A trust is a legal entity separate and apart from its creator. Each trust must have a "Grantor" (the creator of the trust), a "Trustee" (the party managing the investments and distributions of the trust), and a "Beneficiary" (a party who receives the benefits of the trust, such as distributions of income and principle). A trust can be revocable or irrevocable. In a revocable living trust, the Grantor reserves the absolute right to make changes to the trust, or abolish the trust, at any time during Grantor's lifetime. A Revocable Living Trust (hereinafter an "RLT") is a trust created during the Grantor's lifetime. With an RLT, the Grantor can also act as the trustee and in addition be the primary beneficiary under the trust, so long as there are other persons possessing present or future interests.

Advantages of a Revocable Living Trust

1. Avoidance of Probate.

The most popular reason to establish an RLT appears to be the avoidance of the cost and delays of probate. The RLT has to be fully funded during the life of the Grantor(s) in order to avoid probate. If all the decedent's property that would pass through probate is instead held by the trust at the time of death, then the decedent can avoid probate.

2. Avoidance of Public Disclosure of Your Estate Plan.

A Personal Representative is required to file the Last Will and Testament of the decedent with the court. The Last Will and Testament becomes available for the general public to view. An RLT is not typically filed with the court. Thus, an RLT will avoid public disclosure, thereby ensuring privacy and confidentiality.

3. Avoidance of Multiple Probates if Real Property is Located in Other States.

When the decedent holds real property in other states, there usually is the requirement to initiate an ancillary probate in the state where the real property is located. The multiplicity of court proceedings can raise the costs of probate administration to an unreasonable level. Additional time is usually spent when ancillary probates are involved. The use of an RLT, if estate assets are properly transferred to the RLT during the grantor’s lifetime, can avoid ancillary probates.

4. Avoidance of a Guardianship for the Grantor's Estate.

Another popular reason for establishing an RLT is the possible avoidance of a court supervised guardianship of a person's assets if that person become incapacitated. A Power of Attorney can also assist in this endeavor, however, an RLT is usually a more effective document when dealing with the incapacitated person’s assets. The costs of appointing and maintaining a guardianship can be expensive. Additionally, the process by which a guardian of the estate is appointed is likely to make public very private and sensitive information.

5. The Difficulty of Contesting an RLT.

Another reason to establish an RLT is that it can be more difficult to invalidate a trust than a Will at the death of the Grantor or Testator/Testatrix.

6. Little or No Adverse Tax Consequences.

If the trust document is properly drafted and the trust is properly managed, there will be no adverse tax consequences for the Grantor or secondary beneficiaries.

7. Observation of Trustee.

If a person contemplates establishing a trust for his children at his or her death, then an RLT will allow a Grantor to observe an appointed trustee during the lifetime of the trustee. If the trustee proves to be unsatisfactory, another individual or entity can be selected before the death of the Grantor.

Disadvantages of a Revocable Living Trust

1. Costs Associated with an RLT.

The cost of preparing, funding, and managing an RLT on some limited occasions can exceed the drafting of a Will and probating the decedent's estate. Washington probate procedure has been streamlined thereby reducing the costs associated with probate and shortening the time an estate can be probated.

2. Probate May Not be Avoided if Not All Assets are Transferred to the Trust.

An RLT will avoid probate only if all assets which are subject to probate administration are transferred to the trust. It is not unusual for assets to be overlooked or for additional property to be acquired by the Grantor after establishment of the trust.

3. The Time Spent and Inconvenience Associated with Maintaining an RLT.

Depending on the level of sophistication of the RLT and if you have a third party serving as the trustee, it could be more time consuming and expensive to manage an RLT. Normally, though, the Grantor’s serve as the trustee also thereby eliminating those extra management costs with limited time spent administering the RLT. Many people want to simplify their lives, not complicate them. In some situations if the value of the assets warrant it, a professional trust manager may be hired. The costs associated with hiring a professional, however, can be rather expensive.

4. May be More Cumbersome to Conduct Business or Engage in Certain Transactions.

The Grantor must always wear his or her trustee hat when conducting business with trust assets. Title insurance companies and purchasers of real property will want to make sure that the trustee has the authority to conduct trust business. The concern is that the trustee does not have authority to act on behalf of the trust. Usually, additional documentation may need to be presented. The trust might have a difficult time borrowing against the assets of the trust if the draftsman failed to include proper enabling language in the document.

5. Personal Representative in Probate can Press any Causes of Action the Decedent may have.

Washington State Law allows a personal representative of an estate to bring an action on behalf of an estate. If the decedent's estate is distributed through an RLT, then any causes of action the decedent may have would require the opening of a probate.

6. RLT’s do not Reduce Federal or State Taxes at Death.

There are no tax advantages or disadvantages with an RLT. An RLT is generally set up for reasons which are not tax-related.

7. Public Disclosure of Grantor's Assets is Possible even with Revocable Living Trust.

If a complaint was filed challenging the validity of an RLT, or if an action to construe or interpret its provisions were begun, the trust instrument could wind up in the court file and be available for the public review. It is not that common, however, for RLT’s to be involved in litigation.

In certain transaction situations, it might be necessary to disclose some or all of the trust provisions to a bank or financial institution, brokerage firm, transfer agent, or title insurance company who would rely on certain provisions of the trust.

8. Other Methods of Avoiding Probate.

There are other ways to avoid probate, especially if a person holds a modest amount of assets.

The traditional community property agreement is an excellent way for some married couples to avoid probate for the death of the first spouse. If, however, there are State of Washington or federal estate tax issues to address, then transferring assets to the surviving spouse through a community property agreement might not be appropriate.

A joint tenancy with right of survivorship is another way to avoid probate. Also, multiple party bank accounts avoid probate. One could also designate beneficiaries on life insurance policies, retirement accounts, annuities, and other similar assets.