Very frequently, individuals call my office and say – Angel, I just need a Simple Will.  I don’t have much, and I’m leaving everything to my kids and/or my spouse.  I don’t need anything fancy.   Or I hear, more rarely, but still sometimes – I just need a Revocable Trust for all my property – I don’t a Will or any of those other documents.

I agree that an individual definitely always needs a Will AND possibly also a Trust – but that is because a comprehensive custom estate plan involves a set of documents that work together, and a set of actions that support those documents to make them function properly.  And this is where the 4 methods of property transfer come into play and how you, your attorney, and the documents all work together to make the actual estate plan do what you want it to do.

So without further ado, let’s walk through these four methods of property transfer and discuss their different roles in the delicate dance of the transfer of your estate and property whilst avoiding probate and court for your loved ones.

 

Method #1: Transfer Through your Probate ❌

Using a Will Alone or Not Doing Anything and Leaving it Up to the State

Your Last Will and Testament is your final testimony, from the grave, telling the Probate Court how it should change title to your assets after you are dead.  It doesn’t actually do the transfer of assets – it requires a judge, sitting in a courtroom, to review the document and take other testimony in an open public forum to confirm that it is a true and accurate record of your wishes.

This is why you hear about long and lengthy court battles after someone has died, because they either just had a will, or didn’t have a will and so the court (known as probate court – which is simply the court tasked exclusively with reviewing the transfer of legal title of property after death) has to review their “probate estate” (the items that must change legal title after death from the dead to the living) and then put the seal of approval on the transfer to the correct person.  This seal of approval either comes via the authority of your confirmed and affirmed last testimony in the will, or from statutory authority under Intestate Laws for those with no will.  Intestate, means to die without instructions for the distribution of your property, or to die without designating your estate through final testimony or beneficiary designations which I’ll discuss later.

About 75% of adults choose the method known as doing nothing and letting the state decide. Every state including Washington has a statute known as the Intestate Statute for this very purpose – because so few people create a functional estate plan.  The Probate Court follows the instructions of the statute to distribute property to your spouse if you have one, if no spouse to your children if you have them, if no children to your parents if they are still alive, and then if your parents are not alive to your siblings.  If you have no surviving siblings, and none of the other categories of family, then things get really complicated and everything likely ends up in the department of lost property because there is no one who knows to even claim the property and bring the issue up in Probate Court.

The other 25% of adults in the United States have a will and/or a trust but the majority do not have a comprehensive estate plan with all of the documents to avoid the Probate Court.  The major downside to the Probate Court being your method of property transfer is cost, length of time it takes, and the potential for significant conflict you leave as your legacy.  In Washington State it takes 9 months to 2 years for Probate Court, and costs a minimum of $6000 to retain a probate attorney.  And because the forum is public anyone can come into the proceeding to contest your will or distributions – so it is high stakes paid for by your estate, not those contesting it.

For planning purposes, I say that if you are using probate as your method of transfer plan for 5% of the value of the estate to be eaten by all of the costs of the probate process.  But this is not even accurate, as I know of stories where it cost more than $45,000 for individuals to probate their parent’s extremely modest estate in Washington.

 

Method #2: Transfer of Your Property Using a Living Revocable Trust ✅

The Living Revocable Trust is a wonderful tool to transfer your assets if it is set up correctly and you put your property inside of it so it can do its job.  I like to explain a Trust as a metaphysical treasure chest.  It is a special container of protection that you must put your property into, in order for it to be protected as treasure, and avoid the pirates of probate.

A trust is created on paper.  It is a contract between you the person who owns the property and a trustee, the person holding the treasure chest and its key, with a set of instructions on how the trustee is supposed to distribute the property inside the trust upon the death of the property owner.

So hopefully you can see that unless you actually put property INTO the trust, it cannot do its job.   It is just an empty box, not a treasure chest at all.

And this is where a lot of individuals go wrong when they have a trust, or if they choose the Do-it-yourself method.  They think the document alone creates the result.  Which just isn’t true – you can have a beautifully drafted trust, but if you do not fund it (funding a trust means to put property into the trust so it holds title to it), your trust will not be able to do what it is intended to do – which is avoid probate.

This is why a comprehensive estate plan is a team sport involving you, your attorney, your documents and the different methods of property transfer.  One document alone, and one method of transfer alone, is not enough to create an effective estate plan that transfers everything avoiding the cost, time, energy and conflict of Probate Court.

When choosing an estate planning attorney to create a Trust based plan, you want to make sure that their fee includes assisting you with more than just drafting the Living Revocable Trust.  You want assistance and guidance funding the trust, as well as the creation of the other documents that are necessary for a complete estate plan.

 

Method #3: Transfer on Death (TOD) and Pay on Death Deeds Designations ✅

In some states, like Washington, certain properties and bank accounts need to stay in the name of the owner until their death for the proper benefit designations and qualifications.  For example, if an elderly couple is attempting to qualify for medicaid, the home is exempted from the medicaid asset qualification threshold as long as it is in an individual’s name versus being held by a Living Revocable Trust.  In a case like this, a Transfer on Death deed transferring the family home to the trust upon the death of the individual would be a great strategy to both qualify the individual for medicaid during life, but ensure their children do not have to deal with probate after they pass.

In other cases, it is just more convenient for the asset to stay in an individual’s name while they are alive. For example, a primary checking and savings account the individual uses all of the time.  An individual, if they have a trust or a will can make the bank account Pay on Death to their Trust or to an individual, and then upon notice of their death, that bank account automatically goes to the designated person or Trust, and no Probate Court has to be involved. It is quick and easy for those receiving the bank account, and just costs you the time at the bank to set it up.

Finally, for assets like investment accounts, stocks and bonds – Transfer on Death is the necessary designation to ensure that ownership of the investment asset transfers upon your death to the Trust or individual you want it to go to, without involvement of any court.

Transfer on Death and Pay on Death designations are part of a holistic and comprehensive estate plan to ensure that your property passes without probate and in alignment with your wishes.  With the exception of deeds an individual can set these designations up themselves with the help of their broker, bank, attorney and/or financial planner. When choosing an estate planning attorney to work with you should ask them if they work with you to make sure that these designations are all in alignment with your wishes and they can assist you with the creation of any Transfer on Death Deeds that are necessary based on your unique benefit scenario under Washington law.

 

Transfer Method #4: Beneficiary designations ✅

A beneficiary is an individual you designate to receive the benefit of a policy, contract or account upon your death.  The most common place one might see a beneficiary designation is on a life insurance policy, or a 401(k)/IRA account.  If you designate a beneficiary this beneficiary designation controls the asset even if the will or trust says otherwise.  So it is essential that one makes sure that all of their beneficiary designations are in alignment with the legal documents such as a Will and/or Trust.

Beneficiary designations are a great way to pass the benefit of retirement accounts and life insurance to intended persons.  However, if you do not keep your beneficiary designations up to date, there can be really bad unintended consequences that no court can override.  For example, it is unfortunately pretty common for people to forget to update their beneficiary designations after a divorce and/or remarriage. So as a result, ex-spouses sometimes receive unexpected portions of retirement savings and life insurance.  It is essential when creating an estate plan that you review all of your assets and beneficiary designations and update them to be in alignment with the Will and Trust. This will prevent all unintended consequences.

Further, if you have a Trust based plan it is important to work with your estate planning attorney, tax planner and financial advisor to discuss tax implications of certain beneficiary designations and ensure that all designations are in alignment with the trust and your tax planning goals.

 

Need Help Deciding Whats Best For You?

It is never a good gift to leave grieving loved ones a trip to Probate Court.  So I personally do not recommend using Method #1: Probate Court to transfer your assets.  It is expensive, time consuming, and risks leaving pain, frustration, and resentment as your legacy.   Instead, reach out to an experienced estate planning attorney to assist you in using the other three methods of property transfer as part of an comprehensive and functional plan that reduces the time, energy and money your loved ones will have to spend after you die.  You can have the peace of mind that you did everything possible to make it as easy as possible for them, and that your property will transfer to who you want in the way you want, with the least amount of taxes or expense.

Do not leave it up to the state to decide for you. Book a free consultation with an Angel Latterell and the Latterell Law Office — your experienced Washington estate planning attorney — by clicking the link below!