Can You Use Your Will to Create a Trust?

Trusts are often used in Washington estate planning to hold and transfer property. Living trusts are standalone documents that create a trust during the lifetime of the grantor, i.e., the person who makes the trust. But you can also create a trust through your will. These are known as testamentary trusts, and they do not come into existence until after your death.

Mother’s Will Created “Express Trust” Requiring Sister to Share House Proceeds with Brother

While it is a good practice to make it clear in your will that you wish to create a testamentary trust, there are no “magic words” you must use. Indeed, under Washington law a person creates an express trust whenever a property interest is held by one person, at the request of another person, for the benefit of a third party. Put another way, the grantor gives property to a trustee, who holds legal title to the property, even though another party holds equitable title (right to the benefit).

The Washington Court of Appeals recently addressed a case, Henderson v. Schmoll, holding that a will created an express trust even though the “trustee” denied such an arrangement ever existed. This case actually involved litigation between the probate estates of two now-deceased siblings. The siblings’ mother died in 1983. A year before her death, the mother executed a will, which gave “legal” title to her home to her daughter, Jane. The will further provided, however, that when Jane sold the house, she had to distribute one-half of the sale proceeds to her brother, Norman.

Jane continued to live in her mother’s house until her own death in 2021. Norman died three years earlier in 2018. Following Jane’s death, Norman’s estate filed a creditor’s claim for one-half of the sales proceeds from the mother’s house. Jane’s estate rejected the claim.

Litigation followed. The Court of Appeals, upholding a trial court’s prior ruling, held that the mother’s will created an “express trust.” Jane legally held the mother’s house as the trustee with herself and Norman as the co-beneficiaries. The Court noted that under one legal test commonly used in these types of cases, there are four elements needed to create an express trust:

• a will demonstrating the testator’s intent to create a trust;
• a designation of the property to be held in trust;
• a designation of the trust’s beneficiaries; and
• specification of the terms of the trust.

Here, all four elements were satisfied. Notably, the mother’s will stated that Jane “shall” pay Norman one-half of the sale proceeds from the house, which the Court said was sufficient to prove both the mother’s intent and specify her terms for the trust.

Contact a Spokane Trusts Lawyer Today

There are many different kinds of Washington trusts that can potentially benefit your own estate planning. It is therefore important to consult with a qualified Spokane trusts lawyer who can assist you in selecting the right trusts for your family’s needs. Contact Moulton Law Offices, P.S., today to schedule a free consultation. We serve clients throughout the Spokane, Kennewick, and Yakima area.

Source:

courts.wa.gov/opinions/pdf/851560.pdf