A “Revocable Living Trust” is a trust established by a person (the “grantor”) during their life, most often for the purpose of using the trust to hold their assets (real estate, bank accounts, brokerage accounts, etc) so as to avoid probate upon their death. The grantor retains the ability to control and enjoy the use and income of the trust assets during their life. The trust names the beneficiaries to receive the trust assets upon the grantor’s death and the trust assets transfer outside of probate. There are certain advantages and disadvantages of Revocable Living Trusts which I discuss below.
- Avoiding Probate: The primary selling point of the Revocable Living Trust is that the trust assets pass to the beneficiaries upon the grantor’s death outside of probate proceedings. If all assets of the grantor are transferred into the trust or otherwise pass outside of probate, then probate proceedings can be completely avoided. While this may be a significant benefit in some jurisdictions, in Washington this is not as important since probate proceedings are fairly streamlined and the use of an attorney (and the cost of probate) is minimal and generally comparable to the cost of establishing the revocable living trust. However, this is a huge benefit if any of the grantor’s property is located outside of Washington (such as vacation property in California) to avoid having to open probate proceedings elsewhere solely for the purpose of passing real property.
- Secrecy: Probate is a public court proceeding, and as such, the documents filed with the court (such as the will) are accessible by the general public. A Revocable Living Trust is not a public document and therefore can be used to transfer assets without revealing personal information to anyone who wishes to find out. However, it is possible for certain interested parties to compel disclosure through a court proceeding.
- Trust Management: The trust can name a professional or other competent trustee to assist in managing the trust assets. For example, a financial advisor or other professional trust management company could be utilized to efficiently manage the revocable living trust for the grantor if there are complicated trust assets or if the grantor is unable or unwilling to managing the trust themselves. Generally there are fees associated with naming someone other than the grantor as a trustee.
- Necessity of Will: Even with a revocable living trust, it is still advisable to have a will. A will can make sure that any assets not transferred into the trust are distributed according to the grantor’s wishes, including after acquired property not transferred into the trust or small accounts and personal property. A revocable living trust can not name guardians of minor children of the grantor, only a will can do so.
- Probate can be Desirable: Often times, probate proceedings are desirable to cut-off creditors claims (although a trustee can file similar notice as a personal representative for most creditor claims), to handle any potential will disputes/contests and to allow for someone to sue on behalf of the deceased – only a personal representative named in a will, and acting through probate, can bring a cause of action in the name of the deceased (such as a a tort action related to the cause of death).
- Trust does not Protect Estate: The use of a Revocable Living Trust does not protect the grantor’s assets, during their life or after, from creditor’s claims, claims for family support (such as a surviving spouse petitioning for the homestead amount of the decedent’s estate) or taxes (estate or income).
A Revocable Living Trust is most appropriate for Washington residents who own out-of-state real property, might need professional assistance in managing their assets or have privacy concerns. A will should also be utilized to cover any assets left out of the trust and other issues that can not be covered in a trust. A professional estate planning attorney should be employed to establish a Revocable Living Trust and accompanying will.