DO I NEED A WILL AND IF SO WHAT WILL IT COST?
Legal fees are usually in the $500 to $1500 range for consultation and drafting of a will. When married or registered partners are seeking reciprocal or identical wills, the second will is usually done at a much discounted rate. If you have minor children and sufficient wealth that you would worry about your children getting their inheritance dropped in their lap when they turn age 18, a will is essential. When a child under age 18 inherits without a will the funds are "locked up" by the court (but placed in an investment that will grow for the benefit of the child) until the child's 18th birthday. Then the child has the right to have all the funds released to the child, which usually is a worrisome event for other family members. A will would prevent this by setting up a trust for the child in the will which typically names an aunt or uncle as the trustee and provides some delay and structure for distributions to the child. Even if you have adult children the trust tool in a will can protect the adult child's inheritance from creditors.
COMMUNITY PROPERTY AGREEMENT - COSTS $500 OR LESS
If you are married or are a partner in a state resisted domestic partnership and want your spouse/partner to receive all your assets at your death then a community Property Agreement pursuant to Washington State statute 26.16.120 will be sufficient and no will is necessary. But see below re tax issues.
AN EXCEPTION TO THE COMMUNITY PROPERTY AGREEMENT:
If you have a taxable estate ( as in death or estate tax) or will create a taxable estate in your surviving spouse/partner, ( meaning surviving spouse/partner ends up with the combined net estate, after the first death, valued at more than two million dollars (WA state estate tax) or more than five million dollars ( Fed estate tax) then you can save death taxes by having a will that contains a trust for the benefit of the surviving spouse/partner that effectively bumps the two million state estate tax threshold to four million and doubles the Federal estate tax threshold to ten million dollars.
Some recent changes in 2013 with the IRS rules, may allow the surviving spouse or domestic partner to inherit from a deceased spouse or partner and preserve the deceased's estate tax credit - in effect preserving or doubling the credit in the survivor.
Regarding the need for establishing a disclaimer or credit shelter trust for estate planning for couples, the American Taxpayer Relief Act of 2012 (ATRA) – created “portability” of each spouse’s estate tax exemption amount ( which is now $5 million and increases with inflation). Before 2012 the exempt amount that could be transferred at death without incurring Federal Estate tax was $3.5 million. But if a couple was worth $6 million and had wills that simply left everything to the survivor, then the exemption was said to die with the first death of a spouse and the survivor (while not having to pay and tax on the first death) ended up with an estate worth $6 million but only an exemption of $3.5 million on the second death – leaving $2.5 million subject to 35% tax on the second death. So estate planning attorneys came up with the solution of a credit bypass trust and a disclaimer trust inserted into each spouse’s will. The purpose was to push assets outside of the surviving spouse’s estate but also make them available to the surviving spouse if needed for living and other expenses. While ATRA removes the tax advantage or need generally for such trusts and while ATRA is “Permanent” meaning there is no built in provision for future changes or revocation of the Act, lack of change in the law is not guaranteed. Therefore it is a good practice to at least include a disclaimer trust in each spouse’s will. Such a trust is voluntary and will be used or not by the surviving spouse after consultation with legal and tax professional after the first death, which is commonly many years after the wills are signed.
To get the benefit of the portability of the estate tax exemption, the surviving spouse or the executor, after the first death must file an estate tax return, IRS Form 706. This must be done though no tax is owing.
SINGLE OR MARRIED BUT NO REAL ESTATE AND NO LARGE VALUE TITLED ASSETS SUCH AS VEHICLES, PLANES OR BOATS
If this is the case, you can name a death beneficiary or multiple beneficiaries on all your bank accounts, 401K and IRA accounts and on all brokerage accounts and on any annuity or pension benefit. the person(s) names will get the account(s) without a will and without any court probate.
WHAT ABOUT A REVOCABLE LIVING TRUST OR OTHER WAYS TO AVOID PROBATE - SHOULD AVOIDING PROBATE BE A PRIMARY GOAL?
If you own real estate ( examples: second residence or vacation property) in two states, using some form of Trust ownership for real estate outside of Washington makes some sense. The reason behind this is that the courts or deed recording offices in other states don't recognize the authority of personal representatives appointed by Washington courts, so a court proceeding "ancillary probate" needs to be started in the other state to get a personal representative appointed by the court in the jurisdiction where the out of state real estate is located, in order to record a personal representative's deed.
In order to avoid the need for ancillary probate, when the out of state property is purchased, you can set up a trust to own the property (trusts don't die) with a provision in the trust that specifies what happens to the property when the trustor(s) die. The disadvantage of such a trust is that the trust will be required to file a federal tax return each year ( it won't pay taxes though) but there is the time and expense involved in preparing annual tax returns.
Perhaps. a compromise solution for the out of state property is to take tile with a "survivorship deed" where there are two or more owners, because with such a deed the property passes without probate to the survivors when there is a death.