Why Trusts Matter for Washington D.C. Residents
If you live in Washington D.C. and have not yet considered a trust as part of your estate plan, now is the time. The District has its own estate tax, its own probate rules, and a legal landscape that makes trust planning particularly valuable — and in some cases, essential. Whether your goal is to avoid probate, protect a loved one with a disability, minimize taxes, or simply ensure your wishes are carried out with privacy and efficiency, a properly drafted trust can accomplish all of this and more.
This article provides a general educational overview of trusts in Washington D.C. It is not legal advice. Every person's situation is unique, and we strongly encourage you to consult with a qualified estate planning attorney before making any decisions.
What Is a Trust?
A trust is a legal arrangement in which one party (the trustee) holds and manages assets on behalf of one or more beneficiaries. The person who creates the trust is called the grantor or settlor. Trusts can serve a wide range of purposes, from simply keeping your estate out of probate court to sophisticated strategies that reduce tax liability, protect a special needs family member, or preserve your wealth across multiple generations.
Unlike a will, which becomes a public document once filed with the court, a trust remains private. It also does not pass through the probate process, meaning your beneficiaries can receive assets far more quickly and with far less expense.
The Legal Framework for Trusts in Washington D.C.
Washington D.C. adopted the Uniform Trust Code in 2003, codified at D.C. Code Title 19, Chapter 13. This provides a comprehensive legal foundation governing the creation, administration, and enforcement of trusts in the District.
Importantly, D.C. has recently modernized its trust laws in two significant ways. First, trust decanting became available under D.C. Law 25-266, effective March 7, 2025, allowing trustees to transfer assets from an existing irrevocable trust into a new trust with updated terms — in some cases without going to court. Second, directed trust provisions were enacted under D.C. Law 25-298, effective March 21, 2025, which allow the investment, distribution, and administrative functions of a trust to be separated among different parties. These changes bring D.C.'s trust law in line with modern standards and offer greater flexibility to grantors and trustees alike.
Additionally, D.C. has effectively repealed the Rule Against Perpetuities (D.C. Code Section 19-904), meaning dynasty trusts can be structured to continue indefinitely — a powerful option for families seeking multi-generational wealth preservation.
Types of Trusts Available in Washington D.C.
Revocable Living Trust
A revocable living trust is the most common type of trust used in estate planning. A Washington D.C. living trust holds your assets during your lifetime while you continue to use and control them. After you pass away, the trust assets are distributed to your chosen beneficiaries — without going through probate.
Key advantages of a revocable living trust in D.C. include:
- Probate avoidance: Assets held in trust bypass the lengthy and public probate process, allowing your beneficiaries to receive their inheritance faster.
- Privacy: Unlike a will, which becomes a public court record, a trust keeps your assets, beneficiaries, and distribution terms completely private.
- Incapacity protection: Your revocable living trust protects you should you become mentally incapacitated — and while a durable power of attorney can sometimes be rejected, a trust cannot be.
- No property tax reassessment: Transferring property into a revocable trust does not trigger a property tax reassessment in D.C., so your property taxes remain at their current level.
- Avoids ancillary probate: For D.C. residents who own property in Maryland or Virginia, a revocable trust avoids the need for separate probate proceedings in those states as well — a critical consideration for families in the DMV area.
It is important to note that a revocable living trust does not reduce your D.C. estate tax liability. Assets held in a revocable trust are still considered part of your taxable estate.
Irrevocable Trust
An irrevocable trust is a permanent legal arrangement that, once established, generally cannot be altered or revoked without the beneficiary's consent. While this means giving up direct control over the assets you transfer in, the trade-off can be substantial. Assets transferred irrevocably are typically removed from your taxable estate, which can significantly reduce or eliminate your D.C. estate tax exposure. Irrevocable trusts also offer stronger protection from creditors and lawsuits.
Common forms of irrevocable trusts used in D.C. estate planning include Irrevocable Life Insurance Trusts (ILITs), which keep life insurance proceeds outside your taxable estate entirely, and Medicaid trusts, which can assist with long-term care planning.
Credit Shelter Trust (Bypass Trust)
This is arguably the most critical trust tool for married couples in Washington D.C. Unlike the federal government, D.C. does not allow "portability" of the estate tax exemption between spouses. This means that if the first spouse to die does not use their D.C. exemption, it is lost forever.
The solution is a credit shelter trust, also called a bypass trust or B trust. At the death of the first spouse, an amount up to the D.C. exemption is directed into the credit shelter trust, which continues to benefit the surviving spouse during their lifetime while keeping those assets out of the survivor's taxable estate. At the second death, the survivor then uses their own separate exemption. Without this planning, a married D.C. couple could lose $150,000 or more in avoidable estate taxes.
Testamentary Trust
A testamentary trust is established through your will and only takes effect after your death. While it can be an effective tool for managing asset distribution — particularly for minor children — it is subject to probate and does not provide the same privacy or efficiency benefits as a living trust.
Special Needs Trust
A special needs trust (also called a supplemental needs trust) is designed to provide for a loved one with a disability while preserving their eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid. There are two primary types:
- Third-Party Special Needs Trust: Funded by family members (parents, grandparents, or others) for the benefit of the individual with a disability. No Medicaid payback is required at the beneficiary's death — remaining funds pass to whoever you designate.
- First-Party Special Needs Trust: Funded with the beneficiary's own assets (such as a personal injury settlement). D.C. enforces a sole benefit rule for both types — every dollar must be spent for the beneficiary's benefit. A Medicaid payback provision is required at death for first-party trusts.
Thanks to D.C.'s new Uniform Trust Decanting Act (effective March 2025), trustees may now be able to restructure an existing trust into a special needs trust if circumstances change — potentially without court involvement.
Pet Trust
Washington D.C. law recognizes pet trusts, which enable individuals to provide for the ongoing care of their companion animals after their death or incapacity. Under D.C. law, a pet trust remains valid throughout the animal's lifetime, and the trust designates a caregiver and allocates funds for food, veterinary care, shelter, and other needs.
Dynasty Trust
Because D.C. has effectively repealed the Rule Against Perpetuities, it is possible to establish a dynasty trust — a trust designed to hold and grow assets for multiple generations indefinitely. This is a powerful option for high-net-worth families seeking long-term wealth preservation.
Washington D.C. Estate Tax: What You Need to Know
D.C. is one of only a handful of jurisdictions in the country that imposes its own estate tax — and it applies at a much lower threshold than the federal estate tax. Here are the key facts for 2026:
- D.C. Estate Tax Exemption (2026): $4,988,400 per individual. Estates valued above this amount are subject to D.C. estate tax.
- Federal Estate Tax Exemption (2026): $15,000,000 per individual — far higher than D.C.'s threshold.
- Tax Rates: D.C. estate tax rates range from 11.2% to 16% on amounts above the exemption.
- No Portability: D.C. does not allow a surviving spouse to "inherit" their deceased spouse's unused exemption. Credit shelter trusts are therefore essential for married couples.
- No Inheritance Tax: D.C. does not impose an inheritance tax on beneficiaries.
- Revocable trust assets are taxable: Assets held in a revocable living trust avoid probate but are still included in your taxable estate for D.C. estate tax purposes.
Families with homes in D.C. plus retirement accounts and life insurance can easily approach or exceed the exemption threshold, making trust planning an important consideration even for those who may not think of themselves as wealthy.
Do You Still Need a Will If You Have a Trust?
Yes — most estate planning attorneys recommend having both. If any assets are not transferred into your living trust or passed through another method (such as a transfer-on-death deed or joint tenancy), they will be distributed according to D.C. law or via your will. A will is also the appropriate place to designate a guardian for minor children. Furthermore, be aware that assets not titled in your trust's name must go through probate, which defeats one of the primary reasons for creating a trust in the first place — so proper trust funding is essential.
Transfer-on-Death (TOD) Deeds: A Complementary Tool
D.C. allows property owners to use transfer-on-death deeds (under D.C. Code § 19-604.05) to pass real estate directly to named beneficiaries without probate. This can be a useful complement to — or in some cases a simpler alternative to — a living trust for keeping a single piece of real estate out of the probate process.
How Leeds Law Firm Can Help
Navigating Washington D.C.'s unique trust laws, estate tax rules, and probate framework requires knowledgeable, personalized legal guidance. At Leeds Law Firm, our estate planning attorneys help D.C. residents design trust strategies that protect their assets, minimize tax exposure, and ensure their loved ones are provided for — on their terms.
Whether you are considering your first living trust, need to update an outdated plan, or want to explore advanced strategies like credit shelter trusts, special needs trusts, or dynasty trusts, we are here to help.
Contact Leeds Law Firm today to schedule a consultation with one of our experienced estate planning attorneys. The right plan, put in place at the right time, can make an enormous difference for your family's future.
This article is provided for general informational and educational purposes only. It does not constitute legal advice and does not create an attorney-client relationship. Laws change frequently, and the information above may not reflect the most current legal developments. Always consult a qualified attorney regarding your specific situation.
