Types of Trusts Available in Washington State
Many people are familiar with the three major types of trusts available in Washington State, but you should be aware that there are several more variants to choose from based on the circumstances. People understand the term “trust” from television portrayals of prosperity or have heard the phrase “trust fund children” in popular culture references. Tools like these, under specific legal circumstances, are utilized to distribute a deceased person’s assets in the way they see fit. We want to emphasize that trusts aren’t only for celebrities and the wealthy; they may be used for just about everything.
The following guide explains the many types of trusts available in Washington State and how they’re defined. If you have any questions regarding when or how to set up a trust, contact our estate planning attorneys right away.
Three Most Recognized Types of Trusts Available in Washington
Using a trust in your estate plan may provide you and your loved ones several benefits. It allows you to avoid probate, minimize inheritance taxes, and have more control over how your assets are divided after you pass away.
Because there are so many diverse kinds of trusts, one of the most difficult things to comprehend is how they vary, what objectives a specific trust may assist you achieve, and if you really need to establish a trust in your estate plan. Here’s a primer on the three primary sorts of trusts so that you can get started figuring out your options.
An irrevocable trust, unlike a revocable trust, does not allow the assets inside it to be taken out or modified after they are placed in the trust. Because you have ceded control of assets transferred into an irreversible trust, they are effectively deleted from your estate and save you from any estate taxes.
There are many different types of irrevocable trusts. The irrevocable life insurance trust (ILIT) is a popular example. It’s a type of life insurance policy that lets you distribute its death benefits to your heirs or put them toward estate administration expenses without incurring any estate taxes.
It is not always necessary to establish and finance a trust right away if you would like one in place when you pass away. A testamentary trust may be established through a will, and the terms of the trust can be established in your will. Testamentary trusts are frequently used to create special trusts for minors. Assets held in a testamentary trust won’t be distributed to beneficiaries until after your death, but they can still be established and funded while you’re living.
A revocable living trust (also known as a living trust or an intervivos trust) is a legal technique for avoiding the probate process for transferring your inheritance. When it comes to managing your assets, having Probate may be time-consuming, expensive, and inconvenient, making it a poor option for your successor trustee.
A revocable trust may be useful if you own property in several states. For example, if you have a home in Denver and a lodge in North Spokane, your estate may be subjected to probate in both jurisdictions after your death. However, if you hold those two properties using a revocable trust, you might be able to avoid probate in both places.
Lesser Known Types of Trusts Available in Washington
Aside from testamentary, revocable, and irrevocable trusts, there are several other types of trusts available in Washington and they can be created based on the specific needs of the parties.
These are also referred to as asset protection provisions, which protect trust assets from lenders and creditors. You may use them with any type of trust. These clauses, which may also be referred to as “spendthrift provisions”, can safeguard the assets of a trust by keeping them away from its beneficiaries’ creditors.
A trust is the most popular form of legal entity in which individuals with mental or physical limitations can benefit from their own assets. Special needs trusts are used to assist disabled people, children, friends, and parents. These trusts are frequently utilized to supplement rather than obstruct any current or future government assistance.
There are several types of charity trusts to select from depending on the donor’s charitable objectives. A charity trust can be set up for a variety of reasons, including memorializing a loved one or maintaining the settlor’s philanthropic goals. Two common charitable trusts are CRUTS and CRATS.
A bypass trust is a typical estate planning technique for married couples. A bypass trust is established to receive the benefits of the first spouse’s estate tax exemption. If the initial partner in a married couple’s estate plan dies, the surviving spouse may use a bypass trust.
When the bypass trust is funded for less than $1 million, Washington residents may be relieved from estate taxes since a tax reduction has been enacted. When the second spouse passes away, bypass trust assets are regarded as part of the first spouse’s gross taxable estate rather than the second spouse’s, therefore they are not taken into account when computing estate taxes.
Choosing a Trust That Meets Your Needs
An estate planning lawyer licensed in Washington State will be best qualified to advise you on the suitable trusts or legal documents you’ll need to include in your own specific estate plan. It’s actually quite easy to make an unintentional mistake when drafting or funding a trust.
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.
If you’ve already researched the various types of trusts available in Washington State and are ready to take the next step, contact our veteran estate planning lawyers today by calling 509-328-2150 and we’ll setup a quick consultation to understand your needs and get your trust documents started.
We highly recommend checking out this additional resource from Nolo that covers the basics for creating a Living Trust in Washington State.