Trust Issues, Got Any?

Have you ever been told that you should have a trust and wondered what the heck that meant? I meet with clients almost every day who ask me whether they should have a trust instead of a will and here’s what I tell them: “it depends”.  I know, I know, that’s such a lawyerly answer, but it’s the truth.  For some people, a trust is the best fit and for some, a will works just fine.  So, why would you consider using a trust instead of just a will?

Let’s start with the basics: wills and trusts both serve to transfer your assets to your loved ones after you have passed away.  A will is not effective while you are alive, but at death, it springs to life and names who should be in charge of settling your estate (the executor) and who (beneficiaries) should receive your assets (money, investments, real estate, etc.).  A trust will perform the same basic functions at death since it also names who should be in charge (successor trustee) and who should receive the trust assets (beneficiaries).  The difference is that a trust only governs those assets that are titled in the name of the trust and it is effective during your lifetime.  This means that in order for your trust to be effective you actually have to retitle assets into it (i.e. rename applicable financial accounts, transfer real estate, etc.) while you are alive.  Now while this requires a little work up-front, it’s not too difficult a task as long as you remain diligent.

So why would you do this? One big benefit of utilizing the trust structure is that a correctly funded trust will allow your estate to avoid the probate process.  I am sure you have heard horror stories about probate, since pretty much every client I meet groans out loud at the mere mention of the word.  While Washington has a fairly straight-forward probate system, it does still require a trip to court, a waiting period before assets can be transferred, and attorney fees.  While I personally don’t mind the process, it certainly doesn’t hurt to avoid it.

If you own real estate in more than one state, I 100% recommend setting up a trust.  Each state has jurisdiction over the property within its bounds, which means that if you die and own property in two states, there will be a probate here in Washington and then another (ancillary) probate in each other state where you own real property.  In this case, a trust will significantly save your estate when it comes to attorney fees and court costs.

Trusts are also a great way to organize your estate and make it easier for the successor trustee and your beneficiaries when it comes time to settle everything up.  Because you need to fund your trust during life, it typically means that you have a clearer picture of assets that you own, how they are titled, and perhaps even a current list with helpful information that you can then leave for your successor trustee.  Well-organized estates are less likely to deal with beneficiary issues or problems because there is less ambiguity.

Whether you need a trust is a good question to ask your lawyer, but the bottom-line and my favorite soapbox is that regardless of whether a trust or a will is better for your situation, having one is very important.  A large part of the population has no estate planning in place and let me tell you, estates without planning are no fun.  But that’s a topic for another time.

Community Property Law

In your line of work, do you have questions that just come up over and over again? Well I sure do and one of the questions that comes up most around the old conference table is: “Why the heck do we need a Community Property Agreement when we live in Washington and Washington is a community property state?” Such a good question and so often asked with the sarcasm that only comes from a client thinking that they know more about the law than the attorney they just hired to help them. But I digress.  Community property is one of the most commonly misunderstood topics and so I thought I would break it down here.

1.            Washington is a community property state, what does that mean?  Essentially, Washington’s identification as a community property state means that in Washington, if you are married, there is a presumption that anything that you earn during the marriage is “community property”.  Notice the word “earn.” The presumption of community property does not extend to any assets you owned prior to marriage, nor does it include gifts or inheritances that you receive during marriage, those items are presumed to be your separate property.  However, if you take assets that are presumed separate property and “commingle” them with your community assets so that they lose their separate character, then you may have inadvertently transformed them into community property.  Now this is a very basic statement of the law in Washington, so understand that the topic can be much more complicated and nuanced, but this is it in a nutshell.

2.            What is Community Property?  When something is owned between spouses as community property, it means that asset is owned in 50/50 undivided shares by both spouses.  Neither spouse controls the whole asset.  Conversely, separate property is owned 100% by the one spouse and not jointly by both.

3.            What happens to community property when one spouse dies?  Here’s where things start to get complicated because there are three main possible scenarios that could apply: (a) Deceased Spouse has no will, (b) Deceased Spouse has a will; and/or (c) Deceased Spouse has a community property agreement.  The answer is different in each scenario.

                First, if there is no will or community property agreement and one spouse dies, RCW 11.04.015 states how the estate will pass.  Basically, 100% of the community property and a portion of the separate property (depending on if the deceased spouse has children or other heirs).  However, a probate will most likely be necessary to transfer everything over to the surviving spouse, even if most everything was community property if there is real estate or more than $100,000 of assets in Deceased Spouse’s estate.

                In the second scenario where Deceased Spouse has a will, Deceased Spouse can leave his or her half of the community property to whomever he or she wishes (but only his or her half) and the same goes for separate property.  Here again though, if real estate or more than $100,000 of financial assets are part of Deceased Spouse’s estate, it is likely that a probate will need to be opened to transfer assets to the surviving spouse and/or other beneficiaries.  Most people do not know this and assume that no probate is ever necessary when there is a surviving spouse.  This is tough news to break to clients who are already going through the worst time.

                In the event that a spouse dies but the spouses had a community property agreement between them, it means that (if the estate is not taxable and there aren’t other legal considerations we need to worry about) we can record the community property agreement in every county in which the spouses own real estate and the Agreement will serve to memorialize that everything belonging to Deceased Spouse should pass to Surviving Spouse. No probate is necessary under this scenario.  See why you may want to have a community property agreement?

Now it’s important to emphatically emphasize (like what I did there?) that community property agreements (like all estate planning tools) are not right for every person or situation.   But if you are married and your estate is not estate- taxable it is something that you should discuss with your attorney to find out if it would be a good fit for you.

As always, I love answering questions, so ask away if you have any.  This article does not constitute legal advice and is meant to provide basic level information about a very commonly misunderstood topic that every married person in Washington actually needs to know about. 

Tuesday Tips (Summer Edition) Leaving on a Jet Plane? 10 Ways to Prepare for your Trip

It’s summer here in the South Sound, although you would barely know it by looking out the window.  It feels more like what I’ve decided to refer to as “early fall.”  All the more reason to take off for a sunny vacation, check out of your real life and get some real relaxation.  My family’s getting ready for our summer holiday and it’s got me thinking about what’s important to do before leaving for that little break.  Here are my top 10 best ways to prepare and get the most out of my time away:

1.            Pack a Copy of Important Documents: your passport, driver’s license, travel itinerary, credit card and medical documents (like Power of Attorney and Health Care Directive) and pack them in a compartment of your suitcase or save them electronically.  If you lose your actual documents, the copies will help.

2.            Set an Email Auto Response: Nothing ruins vacation more than feeling stuck to your phone or computer.  Using an automatic response to let people know you are away, what your access to email will be like and who they should contact in your absence is one of the best ways I know to be able to actually RELAX when you are away.  Then if an emergency comes up that you need to deal with, it will be the exception, not the rule on your trip.

3.            Set your House up for Success:

                Unplug any electronics possible (they still use energy even when you aren’t using them);

                Give your fridge a little cleaning out;

                Put your lights on a timer so your dark house doesn’t attract the wrong kind of attention;

                Set your thermostat to save energy; and

                Clean your house so you can return to one that feels good.

4.            Stop Your Mail: (or make other arrangements for it to be picked up regularly). Identity theft is no fun!

5.            Tell your Bank you are Leaving: You can usually find the right phone number on the back of your debit or credit card.  Doing this will ensure that you’ll continue to be able to access your funds.

6.            Pay your Bills: Make sure you pay any bills that will be due while you are away.

7.            Charge Electronics: Pre-charge all your devices so they are ready to go when you need them on the plane. AND DON’T FORGET CHARGERS.

8.            Bring Plenty of Sunscreen: I’ve found that it’s usually more cost effective to buy sunscreen at home and pack it with me than buy it in tropical locations. Plus, you want to be able to hit the beach or pool right away.

9.            Check the Weather: I’ve been surprised before-make sure you are prepared by checking the weather before you pack.

10.          Prepare for Lost Luggage:  It’s no fun, but if you have a change of clothes and your essentials in your carry-on bag, you’ll survive in the event your luggage isn’t waiting for you on the other side. I always put a swimsuit, change of clothes and my makeup in my bag that I carry on. It will still be annoying, but it’s way better with a few essentials.

Bonus Tip:  Make a list of everything you need to bring (I do mine on the computer so I can reuse it every time with tweaks for the specific trip) with check boxes.  Then go one by one and check all the boxes. You’ll be as prepared as possible and less stressed than if you are trying to create the list in your head.

None of these tips are rocket science, but they are good reminders as you get ready to check out of real life for a while.  Hope they help you and I’m wishing you a wonderful vacation.

Tuesday Tips (Summer Edition) - Medical Treatment Authorizations for kids

It’s summer in the PNW (even though the view from my window is currently revealing rain.) Kids are out of school and that means they are doing a whole bunch of other activities, spending time with friends, sleeping over & visiting other family members, and attending all kinds of camps. In the summer chaos, its easy to forget important details and this is something that’s been on my mind lately. As a lawyer and a mom I try to be prepared and make sure that my kids are safe no matter where they are. One piece of the puzzle is making sure that someone who is with your child is authorized to seek medical treatment for your child if any medical issue or injury occurs. Personally I hate thinking about this, but if I could not be reached and my child was injured or needing medical attention, I would not want assistance to be slowed down just because there was no one around with authority to consent to treat my child.

In light of that, I’ve created a super simple and straight-forward medical treatment authorization and consent form that I use when my kids are going to be with other adults. I fill this form out with all of our contact information, doctor & dentist, and insurance information and make a stack of copies. Then when I need to give one of these forms out I only need to fill in the name of the adult I am authorizing to seek treatment.

My form is informal and practical and if you would like a copy for yourself, you can download mine here.

As always, if you have questions, call or email and I’ll be happy to help.

Legal Stuff (because I’m a lawyer): Please note that provision of this form does not constitute legal advice and downloading it or reading it for yourself does not create an attorney-client relationship between us. It’s simply a helpful tool that I use that you may find helpful too. Since every situation and circumstance and child is different, it’s important to remember that forms are merely a starting place and need to be customized for each particular situation. While I am happy to share this form, by downloading or reviewing it, you are acknowledging that I am not responsible or liable for your use or misuse of the form.