As part of our estate planning practice, our firm prepares a variety of trusts. In particular, these three trusts tend to be commonly used:
Testamentary Trusts for Children
A testamentary trust is a trust, contained within a Will, that allows parents and other family members to distribute assets to both children and adults who may not be capable of a direct distribution. For example, John and Jolene have three children: Jerry, age 5; Jamie, age 15; and Jack, age 19. John and Jolene can set up a testamentary trust that will come into effect if both of them are deceased. They will name a trustee, and an alternate trustee in the event that the primary trustee is unable to serve. They will establish parameters regarding how the trust will be funded, how the trust assets will be distributed to their three children, when the trust will eventually terminate, and how the remaining funds will be distributed upon termination. For more information, please see this blog post by Sherry.
Testamentary Trusts for Tax Purposes
A variety of trusts, such as a disclaimer trust or a credit shelter trust, can be used to help minimize or avoid Washington and federal estate tax liability. These trusts are included in Wills, and become effective after death as part of the estate administration process. The trusts are designed to minimize the taxable assets in the surviving spouse’s estate upon death, while still ensuring that the surviving spouse’s needs are fully addressed. For more information, please see this blog post by Stacey.
Revocable Living Trusts
A revocable living trust is a trust designed to avoid probate. Unlike testamentary trusts and trusts for tax purposes, a revocable living trust is a document that is separate from a Will and comes into effect upon signature. To work well, an individual needs to fund the revocable living trust by transferring assets into it such as real property and bank accounts. The trust provisions will govern the management and distribution of assets that belong to the trust. For more information, please see this blog post by Sherry.