As I wrote in my previous post on this topic, Revocable Living Trusts are perhaps the most misunderstood of all estate planning documents. A Revocable Living Trust allows a person’s assets held in the trust to be distributed outside probate, which is often touted as one of a Revocable Living Trust’s primary benefits. The assumption underlying all this is that probate is a long, scary, expensive rigmarole to be avoided at all costs. But what if it’s not?
Fun fact: Washington State has one of the country’s most streamlined probate processes. This means that in Washington, probate is often conducted with minimal court filings (as long as the estate’s assets exceed its debts) and there are no statutory estate administration fees, as there are in certain other states. Thus, in Washington, the incentive to avoid probate is not as great as in other jurisdictions.
Some folks do have good reasons to want to avoid probate in Washington State. One good reason may be owning real estate in multiple states. Why is out-of-state property an issue? Probate is a matter of state law. For example, if a Washington resident dies owing a condo in Seattle and a beach house in Malibu, probate will likely be opened in Washington where the majority of their assets were located, but a California probate is also likely to be necessary in order to transfer ownership of the Malibu beach house. And, as I wrote in my previous post in this series, California probate is an entirely different beast from Washington probate.
Another scenario where having a Revocable Living Trust to avoid probate may make sense is when a person has reasons for keeping the terms of an estate’s distribution private. Wills are filed with the court when a probate is opened and are as accessible as any other court filing. A Revocable Living Trust is not filed with the court following a death under normal circumstances. You don’t need to be a celebrity to want privacy. A complex or volatile family situation, where, for example, each spouse has children from previous relationships, may mean a Revocable Living Trust makes sense to protect privacy.
However, many Revocable Living Trusts are not necessary. In addition, the Trust document creates the Trust, but it will not function properly unless property is actually transferred to the Trust. Many Revocable Living Trusts are not funded as the Grantor intended, and many may not be funded at all.
As discussed above, Revocable Living Trusts do provide some benefits, but they also have drawbacks. In my next post in this series, I will discuss some of the ways Revocable Living Trust get ugly. As with any estate planning decision, an honest conversation with an estate planning lawyer will go a long way toward ensuring you end up with the best set of documents to achieve your estate planning goals.
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