The Underlying Complexity of Simplicity

Washington recently became the twenty-first state to enact the Uniform Custodial Trust Act, which became effective on July 27, 2025. This Act, codified in Chapter 11.140 of the Revised Code of Washington, is designed to provide a simple, straightforward way to create a custodial trust without spending time, energy, and attorneys’ fees drafting a “proper” trust document.

RCW 11.140.180 sets forth two ways to create a custodial trust and provides examples of acceptable language. The first is transferring specific property to create the trust; the second is preparing a “Declaration of Trust under the Washington Uniform Custodial Trust Act.”

Numerous potential uses for custodial trusts exist, including enabling someone to act on your behalf to manage property or assets if you are temporarily out of the country or unavailable due to military service. Similar to someone terminating an Agent’s authority under a springing General Durable Power of Attorney,  RCW 11.140.020(5) provides, “[t]he beneficiary [of a custodial trust], if not incapacitated . . . may terminate a custodial trust by delivering to the custodial trustee a writing signed by the beneficiary . . . declaring the termination.” In other words, if the military officer created a custodial trust before leaving for overseas duty, that military officer could easily terminate the trust upon returning to the United States.

Clients often balk at trusts due to the cost of creating and administering them, and the difficulty in understanding the trust’s provisions. However, that complexity often provides clients with a sense of certainty. For example, a well-crafted traditional trust has established answers to questions such as:

• Can creditors reach trust assets?
• How are trusts treated from a tax perspective?
• How do you deed property into a trust? What real estate excise tax exemptions exist for trusts in Washington?
• Does a conservator possess the authority to terminate the trust?
• What type of bank account needs to be established to hold assets within a custodial trust?

By contrast, the simplicity of a custodial trust brings new levels of uncertainty. It’s a new concept, so no Washington case law exists to interpret the gray areas. So, the answer to many of these questions, right now, is “Who knows?” We can only guess at a court’s interpretation and look at the case law from other states for guidance.

Should you use a custodial trust? It depends on the situation. In a few years, the usage of these trusts in Washington will undoubtedly be more established, and some of the perceived problems in the new statute will be worked out. In the meantime, proceed with caution. Please let us know if you have any questions. We’d be happy to help.