What's the difference between a will and a living trust for married couples?

A will takes effect only after you die and must go through probate — a court-supervised process that can take months and cost thousands of dollars. A living trust takes effect immediately, allows your assets to pass directly to your beneficiaries without probate, and also provides a mechanism for managing your affairs if you become incapacitated. For married couples in Washington, a living trust is almost always the more efficient and private option — especially when you own real estate or have significant assets. Washington is a community property state, which creates additional planning opportunities and traps that a properly drafted trust addresses directly.

Why does each spouse have their own separate trust?

Each spouse maintains their own Revocable Living Trust to preserve and protect their separate property — assets owned before marriage, or received as gifts, inheritance, or personal injury damages during marriage. In Washington's community property system, separate property can accidentally become community property if mixed with marital assets — a process called commingling. Holding separate assets in a separate property trust keeps them clearly identified and protected in the event of divorce or death. Having two trusts also enables the $9 million Washington Estate Tax shelter — which requires each spouse to have their own $3 million exemption available at death. A single joint trust cannot achieve this result.

How are trust assets distributed at the first spouse's death?

At the death of the first spouse, the surviving spouse becomes the Successor Trustee of the deceased spouse's trust. The surviving spouse has broad — but not absolute — discretion to tailor gifts to the special needs and circumstances of each beneficiary. The first-to-die spouse may give up to $3 million to beneficiaries in a Married Separate Property Trust. Special circumstances the Trustee may consider include: Disability — The Trustee shall obtain legal advice and give only in ways that do not interfere with disability benefits. Addiction — The Trustee may require drug or alcohol testing; restrict gambling; make direct payments to third parties for treatment or living expenses; and set conditions for distributions during recovery. Bankruptcy — The Trustee may delay any gifts until the bankruptcy is concluded. Divorce — The Trustee may delay any gifts until the divorce is concluded.

What is trust funding and why does it matter?

Funding the Trust means opening accounts and titling property in your name as Trustee of your Trust — rather than in your name individually. This keeps property separate even after marriage. For the greatest protection, after signing your trust documents: 1. Take a copy of the trust to your bank 2. Open a Trust Checking Account and Trust Savings Account 3. Transfer your money into those accounts The purpose of funding is twofold: • It gives the Successor Trustee access to funds (in conjunction with a Power of Attorney for Finances) while you are still alive — to care for you and/or your children if you become incapacitated • It avoids probate upon death by keeping assets inside the trust rather than in your individual name An unfunded trust is one of the most common — and costly — estate planning mistakes. A trust only controls what has been transferred into it.

What is a Spousal Consent Form for a 401(k) — and why must it be handled during your lifetime?

Federal law (ERISA) requires that a married 401(k) participant designate their spouse as 100% primary beneficiary of the entire account balance — including everything accumulated before the marriage — unless the spouse provides written, notarized consent to name someone else. Why timing is critical: If you do not obtain spousal consent during your lifetime, the Spousal Consent Form will be mailed to your surviving spouse after your death. At that point, your spouse can choose to sign — or refuse to sign. A refusal can result in costly litigation over the retirement account at exactly the worst possible time. Once signed during your lifetime, the Spousal Consent Form becomes irrevocable — it cannot be changed by anyone, not even a judge. Best practice: 1. Obtain the Spousal Consent Form from the custodian of the 401(k) account 2. Sign the form — Christopher can notarize electronically as a Remote Online Notary 3. Name your Separate Property Trust as primary beneficiary 4. Call out the separate and community property shares — allocating the separate property share to your adult children and the community property share to your surviving spouse 5. Submit the completed form to the plan custodian

What is a Spendthrift Clause and why is it important?

A Spendthrift Clause prevents a beneficiary from selling, assigning, or pledging their interest in the trust's principal or income to secure credit or pay off debts. The trust itself remains the legal owner of the assets, and the Successor Trustee manages and distributes them according to the terms set by the Grantor. Why it matters: • Protects beneficiaries from themselves — especially those who may be financially irresponsible, susceptible to addiction, or vulnerable to poor financial decisions • Ensures long-term financial security by controlling the distribution of assets over time • Shields the inheritance from the beneficiary's creditors, lawsuits, and potentially divorce settlements • Encourages financial discipline — often paired with an age restriction (age 25 is typical for distributions free of trust) • Maintains the Grantor's wishes rather than allowing what you worked hard to acquire to be redirected to a beneficiary's creditors All Revocable Living Trusts in Washington State are Spendthrift Trusts by default — avoiding probate and protecting beneficiaries from losing their inheritance to creditors.

What is a Trust Protector and why is one important?

A Trust Protector is an individual or entity appointed in a trust instrument to oversee and, in some cases, direct the trustee in the administration of the trust. They act as an independent third party to safeguard the interests of the beneficiaries and ensure that the trust continues to function according to the settlor's intentions — even as circumstances change over time. Key functions of a Trust Protector: • Ensuring the Settlor's Intent is Carried Out — helps ensure the trustee follows the wishes of the trust creator and that the trust's purpose remains intact • Providing Flexibility and Adaptability — can be granted the power to modify trust terms to accommodate new laws, changes in family structure, or evolving financial goals • Preventing Trustee Misconduct — can monitor the trustee's activities and, if necessary, remove and replace a trustee who is failing in their duties • Resolving Disputes — can act as a mediator to resolve conflicts between trustees and beneficiaries • Adapting to Changes in the Law — can modify trust terms to maintain tax efficiency and compliance with current law

What is a Personal Property Memorandum (PPM)?

A Personal Property Memorandum (PPM) is a separate written document — referenced in your will or trust — that directs the distribution of specific items of tangible personal property to named individuals. Washington State law (RCW 11.12.260) specifically permits the use of a separate writing like a PPM to direct the distribution of tangible personal property not otherwise specified in a will. Why a PPM matters: • Ensures your wishes are followed for specific items of personal property • Avoids family disputes over sentimental items such as heirlooms, jewelry, artwork, and collectibles • Flexible — can be updated without amending your will or trust • Preserves sentimental value by designating items to individuals who will cherish them • Simplifies estate administration for the Successor Trustee Legal requirements in Washington State: • Must be referred to in your will or trust • Must be signed and dated by you • Must describe the items and their recipients with reasonable certainty

What happens if a Successor Trustee is not a U.S. citizen — can my trust become a Foreign Trust?

Yes — and this is one of the most overlooked traps in trust planning for families with international ties. Under U.S. tax law, a trust is classified as a Foreign Trust if it fails either of two tests: 1. The Court Test — a U.S. court must be able to exercise primary supervision over the trust's administration. 2. The Control Test — one or more U.S. persons must have the authority to control all substantial decisions of the trust. If a non-U.S. citizen Successor Trustee who lives outside the United States takes control of the trust, the Control Test may fail — and the trust can be reclassified as a Foreign Trust, triggering a cascade of reporting obligations and potential tax burdens. Additional reporting requirements triggered by Foreign Trust status: • Form 3520 — required for transactions with foreign trusts • Form 3520-A — annual return required if you are treated as the owner of a foreign trust • Form 8938 (FATCA) — may be required to report specified foreign financial assets • FinCEN Form 114 (FBAR) — may be required if the trust holds foreign financial accounts over $10,000 How Christopher addresses this in every trust: The following language is included in all Mulvaney Law Offices trusts: 'This Trust shall not be deemed to be a Foreign Trust even if the Successor Trustee appointed is not a U.S. Citizen and does not live in the U.S. The Successor Trustee has the Power to Appoint a citizen resident to carry out the duties, and shall be required to do so to avoid Tax

Christopher S. Mulvaney, Esq. — Attorney-and-Counselor-at-Law — Professionalism with Integrity — WSBA#33595 — Licensed Only in Washington State

[email protected]Bellevue, WA

Married Revocable Living Trusts

Trusts Overview

Washington State Estate Planning

The cornerstone of every married couple's estate plan — private, flexible, and probate-free.

RCW Chapter 11.98 — Trusts (Revised Code of Washington)

A Married Revocable Living Trust is the foundation of a Washington State estate plan for couples. It avoids probate, provides seamless incapacity planning, keeps your family's affairs private, and — when properly structured — can shelter up to $9 million from Washington State Estate Tax. Each spouse typically maintains their own separate trust, coordinated to work together as a unified plan.

Reference Links

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