In a general sense, a trust is nothing more than an arrangement whereby one person agrees to hold property for the benefit of another. A “testamentary trust” is a trust created under a Last Will and Testament. As such, a testamentary trust becomes effective only after the testator’s death and, even then, the will must be approved and admitted to probate.
A “living trust,” is a trust created during the grantor’s lifetime, and the trust becomes effective immediately upon its creation. Living trusts are created by a written instrument, called a “trust instrument.” If the grantor is also the sole trustee, then the trust instrument is called a “declaration of trust,” because the grantor simply declares his or her intentions to the world. However, if someone other than the grantor is a trustee, then the trust instrument becomes a “trust agreement,” because the grantor and the trustee must agree on the terms of the trust.
Since living trusts are created during one’s lifetime, they can be either revocable or irrevocable. A “revocable trust” or “revocable living trust” is one that can be amended or changed, or even terminated, during the grantor’s lifetime. In almost all cases, it is the grantor who reserves this right when the trust is created. Even so, the trust becomes irrevocable upon the grantor’s death because only the grantor retains the right to amend or terminate the trust.
An “irrevocable trust” or “irrevocable living trust” is one that cannot be amended or changed, or even terminated, during the grantor’s lifetime. Once created, an irrevocable trust is governed exclusively by the terms of the trust instrument without any control by the grantor. For this reason, irrevocable trusts are created almost exclusively to obtain favorable income tax and/or estate tax benefits for the grantor.
Revocable Living Trust (RLT) are for the purposes of avoiding probate in Washington State, as well as making sure that assets are protected during life, protecting assets for certain beneficiaries, reducing estate taxes, avoiding will contests, etc. A RLT will only govern assets that are held in the trust or that are conveyed to it. This means that assets held in an individual name will be governed by the Last Will and Testament of the deceased. A pour-over Will will govern the assets and those assets will still be subject to probate, even though the RLT will govern their distribution. For a Trust to work, there must be a Will and and a funded RLT.