Introduction & Initial Decisions

1. Providing for a Trust in Your Will.
   1. Decision No. 1: Should the Will Provide for a Trust?
   2. Examples of Testamentary Trust Provisions for Minor Children
2. Providing in a Will for Tax Savings.
   1. Estate Taxes
   2. Decision No. 2: Should the Will Provide for Estate Tax Savings?

This website provides instructions and forms for making a Will in Washington.  Before proceeding, however, two major decisions need to be made:

• Whether your situation is such that outside management of your assets will be needed following your death; and
• If you are married, whether your situation is such that you would benefit from your Will including provisions to reduce or eliminate any potential estate, inheritance, or death tax liability.

Providing  for a Trust in Your Will.

Here, the issue is whether at your death, you want to give property to someone but want another to manage or invest the property for that person.

The simplest solution is to provide that the Will contain no Trust, and that any minor beneficiary shall receive his/her distribution through a Custodian under the Washington Uniform Transfers to Minors Act.  This solution works remarkably well for what it is designed to do: Provide a simple solution for transferring property to minors.  It has two serious limitations, however:

• It’s only available to minors and not to adults, regardless of their need or desire; and
• The minor is required to receive the property outright by age 21, and there is no legal way to extend that age.  RCW 11.114.200(1)

  Note:  It may be extended to age 25 for transfers made on or after July 1, 2007.  RCW 11.114.200(2)

What is needed is a mechanism to hold title to property not only for minors but also for any adult who would benefit from having someone else take title to and manage or invest their property.  And the solution to this problem is a Trust —

• You provide in your Will for one or more Trusts.  [A Will containing a Trust is known as “Trust Will,” as opposed to a “Simple Will,” one that does not contain a Trust.  A Trust contained in a Will is known as a “Testamentary Trust.”]
• In your Will, you name a list of persons who will serve successively as the Trustee of the Trusts, to continue to hold any property in the Trusts for their respective beneficiaries.
• You provide in your Will for one or more gifts (usually your residuary gift) to your named initial Trustee, to be held in the Trusts for their respective beneficiaries, under the terms and provisions for the Trusts that you specify in your Will.

Decision No. 1: Should the Will Provide for a Trust?

Consequently, the first major decision you will need to make is whether you wish your Will to include a Trust.  If you have a young child or children, even children over age 21, and want to provide for the possibility of extending the age when they would receive any gift you made to them in your Will past age 21, using a Trust Will would allow you to accomplish that result as simply as possible.  Similarly, if there is anyone else to whom you wish to make a gift in your Will and who could benefit from having someone else manage or invest the property for them, a Trust Will would allow you to do that as well.  Possibilities regarding the latter are:

• Your spouse or life-partner, or
• One or both of your parents, or
• Your grandchildren, or
• A relative’s children, or
• Any other relative or friend.

For purposes of the following discussion, this website will assume that the beneficiaries of any intended trust will be your children.

Examples of Testamentary Trust Provisions for Minor Children.

If you want any gift you make to a younger person to be held until he/she attains an age older than 21, a typical way of accomplishing this result would be to provide in your Will for a Testamentary Trust for the benefit of such person, with the income and principal being distributed by the Trustee to the beneficiary as you set forth in your Will.  For example, a simple distribution scheme would be:

• Income and principal in the Trustee’s discretion to the beneficiary, for example, for health, education, maintenance, and support, with undistributed income being accumulated and reinvested by the Trustee.
• All current income to the beneficiary after the beneficiary’s attaining age 21.
• All principal to the beneficiary at age 25.

A more complicated distribution scheme would be:

• As above, income and principal in the Trustee’s discretion to the beneficiary for health, education, maintenance, and support, with undistributed income being accumulated and reinvested.
• A third of the principal upon the beneficiary’s request at age 25 or later.
• Half of the remaining principal upon request at age 30 or later.
• All of the remaining principal upon request at age 35 or later.
• With the Trustee having the right to postpone or accelerate payments depending on the beneficiary and his/her circumstances.

Providing in a Will for Tax Savings.

1. Estate Taxes.

   Both federal and Washington law exact a death tax, known as the estate tax.  Fortunately, both federal and Washington law also provide for no estate taxes to be levied on the first so many dollars of value of property in a Decedent’s estate (plus the amount of taxable gifts made by the Decedent during his/her life).  For Decedents dying in 2006 or 2007, that amount (the “estate tax exemption amount”) is $2 million for both federal and Washington state purposes.

   Furthermore, qualifying gifts to your spouse or to one or more charities are effectively ignored in this determination (through the “unlimited marital and charitable deductions,” respectively).  Consequently, at first impression for a death occurring in 2006 or 2007, if the amount of your total lifetime and deathtime taxable gifts to persons other than your spouse or to charities does not exceed $2 million, the issues of estate tax liability and its reduction or elimination may be unimportant to you.  If, however, you are concerned about the possibility of the imposition of estate tax upon your estate, and particularly if the value of your property exceeds $2 million, you might benefit substantially by becoming aware of the possibilities available to you to reduce or eliminate the potential for taxes to be imposed as a result of your death.  Such reduction or elimination is readily available although:

   • It inevitably results in a compromise situation, ie, you generally have to give up something to get a tax reduction or elimination (eg, some benefits of, use of, or control over the property); and
   • It is MUCH EASIER TO ACCOMPLISH while you are alive than after your death.

   Decision No. 2: Should the Will Provide for Estate Tax Savings?

   The primary focus of this website is to allow you to transfer property during life and at death as simply, efficiently, and inexpensively as possible.  While this website attempts to acknowledge the tax consequences of these transfers, it does not attempt to provide detailed suggestions for reducing or eliminating any tax liability that may result from such a transfer.  If you believe you may be subject to estate tax liability, WASHINGTON PROBATE encourages you to engage estate tax counsel in your locale.

   Preparing Your Simple Will

   Preparing Your Trust Will