A Revocable Living Trust (RLT) is a well-known estate planning tool that is used throughout the United States. For some, an RLT can provide meaningful advantages, including privacy, disability planning, and a smooth transition of asset management. However, an RLT is not the right fit for everyone, and in Washington State, it is often worth weighing its benefits against the relative simplicity of the probate process—the legal process of validating a will, appointing a personal representative, and administering an estate.
An RLT is a trust that is created while you are alive. Once the trust is created, to function as intended, it must be funded, meaning the trustor (the person who creates the trust) must transfer substantially all his assets into the name of the trust, instead of owning assets personally.
While the probate process may be cumbersome in many states, Washington State’s process is quite efficient. This is largely because the personal representative can usually obtain nonintervention powers as long as the estate is solvent and the decedent’s will does not provide otherwise. These nonintervention powers allow the personal representative to carry out the testator’s wishes and plan without obtaining court approval for every step, making the overall probate process more streamlined than commonly found in other states.
Creating an RLT can be more expensive and labor-intensive compared to the process of creating a will. While an attorney has to draft both a Will or an RLT, funding the RLT requires more work that is not required when using a will-based plan. For example, all other real property should be transferred to the trust, which is done by recording deeds. This adds to the overall cost of the estate plan because the attorney must draft the deed and also there are recording fees (which are paid to the county). Bank and most brokerage accounts also need to be re-titled into the name of the trust. While an attorney can assist with the initial steps, after an RLT is created, the trustor is responsible for confirming that his assets—present and future—are titled in the RLT’s name. Even when using an RLT-based estate plan, it is important to also have a will. For an RLT-based plan, the will is called a “pour-over” will. A pour-over will is a type of will that transfers any remaining assets not already in the RLT into the RLT upon your death. If you forget to title an asset in the name of the RLT and must use the pour-over will, you will still need to utilize the probate process.
These upfront costs and extra labor needed to properly fund an RLT may outweigh the benefits of utilizing an RLT-based estate plan, especially if the only goal is to avoid probate. Fortunately, there are many other estate planning tools that can achieve efficient results. For example, a community property agreement between spouses allows you to skip the initial probate and leave everything to the surviving spouse.
So, when can an RLT be helpful? Here are some common examples when an RLT may be a good fit:
- People who own real estate in more than one state. Holding real estate in an RLT can help avoid the need for multiple estate administrations to take place in the various states upon death.
- Those who want their estate plan to be more private upon their death. A will is filed in court after the person who made the will (the testator) dies, at which point the will technically becomes a publicly accessible document. The RLT trust instrument itself, however, usually does not get filed in court upon death, providing an additional measure of privacy especially for high profile individuals and families.
- When a person is facing an oncoming event of incapacity (such as dementia) and would like for another person or financial institution to assume management of all his or her assets in a consolidated manner, particularly before the person’s incapacity fully sets in.
RLTs remain a valuable option in certain circumstances, but Washington residents should evaluate them carefully rather than assume they are necessary. If you are interested in finding out which estate planning tools are right for you and your estate plan, reach out to a trusted estate planning attorney.
