Common Mistakes and Misconceptions in Trust and Will Planning in Washington

Estate planning can simplify matters for your family, but certain common mistakes or misunderstandings can create unnecessary complications. Recognizing and addressing these common issues helps ensure your estate plan effectively supports your goals and protects your loved ones.

Many people assume that simply creating a revocable living trust automatically avoids probate. However, for assets to bypass probate, they must typically be transferred into the trust or appropriately designated to the trust as a beneficiary. While fully funding a trust can reduce probate, even partially funded trusts can still offer significant benefits, such as clear distribution instructions and management of assets like life insurance or retirement accounts, particularly beneficial for families with younger children.

A pour-over will complements your trust by transferring untitled assets to it after death, but it should not replace efforts to properly fund your trust. While beneficiary designations and small estate affidavits can mitigate probate, depending solely on a pour-over will might lead to unintended probate procedures for certain assets, delaying access and creating additional administrative tasks for your family.

Even when probate is avoided, careful estate administration remains necessary. Your successor trustee must manage trust assets responsibly, pay any outstanding debts, handle tax obligations, and distribute assets according to your instructions. Clearly defining and communicating these responsibilities helps ensure a smooth estate transition.

A revocable living trust alone does not reduce estate taxes or offer asset protection against creditors. Assets, including life insurance and retirement accounts, remain part of your taxable estate. Proper estate tax planning—such as incorporating credit shelter trusts or other advanced strategies—is essential for taxable estates. Aligning beneficiary designations to direct assets into the trust allows these assets to benefit from established tax and asset protection provisions.

Beneficiary designations on retirement accounts, life insurance policies, and bank accounts override instructions in your trust or will. If these designations are outdated or inconsistent with your overall estate plan, your intended asset distribution can be disrupted. Regularly reviewing and updating these designations ensures alignment with your trust provisions and overall objectives.

Estate plans are not meant to be static documents. As you reach different milestones or encounter significant life changes—such as marriage, divorce, births, deaths, or significant changes in assets, beneficiaries, fiduciaries, or personal goals—it’s important to review and update your documents accordingly. Periodic funding reviews and adjustments to your plan can help maintain its effectiveness throughout your lifetime.

Consider Mark, who initially set up his revocable living trust but neglected to review or update asset titling as he aged. Consequently, several significant assets remained outside his trust, resulting in probate upon his death. This oversight led to delays and additional administrative burdens for his beneficiaries. Regular funding reviews and updates could have prevented these complications.

Understanding and avoiding these common mistakes ensures your estate plan remains effective and aligned with your evolving life circumstances. Proactive reviews and thoughtful planning can provide clarity, minimize administrative complications, and offer lasting peace of mind for both you and your loved ones.