Estate planning presents a number of choices. One way to protect and pass on your estate is to form a living trust. If you’re in Washington and thinking about creating a living trust, this guide has all of the information you’ll need, including a step-by-step rundown on how to set up a living trust. If you’re about to make a living trust or are dealing with financial planning questions more generally, it might make sense to find a financial advisor to help. SmartAsset offers a free financial advisor matching service that will help you find a good advisor for you in your area.
How to Create a Living Trust in Washington
These are the steps to creating a living trust in the Evergreen State:
- Decide what type of trust you need to make. If you are single, a single trust is almost certainly what you’ll want. Married couples have the choice between a single trust and a joint trust. A joint trust is likely the best choice because jointly owned property can be easily placed in it.
- Take stock of your property. Know exactly what you own and what assets you want to store in your living trust. You can store assets like stocks and bonds in a living trust, as well as items like family heirlooms and jewelry. Now is also the time to find all the relevant paperwork for your assets, including certificates of stock ownership, home deeds and car titles.
- Pick a trustee. You can name yourself as trustee or pick someone else. If you choose yourself, you’ll also need to pick a successor trustee to take over when you’ve died or in the event you become incapacitated. You should also take this time to decide who will get what property when you die.
- Create a trust document, either by yourself or with the help an attorney.
- Sign the trust document in front of a notary.
- Transfer your property into the trust. You can do this by yourself, though it can be tricky. Getting help from a lawyer may be good idea.
What Is a Living Trust?
A living trust is a framework, established by a legal document, in which property can be placed. A trust has a trustee who is in charge of doling out the property as directed. You can make yourself the trustee or have someone else handle the job.
There are two types of living trusts. One type is an irrevocable living trust. This trust is permanent and cannot have property removed from it unless the grantor gets permission from everyone named in the trust. Property in an irrevocable living trust trust is completely handed over to the trust, and taxes are paid via the trust.
A revocable living trust, on the other hand, can be modified and have property removed from it. The tryst creator still owns the trust property and pays taxes on it as usual.
How Much Does It Cost to Create a Living Trust in Washington?
The price of creating a living trust in Washington depends on how you go about making it. The first option is to use an online service and draw the trust up yourself. This will cost a few hundred dollars at most. The other option is to hire an attorney, which could cost more than $1,000.
You may want to set up a living trust by yourself to save money, but there are risks to DIY estate planning that you should know about. You have to pay close attention to detail, so a good amount of time and energy will need to be spent on research. If you do decide to hire an attorney, make sure you know the attorney’s fees upfront so you aren’t surprised. Also make sure you’ve found an attorney who specializes in trusts rather than one who is just an estate planner.
Why Get a Living Trust in Washington?
The main reason a person in Washington would get a living trust is to make things easier for their family after they’ve died. With a living trust, you can avoid probate court, a potentially time-consuming and costly process that some estates have to undergo to prove the will.
In Washington, there is a relatively high threshold for which estates must go through probate. Any estate worth less than $100,000 does not have to go to probate court, so you likely won’t need a living trust if your estate is worth less than that.
There are other reasons to get a living trust though. If you want to leave property to a minor, for instance, a living trust allows for the trustee to retain ownership of the property until the child reaches legal age. Also, a living trust can help you avoid conservatorship if you become incapacitated because you’ll already have named a trustee.
Who Should Get a Living Trust in Washington?
Common thought is that a living trust is just for the wealthy. That isn’t necessarily true. However, estates in Washington that are worth less than $100,000 probably don’t need a living trust, as they will be able to bypass probate anyway.
There are some cons to living trusts, namely that they are more expensive and time-consuming to set up than wills. They also provide a longer time frame for legal challenges after you’ve died, potentially creating a hassle for your family. If you decide against getting a living trust, remember that you’ll still need an estate plan.
Living Trusts vs. Wills
Even with a living trust, you’ll still need a will to direct the fate of any property that’s not placed inside the trust. A living trust will also not define the action to be taken if you become incapacitated like with a living will. Moreover, there are also some capabilities that wills have that living trusts do not, such as:
- Naming an executor
- Establishing guardianship for children
- Providing instructions for paying taxes and debts
- Naming managers for children’s property
This chart shows what both living trusts and wills can and cannot do:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes
The Washington estate tax applies to estates worth more than $2.139 million. It is progressive, and the tax rate ranges from 10% to 20%. The federal estate tax may also apply. The federal estate tax applies to estates worth $11.18 million ($22.36 million for couples).
There is no inheritance tax in Washington.
The Bottom Line
A living trust in Washington can be a useful way to plan your estate. It likely won’t be useful for estates worth less than $100,000 though, because estates under that threshold already don’t have to go through probate court in the Evergreen State.
You can form a living trust by yourself, but there are a lot of details involved. Especially if your estate is large or particularly complicated, you might find it easier to get the help of a lawyer.
Estate Planning Tips
- Whether you’re thinking about retirement, estate planning or investing, you might need to find a financial advisor to help. It can be difficult, though, to find the right advisor for you. SmartAsset can help with our financial advisor matching service. You’ll answer a few questions about your financial situation and we will match you with up to three financial advisors. We have fully vetted all of the advisors on our platform and ensured they are free of disclosures. Each of your matches will then reach out to you to talk about possible next steps.
- Don’t forget to put any assets in your living trust that want it to take care of after you’ve died. Obvious as that may sound, it’s a common mistake. You can read the four other most common estate planning mistakes here.
- You can’t put your 401(k) into your living trust. However, you can name the trust as the beneficiary for your account.
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