Polly Prolific loves children. So much so that she now has five adult children and fifteen grandchildren. In Polly’s Will, she gives everything to her husband, but if her husband predeceases her, Polly would like her estate to be distributed equally between her five children. But what if Polly’s husband and children all predeceased her? It’s unlikely, but it could happen. In that event, Polly would like her estate to be distributed equally between her grandchildren – none of whom are adults.

How would Polly set this up? One way is through a testamentary trust. A testamentary trust is a safe option. However, another option is to transfer funds to the grandchildren pursuant to Washington’s Uniform Transfers to Minors Act (“UTMA”). Polly could nominate a custodian in her Will in accordance with RCW 11.114.030. That custodian, pursuant to RCW 11.114.200 (1) would take charge of the estate assets and then “transfer in an appropriate manner the custodial property” to each grandchild once they attain age 21. If Polly wanted to, she could extend that age to 25.

Why would Polly select this option? Some reasons might include:

  • Polly might want to reduce the attorneys’ fees in setting up her estate plan. The attorneys’ fees related to drafting a UTMA transfer in a will or a revocable living trust are generally significantly lower than the attorneys’ fees generated in drafting a testamentary trust.
  • Polly may conclude that it is highly unlikely that her husband and all five of her children would predecease her, so a testamentary trust for her grandchildren might be “overkill.”
  • Polly may not have significant assets, so if her estate is divided by ten, the beneficiaries will not receive enough assets to make a compelling case for creating a testamentary trust.

A testamentary trust is a more sophisticated way to transfer money to the grandchildren. It would allow Polly to set detailed parameters around how the trustee would manage and distribute the trust assets. On the other hand, with a UTMA transfer, the custodian would simply distribute the assets, and that would be that. What’s the better choice—sophistication or simplicity? If you need help weighing those options, we’d be happy to advise you.

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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