Estate Plan Note is a composite account of many cases we have worked on over the years.  The names and events have been changed to avoid disclosing confidential client information.

We have all seen ads or heard from friends and TV personalities:  “if you don’t have a living trust your estate may be consumed by probate costs and taxes.”  Surprise, the truth is different than the advertising.  For clients with modest estates, it can be more expensive to dispose of their property through a living trust than through a Will because it adds an additional document to their plan.  Also, many vendors of living trusts charge high fees, leave their clients with a complicated set of documents and little guidance as to how to use them, and then fail to tell the client that the trust must be fully funded during life to avoid probate.  Washington has recently passed legislation to try to police these so called “trust mills.”  That being said, living trusts can be wonderful estate planning tools when used correctly and we frequently use them for our clients.

A trust is simply a legal entity that can hold title to property and is managed by someone called a trustee.  A living trust is a marketing name for a revocable trust.  If you transfer all your property to your trust during your life, it will not be necessary to probate your estate.  Also, a trust is private and does not become a public document at your death as does your Will, it is a little easier to amend a trust than a Will, and a living trust can be used to manage your assets if you become incapacitated.

Probate is the procedure to administer the estate of a deceased person.  An executor is empowered by the court to manage the decedent’s assets, wrap up the decedent’s financial affairs (deal with creditors, pay taxes, etc.), and distribute the decedent’s assets in accordance with the decedent’s Will, (or if there is no Will, then in accordance with state statutes).  In some states, probate is onerous, time consuming and can be very expensive, even for modest estates.  Moreover, some state probate laws provide for the payment of arbitrary fees (usually, a percentage of the assets of the estate) to the attorney and/or executor, regardless of how much work they do.  Washington is not one of those states.  In fact, it has one of the most streamlined probate systems in the country, with little court involvement and no arbitrary fees (the attorney for the estate is only entitled to his or her normal hourly rate and only for the work they perform).  Usually, it is not worth the extra cost to avoid probate here. (However, if you own real estate in another state, you can avoid an additional probate in that state by having the property owned by a living trust.)  Also, for some clients the use of a community property agreement or joint tenancy ownership can be a more appropriate and less expensive way to avoid probate than using a living trust.

There are no estate, gift or income tax advantages or disadvantages to using a living trust instead of a Will.  Moreover, unless an individual or a couple has more than $2 million, the state or federal estate tax will not apply to their estate in any event.  For couples who do have to plan for the estate tax, we frequently recommend using a living trust as it does not cost any more than a Will and offers the potential benefits of probate avoidance, privacy, ease of amendment and lifetime management of their property.  We “trust” you have found this information helpful.

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This is a composite account of many cases we have worked on over the years.  The names and events have been changed to avoid disclosing confidential client information.

We know there are at least 50 ways to leave your lover, but we also should remember that “breaking up is hard to do.”  Relationships do not always work out.  Washington law presumes that you do not want your ex-spouse to benefit from your estate, serve as your executor, trustee or agent.  The problem is that presumptions can be rebutted and the mere passage of time without changing your Will or other documents might be argued as intent to not have the presumption apply.  Washington law does not affect certain employee benefits governed by federal law, so you cannot be sure if the beneficiary designations are changed.
Washington law also has no affect on any provisions you may have made for someone to whom you were not married.  Perhaps you designated your partner or significant other as the beneficiary of your employer-provided life insurance or your retirement account.  Finally, do not assume your divorce decree covers everything; we have had more than one case where an ex-spouse received a client’s retirement account to the detriment of the rightful heirs because the client never changed the beneficiary designation.

As soon as Lee drops off the key or Gus hops on the bus, remove your ex’s name from all bank and brokerage accounts, credit cards and other forms of joint credit that you may have.  Check your Will or Trust, and Durable Power of Attorney to make sure those documents coincide with your current wishes.  Often, people do not want their ex to be a beneficiary or fiduciary under their estate planning documents, if that is the case, you need to revise your documents.  More important, if you do want your ex to be a beneficiary or serve as a fiduciary for you, you need to revise your documents to rebut the contrary presumption under Washington law.  Check all your beneficiary designations – life insurance, including employer provided life insurance, retirement accounts, pensions, etc.  Finally, check the deeds to your home and other real estate to make sure they are consistent with your new life.

While it is fine to tell Stan you’ve made new plans, follow the above recommendations and don’t make breaking up any harder to do than necessary.

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