The movies and tabloid news make it sound like only rich people need wills and trusts. You have probably read about disputes over the estates of famous musicians or local notables whose notability derives mostly from their wealth. You might think that because you do not have enough money for it to be worth fighting over, you do not need to write a will or have a trust, but you would be wrong. Wills and trusts can be important estate planning tools.
When you are dead, no one can ask you what you meant, and your lack of response can leave disagreements between your surviving family members unresolved, sometimes leading to a lifetime of family estrangement. Likewise, trusts are not only for trust fund babies.
Ultimately, it is your decision how you divide your property—how much or little of it there is. Contact a Seattle estate planning lawyer to learn more about how you can have your final wishes carried out in the way you intend.
Everyone Needs a Will
Your will, properly called a last will and testament, is a document that indicates who will inherit your property when you die. You can leave property to anyone you choose, including members of your immediate or extended family, friends, and charities.
You can also disinherit anyone you choose, no matter how closely you are related. The only person with a legal right to claim a share of the estate despite being disinherited pursuant to a legally valid will is the decedent’s surviving spouse (the person who has died).
Wills address matters other than property, too. They express the decedent’s choice of personal representative of the estate during probate proceedings. They also include the decedent’s wishes for the final disposition of remains; in other words, details about burial or cremation.
If you die without a will, a family member or friend can still open your estate for probate in probate court. In this case, Washington state laws about intestate succession will apply. This means that your closest surviving relatives will inherit your estate.
In Washington, unlike some other states, your will can be handwritten or typewritten. However, it is not legally valid until you sign it in the presence of two witnesses, who must also sign the will.
Revocable Trusts Provide Peace of Mind, But Not Tax Breaks, for the Indecisive
Whether or not you write a will, your heirs will inherit your property at the end of probate after your estate settles. If you want them to inherit from you faster than that, you need non-probate assets. These are assets that do not become part of your estate when you die. Instead, they pass directly to your beneficiary as soon as you die. Revocable trusts are a popular type of non-probate asset, especially for people who want to retain power during their lifetime to make any changes to it.
In a trust, revocable or otherwise, the person who sets up the trust and transfers their own property to it is called the grantor. The trust’s rulebook, written by the grantor, is called the trust instrument, and the person who implements the instructions in the trust instrument is called the trustee. The people who receive money from the trust are called the beneficiaries. A trust is its own legal entity; the property in the trust belongs to the trust, not to the grantor; therefore, the assets in the trust do not become part of the grantor’s estate when the grantor dies.
A revocable trust only becomes a fully independent legal entity when the grantor dies. While you are alive, you can modify the trust instrument as many times as you want; you can even be a beneficiary of your own revocable trust. Naming yourself as a beneficiary of your own trust is a good way to ensure that your long-term care is paid for when you need it and that your instructions about your care are fixed in writing. For tax purposes, the assets in your revocable trust still belong to you while you are alive, so you must still pay any taxes associated with them.
Irrevocable Trusts Require a Leap of Faith
A trust that is completely legally separate from its owner is called an irrevocable trust. You can set up an irrevocable trust that goes into effect immediately, but once you do that, you cannot modify the trust instrument. If you change your mind, your only option would be to dissolve the trust, which is allowed only under limited circumstances. Therefore, most people set up their irrevocable trusts to be testamentary trusts. A testamentary trust goes into effect only when the grantor dies; therefore, you should list it as a provision of your will.
One benefit of setting up an irrevocable trust that goes into effect immediately is that it enables you to save money on taxes. Since the trust is legally separate from you, it no longer counts as your property for tax purposes. The beneficiaries must, however, pay taxes on income earned by the trust.
Trusts for Special Purposes
A common motivation for setting up a trust is to help manage a beneficiary’s finances. For example, you might set up a spendthrift trust so that a family member receives their inheritance as an annual income instead of a lump sum.
Some people set up special needs trusts to pay certain expenses for a disabled family member without jeopardizing the beneficiary’s eligibility for government benefits. You can even set up a trust for the purpose of paying for the care of your pets after you die. This is as close as you can get to leaving an inheritance for your pets because domestic animals cannot be beneficiaries of a will.
Contact Elise Buie Family Law About Wills and Trusts for Estate Planning
Thinking about what will happen if you die or become incapacitated is not enjoyable for most people. But it is necessary if you want peace of mind that your wishes will be honored when the time comes, and you and your loved ones will be cared for as you intend.
An estate planning attorney can help you draft a will or designate some of your property as non-probate assets. Contact Elise Buie Family Law in Seattle, Washington, to set up a consultation.
