Updated January 25, 2024
A Washington D.C. living trust is a legal document that can provide a number of advantages in the process of passing on assets after death. The person who starts the trust is sometimes known as the grantor, but in Washington D.C. this person is usually known as the “settlor.” A trust resembles a will, in that the settler identifies beneficiaries for a particular property. But unlike a will, a living trust does not have to go through the probate process. Particularly for large estates or those involving complex assets like control of a business, probate can be time-consuming and challenging, and many people pursue living trusts for this reason. Irrevocable living trusts, one of two main types of living trusts, also offer some potential protection from creditors. Revocable living trusts, the other main type of living trusts, offer less protection but are easier to modify after creation.
Laws – Title 19, Chapter 13 (Uniform Trust Code)
Will (Last Will and Testament) – An alternative or supplemental means of distributing assets after death
Types
Irrevocable – Irrevocable trusts avoid probate. Unlike most states, an irrevocable trust in Washington D.C. may be modified but requires either the approval of the grantor and all of the beneficiaries or the judge approving a court petition.
Revocable – Revocable trusts avoid probate and can be altered or revoked in exactly the same way a will can.
Individual Roles
The four (4) parties in a Washington D.C. living trust are:
Settlor (or “Grantor”) – The person who creates the trust and whose assets fund it.
Trustee – The person or entity who administers the trust and is bound by a duty to manage it responsibly.
Successor Trustee – In the event the trustee becomes incapacitated, the successor trustee will take over administration of the trust.
Beneficiaries – The people or entities whom the trust designates as the recipients of the trust’s assets.
How to Create a Living Trust in Washington D.C.
The primary way to create a living trust in Washington D.C. is for a settlor to transfer property to another party as trustee (§ 19-1304.01). There are five (5) primary requirements for a valid trust:
- (1) the settlor has capacity to create the trust;
- (2) the settlor intends to create a trust;
- (3) a trustee is identified and given duties to perform;
- (4) the trustee is not the sole beneficiary; and
- (5) there is some beneficiary defined (§ 19-1304.02).
There are some exceptions to the last requirement, including a charitable trust, or one in which a beneficiary is not explicitly defined but the trustee is charged with selecting one (§ 19-1304.09) This may occur when a settlor wants to set up a trust to transfer assets to, for example, a child who has not yet been born. A trust may be created for any legally valid reason (§ 19-1304.04). Like a contract, settlors have wide latitude to structure trusts as they see fit, and for the most part the terms of the trust will control in the event of a dispute (§ 19-1304.05). Once drawn up, the document may be signed in person or electronically; there is no requirement for the document to be notarized, but it is highly recommended (§ 19-1311.02) A trust is not considered a public record, and need not be filed with a court in order to be valid, though it may become public if a lawsuit is filed over its terms (§ 19-1302.01). Once a trustee has been appointed, the trustee must provide the beneficiaries with a means of contacting the trustee within sixty (60) days; if it is an irrevocable trust, the trustee must also identify the settlor, and inform the beneficiaries of their right to request periodic reports about the condition of the trust (§ 19-1308.13).
Motor Vehicles – Motor vehicles may be distributed to a trust, but the settlor, and eventually the beneficiary, must transfer title to the trust through the District’s Department of Motor Vehicles. To do so, use a Washington D.C. Motor Vehicle Bill of Sale.
Real Estate – Real property may be transferred to a trust using a Washington D.C. deed. The change in ownership should be recorded with the District of Columbia Recorder of Deeds.
Do I Need a Living Trust?
Whether to pursue a living trust depends largely on the size and complexity of an estate. Small estates have the least to gain from setting up a trust. Estates with a total value of less than $40,000 can escape the probate process through the District’s Small Estate Affidavit. Estates above this threshold may have to go through the probate process, but the costs associated with operating a trust — especially compensating a trustee to manage it — can be substantial, and many may still be better off using a will.
The benefits of living trusts start to kick in for larger estates. Estates worth more than $12 million are subject to federal estate taxes, and for people who died after Dec. 31, 2020 estates worth more than $4 million are subject to the District’s local estate tax. These taxes may be delayed with an irrevocable trust. Settlors concerned about irresponsible behavior by beneficiaries may incorporate a “spendthrift” provision, which limits the ability of a beneficiary to liquidate the assets of a trust, and for creditors to reach it, for a certain length of time.