A living trust — sometimes called a revocable living trust or simply an RLT — is a legal arrangement you create during your lifetime that holds title to your assets and provides instructions for what should happen to those assets if you become incapacitated or die.
The word “living” simply means the trust is created and funded while you are alive, as opposed to a testamentary trust, which is created at death through your will. The word “revocable” means you can change it, amend it, or cancel it at any time during your lifetime, for any reason or no reason at all.
For most families with substantial assets, real property, or any desire to keep their estate out of court, a properly drafted and funded living trust is the foundation of a good estate plan. But it is not the right tool for every situation, and it does not do everything. The honest answer to “do I need one?” is: it depends — and below is the framework we walk clients through to answer that question.
How a Living Trust Actually Works
A living trust involves three roles, all of which are typically held by the same person at the start.
You are the grantor — the person who creates the trust and contributes assets to it. You are also the trustee — the person who manages the trust’s assets. And you are the initial beneficiary — the person who is entitled to the trust’s income and principal during your lifetime.
So during your lifetime, nothing about your day-to-day relationship to your assets changes. You manage them. You spend them. You sell them. You buy new ones. The trust is, for all practical purposes, transparent during your life.
What changes is the title to the assets. Your home, instead of being titled “John Smith” or “John and Jane Smith, husband and wife,” is titled “John Smith, Trustee of the John Smith Revocable Living Trust dated [date].” Your brokerage account, your bank accounts, your business interests — all of them are retitled to the trust.
This retitling step — called trust funding — is the single most important and most commonly overlooked part of trust-based planning. An unfunded trust is a piece of paper that does nothing. A trust that has been properly funded with all of your major assets is a powerful tool that does everything we describe below.
When you die, the person you have named as your successor trustee steps in. They follow the instructions you have written into the trust, which typically include distributing the assets to your beneficiaries — your spouse, your children, charities, or whomever you have chosen. None of this requires a court proceeding.
What Are the Disadvantages of a Living Trust?
This is the question we hear most often, and it is a fair one. A living trust is not free; it requires upfront work, and it does not solve every problem.
The drafting fee for a living trust is higher than for a simple will, often substantially so. The trust funding process — retitling assets — takes time and attention, and some assets (like vehicles, certain retirement accounts, and life insurance) are typically not placed in the trust at all. The trust does not avoid income tax during your lifetime, because it is treated as transparent for income tax purposes (you continue to file your own return and report the trust’s income on it). And the trust does not, on its own, eliminate federal or Washington state estate tax.
A living trust also does not protect your assets from your own creditors during your lifetime. Because it is revocable — because you retain the power to take assets back out — the law treats those assets as still belonging to you for creditor purposes. If you want creditor protection, you need a different tool (an irrevocable trust), which involves giving up control in ways that revocable trusts do not require.
For families with modest estates, no real property, and straightforward distribution wishes, a well-drafted will may genuinely be enough. We tell clients this when it is true.
Who Owns the House in a Living Trust?
Legally, the trust owns the house — but the trust is you, in a different legal wrapper. As long as you are the trustee and the beneficiary of your own revocable living trust, you have all the same rights you would have if you held the house in your individual name. You can sell it, refinance it, take a home equity line against it, rent it out, or live in it for the rest of your life. Your homestead exemption, your senior property tax exemption (in Washington), and your other property tax benefits are preserved when the property is held in a properly drafted revocable trust.
What changes is what happens to the house when you die. Instead of the house going through probate before passing to your beneficiaries, it passes immediately under the terms of the trust. Your successor trustee can list it for sale, distribute it to a child, or hold it for a beneficiary — whatever your trust instructs — without waiting for a court order.
What Assets Cannot Be Placed in a Living Trust?
A few categories of assets are typically not transferred into a revocable living trust, either because they cannot be or because doing so would create unintended consequences.
Retirement accounts — IRAs, 401(k)s, 403(b)s, and similar tax-deferred accounts — are not transferred into a trust during your lifetime, because doing so would be treated as a full distribution and would trigger immediate income tax on the entire account balance. Instead, you name beneficiaries on these accounts directly. Whether to name your trust as the beneficiary, or to name individuals, is a separate (and often complex) question that depends on the size of the account, your beneficiaries, and the SECURE Act rules that now govern post-death distributions.
Health Savings Accounts and similar tax-advantaged accounts follow similar rules — they pass by beneficiary designation, not through the trust.
Vehicles are often left out of the trust as a matter of practical convenience, particularly in Washington and Idaho where small-estate transfer procedures handle vehicles efficiently outside of probate.
Life insurance is generally not transferred into a revocable trust either; it passes by beneficiary designation. (For larger policies, an irrevocable life insurance trust may be appropriate — but that is a separate tool with separate rules.)
Almost everything else — homes, rental properties, brokerage accounts, business interests, bank accounts, valuable personal property — can and typically should be placed in the trust if you are using a trust-based plan.
When a Living Trust Genuinely Helps
A living trust does several things that a simple will cannot do. It avoids probate — meaning it avoids the court-supervised process of administering your estate, which in Washington and Idaho can take months and in more complex cases years. It provides for incapacity, allowing your successor trustee to step in immediately if you become unable to manage your affairs (without a court guardianship proceeding).
It keeps your estate plan private, because trust administration is not a public court record the way probate is. And it consolidates your planning, so that all of your major assets are governed by one document rather than scattered across multiple beneficiary designations and joint ownership arrangements.
For families that own real property in more than one state — extremely common in the Lewis-Clark Valley, where families routinely own a home on one side of the state line and a cabin or rental on the other — a living trust can avoid the need for a separate probate proceeding in each state. This alone is often sufficient justification for trust-based planning.
Do You Need One?
If you own real property, if your estate exceeds a few hundred thousand dollars, if you have minor children, if you have a blended family, if you own a business, or if you have any concern about incapacity — the answer is most likely yes, and a living trust deserves serious consideration.
If your estate is modest, your distribution wishes are simple, and you have no real property, a well-drafted will may be enough. We will tell you that honestly.
The only way to know which category you are in is to walk through the actual specifics of your estate. We do that in an initial meeting at no charge, and we will not recommend a trust if your situation does not call for one.
Contact McKarcher Law to discuss whether a living trust fits your situation.
Author Bio
Joshua McKarcher, Estate Planning Attorney
Joshua McKarcher is the founder of McKarcher Law PLLC in Clarkston, where he practices estate planning and administration for families in the Lewis-Clark Valley and throughout Washington and Idaho. He handles the cross-border planning that families with property or relatives in both states need.
He earned his law degree from The George Washington University Law School in Washington, D.C., graduating in the top 2% of his class, where he was elected to the Order of the Coif and served as Managing Editor of The George Washington Law Review.
He began his career at Covington & Burling LLP, handling complex corporate bankruptcy and insurance insolvency matters. He argued and won before the U.S. Court of Appeals for the Fourth Circuit, where the court ruled unanimously in his clients’ favor, and he won unanimous opinions twice before the Idaho Supreme Court, which overruled one of its precedents at his suggestion during oral argument.
That experience, spent untangling estates and businesses after something has gone wrong, is what shapes his work today: building estate plans that identify and minimize the risk of disputes, keep families out of probate, reduce estate and income taxes, and protect what people leave behind.
537 6th Street, Clarkston,
WA 99403
