Revocable Living Trusts

A Washington State Bar Association consumer information guide

created in cooperation with the WSBA Real Property, Probate & Trust Section Revocable Living Trusts

What you need to know about revocable living trusts

What is a revocable living trust?

A revocable living trust is a written

agreement in which the trustor, the

person who creates the trust, names

a trustee and governs the manage-

ment of trust assets during the trus-

tor’s lifetime and upon the trustor’s

death. Establishing the revocable liv-

ing trust (RLT) essentially creates a

legal trust entity, to which the trustor

transfers ownership of some or all of

his or her assets. RLT-owned assets

typically include the trustor’s resi-

dence and nancial accounts. Usually

retirement accounts such as IRAs

are not transferred to the RLT. As

with any estate planning document,

each situation is unique and the RLT-

based plan should be tailored to the

individual’s particular circumstances,

assets and goals. (Although this re-

source refers to a single trustor, often

couples create a revocable living trust

together as their joint estate planning

document, in which case both spous-

es or partners are usually the trustors,

together. Note also that another word

for trustor that is sometimes used in

trust agreements is “grantor;” but

only the term “trustor” is used herein

for simplicity’s sake.)

Who should serve as trustee of a revo-

cable living trust?

Typically, a trustor serves as the trust-

ee immediately and throughout the

trustor’s lifetime. The trustee is re-

sponsible for carrying out the terms of

the RLT. It is important for the trustor

to designate at least one alternate to

serve in the event of the trustor’s inca-

pacity or death. The alternate trustee

is usually referred to as the “succes-

sor” trustee. If a trustor is elderly or

already facing a debilitating illness

at the outset, he or she may choose

to name a third party as trustee im-

mediately. Depending on the circum-

stances, a trustor may name a family

member, friend, colleague, and/or a

professional duciary, such as a trust

company, as successor trustee(s).

How is a revocable living trust dier-

ent from a last will and testament?

Both wills and RLTs give instructions

about the transfer of assets after death.

However, a will is essentially sits dor-

mant until the testator – the person

who created the will – passes away.

If someone dies with a will instead

of a RLT a court probate proceeding

is often required. By contrast, a RLT

agreement creates a legal trust entity

upon signing, and that trust becomes

the owner of some or all of the trus-

tor’s assets during the trustor’s life. If

a RLT is maintained properly, then a

court probate proceeding may not be

necessary when the trustor dies. The

RLT is an alternative to a will; a per-

son has one or the other as their fun-

damental estate planning document.

However, usually a simple will called

a “pour-over will” accompanies the

RLT, to capture any assets outside of

the trust.

How much does a revocable living

trust cost?

The cost of establishing a RLT varies

greatly, depending upon where one

lives, attorney fees, and the level of

complexity of the trustor’s situation.

In addition, usually RLTs are created

as part of a comprehensive estate plan

Revocable Living Trusts

that includes other documents such as

powers of attorney. Some attorneys

perform estate planning work on a “at

fee” basis, while others charge hourly

rates. If cost is a concern, it is usually

a good idea to compare cost estimates

from two or more attorneys.

Can a revocable living trust be

changed?

The terms of a RLT can be changed

at any time, which is usually accom-

plished by amending the document or,

if the changes are substantial, by restat-

ing and amending the trust document

in its entirety. Moreover, a RLT is, as

the name states, revocable, and may be

cancelled in full at any time before the

trustor’s death.

I oen hear mention of “trusts.” How

does a revocable living trust compare

to other types of trusts?

There are many different types of

trusts, some of which are created dur-

ing the trustor’s lifetime and others that

are created only after death. Different

trusts have different purposes, such as

minimizing estate taxes or providing

for a disabled family member. In gen-

eral, the RLT’s purpose is to provide

for a relatively straightforward and

private process for transferring assets

after death.

Does a revocable living trust protect

assets from potential lawsuits and

creditors?

No; contrary to popular belief, the

transfer of assets to a RLT does not

provide meaningful protection from

potential lawsuits and creditors.

Are there tax reasons to have a revo-

cable living trust instead of a will?

No, there are no tax advantages to us-

ing a RLT instead of a will. The cre-

ation of a revocable living trust has no

effect on the trustor’s personal income

tax situation; all income and expenses

are reported on the trustor’s regular,

individual tax return. Also, the same

gift and estate tax planning can be ac-

complished with a RLT as with a will.

(In 2013, an individual’s estate is ex-

empt from Washington’s estate tax if

the net estate is less than $2 million,

and exempt from federal estate tax if

the net estate is less than $5.25 mil-

lion. These exemption amounts will

increase over time because, under

current law, both the state and federal

exemptions are indexed for ination.

In addition, and in general, estate tax

laws often change.)

What are the advantages of a revo-

cable living trust compared to a will?

RLTs offer some advantages, includ-

ing:

• Private transfer of assets to bene-

ciaries after death instead of pro-

bate, which creates a public record;

• May avoid (if properly created and

maintained) the requirements and

expenses of a probate;

• Designation of another person to

manage one’s assets during life is

easy, if desired.

What are the disadvantages of a revo-

cable living trust compared to a will?

There are also disadvantages to RLTs,

including:

• RLTs are not as common as wills in

Washington and their unfamiliar-

ity can complicate matters after the

trustor’s death;

• RLTs are usually more expensive

to establish than a will because of

the time involved in ensuring that

appropriate assets are transferred

to the trust;

• Administering a RLT without

a probate does not provide the

helpful and protective aspects of

probate, which include creditor

deadlines and a court venue for ad-

dressing disputes;

• Ongoing maintenance is required

to ensure that appropriate assets

are held in — and new assets are

acquired by — the RLT.

Why have I heard from friends or

relatives who live in other states that

a revocable living trust is superior to

a will?

Approaches to estate planning vary

signicantly from state to state. For

example, in some states only RLTs are

used. Moreover, the probate process

varies greatly among states in terms

of cost, benets, complexity and du-

ration. For Washington residents, the

decision about whether to establish a

RLT or a will is an individual one that

is best made in consultation with an

experienced estate planning attorney.

This pamphlet was prepared as a public ser-

vice by the Washington State Bar Associa-

tion. It contains general information and is not

intended to apply to any specic situation.

If you need legal advice or have questions

about the application of the law in a particular

matter, you should consult a lawyer.

Washington State Bar Association

1325 4th Ave., Ste. 600

Seattle, WA 98101-2539

800-945-WSBA • 206-443-WSBA