What is a Trust?
A trust is a relationship between two people, settlor and trustee, in which the settlor gives legal title to assets to the trustee to hold and administer for the equitable benefit of other persons, who are called beneficiaries. The trustee becomes a fiduciary with respect to the settlor and the beneficiaries, and exercises any discretion he or she is given in administering the assets subject to the core fiduciary duties of loyalty (no trustee-benefiting acts), good faith and honest judgment (no aberrant or arbitrary decisions), impartiality (no favoritism among beneficiaries), and diligence (exercise reasonable competence in administering assets). When investing, trustees must comply with the “prudent investor rule,” contained at RCW 11.100.020.
A trustee must be over eighteen years of age, a person of sound mind, and have no felony or misdemeanor convictions for crimes involving moral turpitude. RCW 11.36.021. Crimes involving "moral turpitude" are those that constitute "an act of baseness, vileness, or depravity in the private and social duties which a man owes to his fellow men or to society in general." City of Seattle v. Jones, 3 Wash. App. 431, 467, 475 P.2d 790 (1970), affirmed by 79 Wn.2d 626 (1971). Crimes involving moral turpitude are characterized by their intentional injury to the victim's physical or financial well-being, and a general disregard for the law.
Testamentary trust gifts should be utilized where there exist specific concerns about the effect having control of substantial sums of cash might have on a beneficiary, for example, minors or persons of diminished mental capability. Lancaster Law Office clients frequently employ testamentary trusts (trusts contained in Wills that are effective upon the death of the Will-maker) to provide for their minor children or aging parents. One can even donate funds in trust for the benefit of animals. RCW 11.118.
A revocable living trust is an agreement that a trustee (usually yourself) shall hold all the property you transfer into the name of the revocable living trust for the benefit of the trust beneficiaries (usually yourself and your spouse). With a few exceptions, revocable living trusts offer few advantages to Washington residents and are inappropriate for those who do not: 1) require heightened privacy, 2) hold large numbers of out-of-state real property parcels, or 3) have ongoing businesses in need of continuity of administration. Some attorneys who sell revocable living trusts as their primary business dispute my conclusion in this regard.
Trustees are bound to benefit the trust’s beneficiaries in some specific ways, and thereafter to distribute all the trust principal as the trust specifies. Trusts are extremely flexible instruments, and a trustor (person creating the trust) may release her trustee from many statutory duties (other than the duty of acting in good faith with honest judgment), or she may add duties not contained in the statutory scheme. RCW 11.97.010. A trustee has substantial powers over the assets of a trust, enumerated in the statute. RCW 11.98.070. No trust provision that extends control over the trust funds longer than 150 years is valid (Rule Against Perpetuities). RCW 11.98.130, 11.98.140, 11.98.150. The trust statute specifies investment rules for trustees. RCW 11.100. For example, trustees must invest solely for the benefit of trust beneficiaries, and impartially as between them. RCW 11.100.045. A trustee shall diversify her investments. RCW 11.100.047. Specific statutory rules govern the allocation of receipts and disbursements as between principal and interest with respect to trust funds. RCW 11.104A.010 et seq. Trustees have a duty to account to the court and beneficiaries, unless relieved of that obligation by express terms of the trust. RCW 11.106. Gift distribution rules lie at RCW 11.108. Rules governing charitable trusts are contained at RCW 11.110. Rules governing gifts to minors are contained at RCW 11.114.
The Washington Trust Act has recently been substantially revised, and those revisions take effect January 1, 2012, and they shall apply to all Washington trusts whenever those trusts were created.