funds it.
Common Misconceptions About Revocable Living Trusts
People may have various misconceptions about revocable living trusts that convince them that estate planning tools like these cannot help them. Some of the most common misconceptions people have about revocable living trusts include:
Only Wealthy Families Use or Need Trusts – Although revocable living trusts can provide valuable advantages to wealthy families, such as affording privacy in their financial affairs, they can also help families of all income levels by minimizing expenses from probate or ensuring management and supervision of assets if an individual becomes incapacitated.
Trusts Help Avoid Taxes – Although certain trusts can minimize tax liabilities, many revocable trusts offer limited or no tax benefits for a single person. A marital trust can be funded in a revocable living trust upon the death of the first spouse, providing tax protections.
Placing Assets in a Revocable Trust Means Losing Control Over Them – With a revocable living trust, a grantor retains control over the assets they put into the trust by having the right to amend the trust document or dissolve the trust.
Revocable Living Trusts Protect Assets from Creditors – Assets placed in a revocable living trust remain subject to seizure by a grantor’s creditors since the grantor retains ultimate control over the assets through their right to terminate the trust and regain ownership. The assets also are generally considered to be a part of the grantor’s estate for creditor claims and estate tax purposes.
Why Work with an Attorney to Establish a Revocable Living Trust?
Having experienced legal counsel to help you evaluate the suitability of a revocable living trust and structure one as part of your estate plan can ensure that your estate plan meets your needs and goals. An estate planning lawyer from ELG Estate Planning can help you with revocable living trusts by:
Taking the time to discuss your situation to understand your circumstances, concerns, and estate planning wishes
Determining whether a revocable living trust provides the best option for meeting your estate planning objectives
Advising you regarding trustee selection and the scope of the trustee’s authority
Structuring your revocable living trust to tailor it to your goals and objectives
Helping you fund the trust, including preparing and recording deeds necessary to transfer real property to the trust
Working with you to amend the trust in response to your or your family’s changing circumstances
Contact Our Washington Estate Planning Firm to Learn More About Your Legal Options
A revocable living trust may enable you to protect and manage your hard-earned assets and wealth. Contact ELG Estate Planning today for a confidential consultation with our legal team to learn more about revocable living trusts and discuss their suitability for your estate planning needs and goals.