Can a Living Trust Help Avoid Probate?
How can a living trust help avoid probate? It’s a legal document that might be the right choice for you and your family if avoiding probate is a priority.
Most of us don’t like to think about what will happen to our family after we die, but we like having control and doing the right things for our family. Much of estate planning doesn’t improve our lives — it improves the lives of others when we’re no longer around. For that to happen, we need to put into place the control of a legal structure that can effectively distribute our assets after our passing. Unless you take steps to avoid it, your assets will be subject to probate at the time of your death.
When a will is present, the probate court will oversee the organization of your assets, which includes paying debts, taxes, and fees, and then distributing the remaining assets according to the terms of your will. If you have no will, the assets will be distributed according to Washington State law, which, unless it’s an extraordinary situation, would mean going to your next of kin in equal portions. if there are no locatable descendants, then ultimately, your assets would go to the state.
Understanding a Living Trust
A living trust is a legal document created during the settlor’s lifetime. Because of this, it has legal effect in the present, rather than only upon the death of the person making the trust (called the “trustor” or “grantor”) This legal document spells out what you, as trustor, want to be done with your assets and who benefits from them during your lifetime. Trust that it creates is essentially a separate entity, with the sole purpose of holding title and control to the trustor’s assets.
Typically, in life, the grantor/trustor of the initial trust also serves as the trustee. A trustee’s job, in essence, is to oversee the management and distribution the trust assets. If you were to no longer be able to manage the trust as the trustor/trustee, then you may appoint a successor trustee who can manage these assets for your benefit. This successor trustee would also manage and distribute the trust assets after your passing. You could name a co-trustee who would serve with you during your life and have more than one trustee do the job after your death.
A living trust can act as a will because that successor trustee can carry out your instructions on the disposition of assets after you pass away. It can be a distribution where others take ownership of the assets or they could continue to be part of the trust for the benefit of others. This might be a good idea if you want to help someone too young to handle the assets, you don’t think an adult will use the assets wisely or you want to create a long-term source of ongoing donations to a charity or charities of your choice.
How Does a Living Trust Avoid Probate?
Depending on the size of a person’s estate (meaning the property, investments, money, and personal effects left behind), it probably can be costly, time-consuming, complicated, and perhaps worst of all, could create contention between the surviving heirs/family members of the deceased person’s estate. You may be able to avoid or at least limit the effect of the probate process with proper trust planning. One of our attorneys can provide you with information on a variety of estate planning methods and help you develop a comprehensive plan for all your assets. A living trust is an estate planning option to help you prevent assets from becoming part of the probate process.
Do I Need a Living Trust to Avoid Probate?
Do you need a living trust to avoid probate? With a trust, your assets would no longer legally be yours and would not be part of your probate property. The trust would be the legal owner. Now, those sentences seem almost intrusive in their implication, however, one must bear in mind that the person who creates the trust can (and usually does) appoint themselves as the trustee and primary beneficiary of the trust assets in life. That’s why the trust me technically own “your assets” in reality you are still in control.
There are two kinds of assets at the time of your death: probate and non-probate property.
- Probate property is assets held in your name alone or in which you have an interest. They’re distributed through the probate process overseen by the court.
- Non-probate property does not pass through the court. These assets include jointly-owned bank accounts or titles with a “transfer on death” or TOD provision. Property held in a living trust are also nonprobate property and would be distributed according to the terms of the trust, without court involvement. This process is generally faster, less complex and less costly than probate.
A trust is a legal document in which the property owner (the trustor, settlor, or grantor) sets aside ownership of assets, which will be overseen and managed by the trustee for the beneficiary. In a living trust, you could be the trustee and the beneficiary.
Costs of a Living Trust
All choices involve tradeoffs, including whether or not to use a living trust or some other method to avoid probate and whether the cost of avoiding it would be worse than the cost of the probate process itself.
A living trust generally costs more time and money to create and fund compared to creating a will. With a living trust, the costs are incurred during your lifetime, while the costs in time, money, and energy of probate happen after you pass away. If you have few and simple assets, a will may be the better choice.
Some costs for a living trust relate to filing new documents related to your existing assets. With a living trust, you would need to create new deeds and other documents to transfer ownership of your assets into it. Your bank or other financial provider which holds your investments and your insurance company would need to be notified and the proper paperwork completed. Your accounts, stock ownership, and beneficiaries would need to change. New stock certificates would have to be issued. There would be new titles for cars and boats.
Can a Living Trust Avoid Probate in Washington?
Yes, But You Should Still Create a Will and an Estate Plan
If you acquire assets after creating the trust and don’t transfer ownership into it, they may be subject to probate. You may have assets you don’t want to be part of the trust or own assets that can’t go to the trust. Some retirement plans and jointly held assets can’t be the subject of a trust.
With a “pour-over” will, your assets (after the taxes, fees and costs of your estate are paid) could be transferred (or poured over) into your trust. This will would need to be probated but can be a good back-up tool for assets that remain after probate.
What Should I Do Next?
You may still wonder, can a living trust avoid probate in Washington and is the cost worth the effort? A living trust could save your family considerable time, stress, and money down the road by preventing or limiting probate, but that comes at a cost, too. Whether or not a living trust makes sense for you requires some thought and consideration of your goals and priorities.
If you have questions or concerns about living trusts, probate and how it might be avoided, consult with a Dickson Frohlich Phillips Burgess probate law attorney who can evaluate your situation, give you some options and suggest what might work for you and your family. For more information or to discuss your concerns about avoiding probate in Washington State, call our offices in Seattle or Tacoma today for a free phone consultation at 206-621-1110. We look forward to working with you.