Estate planning is for everyone. While most people do not like to think about death, it is a reality and typically unplanned. It is a lot easier on everyone, especially if you have a spouse, children and/or any relatives, if you draw up your own will and testament. I have been posted lots of information on estate planning, they should answer most of your questions. When you are ready to plan your estate give me a call and we will get started.

Here is the last post this week on estate planning, remember to contact me when you are ready to start your planning.

Washington law does NOT require a probate proceeding to be filed following death, regardless of whether the Decedent died with or without a Will (ie testate or intestate, respectively).  Probate in Washington is entirely discretionary, and probably only a few percent of deaths in Washington result in a probate being filed.  In Washington, if a probate is filed, it is because someone wants it to be filed, NOT because the law requires it.  By far, the most common reason for probate is that the Decedent died holding:

1.     Any real property titled in his or her own name, or
2.    Personal property (usually a cash or securities account) titled in his or her own name whose value exceeds $100,000.
3.    There are other reasons, but the two listed above are the main ones.

Washington law, however, does require any last Will of a Washington resident Decedent to be filed promptly following death.  RCW 11.20.010 requires any person having the custody or control of any will to file said will within thirty days after he or she shall have received knowledge of the death of the testator.

Don’t put your head in the sand, get your estate planned.

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.

With the widespread adoption of limited liability company acts by state legislatures, limited liability companies (LLC) have become the business organization of choice for small closely held businesses. An LLC also provides tax advantages to transfer wealth from one generation to another while allowing the donor to maintain control over over the assets until death.

An LLC consists of members and managers. It can be structured like a limited partnership, with the members being passive investors and the managers actively managing the company. The concepts of wealth transfer are the same for LLCs and limited partnerships: The generation transferring the wealth (the parents) forms an LLC, making themselves both managers and members. The generation receiving the wealth (the children) are made members of the company. Initially, the parents hold all of the membership interest in the company along with the assets it represents. Over time, the membership interest is gifted to the children, within allowable gift tax amounts, and the parents retain the control of the company and its assets as the managers. LLCs can be structured to allow flexibility to accommodate income distribution issues and restrictions on transfers of interests.

A “Last Will and Testament” is a legal document that allows you to say who should get your property when you die. Besides saying who should get your property when you die, a Will also gives you the opportunity to say who you want to be in charge of settling your estate.  It also gives you the opportunity to say who you want to serve as guardians of your minor children.  And, it gives you the opportunity to protect any money or property you give to minor children and/or other beneficiaries who are not good candidates to receive an inheritance outright; i.e., via the creation of testamentary trusts (see below).

In order to be valid, a Last Will and Testament must comply with Washington law. Washington law requires the testator to be over the age of 18, put the will in writing, and it must be witnessed by 2 people that are “uninterested,” meaning they receive nothing under the will.

You can change or revoke your Last Will and Testament as often as you’d like.  There are two ways in which you can change your Will.  First, you can prepare an amendment to your Will (called a “codicil”).  With a codicil, your Last Will and Testament remains in place, but one or more of its provisions are changed by the terms of the codicil.  To be valid, a codicil must be executed with the same formality as a Last Will and Testament; i.e., it must be in writing, it must be signed by you, and it must be attested by two independent witnesses.

The second way in which you can change your will is to make an entirely new one.  The new Will can be identical to the original Will, except for the changes you wish to make.  Because it is a Last Will and Testament, it will have to be made and executed with the same formalities as your original Will; i.e., it must be in writing, it must be signed by you, and it must be attested to by two independent witnesses. The new Will automatically revokes the prior Will as a matter of law.

If you die without a Last Will and Testament, you are said to have died “intestate.”  In that case, the laws of the state in which you are domiciled at the time of your death will control the settlement of your estate and the distribution of your probate property.  There are other considerations as well.  For example, if you die without a Will, the state will appoint a personal representative to settle your estate.  That could be anyone, including a local attorney, a professional administrator, or a family member.  Moreover, the court-appointed representative will not have the authority to make many decisions without obtaining court approval beforehand.  If you have minor children, the court would appoint guardians for them.  There is no assurance, however, that the court will look for the same qualities in a guardian as you would have wanted.  Court-appointed guardians are also entitled to compensation for their services, which can be a very expensive proposition and consume all the money that is left for your children.

In Washington, many laws concerning estate planning are found in Title 11 (Probate and Trust law) of the Revised Code of Washington (RCW). Additional laws may be found in Title 26 (Domestic Relations), Title 63 (Personal Property), Title 64 (Real Property), Title 68 (Cemeteries Morgues and Human Remains), Title 70 (Public Health and Safety), Title 83 (Estate Taxation). You may also need to look at Federal Laws.