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.
