Many Washington people are aware of the presence of trusts. People frequently know the word from television representations of affluence or have heard the expression “trust fund kids” in pop culture allusions. Under specific legal situations, wealth instruments like these are used to distribute a decedent’s estate assets. Nonetheless, trusts aren’t only for the wealthy and famous; they’re helpful for nearly any sort of estate plan you could think about.
Finding a trust in Washington
Two main types of Trusts
Other types of trusts
Choosing a trust that suits your needs
The following provides information on the types of trusts in Washington, as well as how each trust is defined. If you’re still unsure as to when and how to create a trust, speak with one of your estate planning lawyers in Washington immediately for guidance with establishing your trust.
Three primary trusts
Including a trust in your estate plan may offer you and your loved ones a variety of advantages. It helps you avoid probate, minimize potential estate taxes, avoid income taxes, or have more say over how your estate is divided after you die.
Because there are so many different kinds of trusts, one of the most challenging things to understand is how they vary, what objectives a particular trust may help you achieve, and if you even need to establish a trust in your estate plan. Here’s an introduction of the three main types of trusts to help you get started understanding your choices.
Unlike revocable trusts, assets in an irrevocable trust cannot be withdrawn or changed after they are held in the trust. Because you have given up control of assets put in an irrevocable trust, they are effectively removed from your estate, saving you from any estate taxes.
There are many kinds of irrevocable trusts. The irrevocable life insurance trust (ILIT) is a typical example. It is a life insurance policy whose death benefits may be handed out to your heirs or used to pay the expenses of managing your estate without incurring any estate taxes.
Rather than establishing and financing a trust instantly, it is possible to establish a trust that comes into effect when you die. This type of trust, known as a testamentary trust, is created through a will, and the conditions of the trust are spelled out in the will. Testamentary trusts are frequently used as a tool to assist in the creation of a trust for minors. Even though assets in a testamentary trust may be susceptible to probate, the adaptability this type of trust provides when naming a trustee may outweigh the costs.
A revocable trust (sometimes known as a living trust and an inter vivos trust, is used to circumvent the legal process of dispersing your inheritance, known as probate. Probate may be a time-consuming, costly, and general procedure, making it a poor choice for your successor trustee when it comes to managing your assets.
If you own land in several states, a revocable trust may be beneficial. For example, if you own a house in Iowa and a lodge in northern Tacoma, your estate may be liable to probate both in jurisdictions after you die. However, if you hold those two properties via a revocable trust, you may be able to skip probate altogether, making the process of managing your inheritance faster and less expensive.
Other types of trusts
Aside from testamentary, revocable, and irrevocable trusts, other trusts are based on the parties’ needs. We will discuss these further in this section.
Asset Protection Trusts
These are also known as asset protection provisions, limit the vulnerability of trust assets to lenders and creditors. You may add them to any kind of trust. Also known as spendthrift provisions, asset protection clauses serve to prevent the trust’s assets from being exposed to the creditors of its beneficiaries.
Special Needs Trust
Trusts for special needs people are created to help disabled people, children, friends, and parents. To augment instead of interfering with any current or future governmental aid, these trusts are frequently employed.
Based on the donor’s philanthropic goals, there are several forms of charitable trusts to choose from. There are several purposes for setting up a charity trust, including memorializing a loved one or preserving the settlor’s philanthropic intentions. CRUTS and CRATS are two examples of common charitable trusts.
For married couples, a bypass trust is a typical estate planning strategy. A bypass trust is set up to take benefits of the first spouse’s estate tax exemption. The surviving spouse in a married couple’s estate plan may utilize a bypass trust if the first partner dies.
When the bypass trust is financed with less than $1 million, Washington citizens may avoid paying estate taxes because of an estate tax decrease. Bypass trust assets are treated as part of the first spouse’s gross taxable estate rather than the second spouse’s, so they are not included for computing estate taxes when the second spouse dies. A husband or wife may earn payments and principal over their lifespan even though the trust has been set up irrevocably.
Choosing a trust that suits your needs
An estate planning lawyer is most knowledgeable with the Washington trust state laws and can advise you on the appropriate trusts or which legal documents you need to include in your specific estate plan. When preparing estate planning documents, it is simple to make an inadvertent error in the drafting or funding process. You may discuss the function of a trust in an estate plan and the trustee’s duties with a trust lawyer in WA. If you need to make use of trusts, they may assist you in putting your entire estate plan together.
Due to widespread misunderstandings about trusts and their purpose, creating, executing, and funding a trust may be challenging without the assistance of an estate planning lawyer. An attorney who has little expertise with estate planning may also be unfamiliar with the complexities of developing a customized estate plan. It is preferable to leave it to a skilled attorney who can help you with your entire estate strategy. Here at Jones Legacy Law, we are a law firm equipped with some of WA’s best estate planning lawyers.