Should You Include a Trust in Your Estate Plan?
Find out if including a trust in your estate plan can help protect your assets, avoid probate, and secure your family's future.
Planning for the future can feel overwhelming, especially with legal terms like wills and trusts. If you’re creating or updating your estate plan, you may be wondering: Should I include a trust as part of my estate plan? This article will explain what trusts are in simple terms, highlight the benefits of including a trust, compare trusts vs. wills, and help you determine if adding a trust is the right move for your family.
(Fun fact: You’re not alone in navigating estate planning – about two-thirds of Americans don’t have any estate planning documents at all. Taking steps now can put you ahead of the curve and give you peace of mind.)
What Is a Trust in Estate Planning?
A trust is a legal arrangement (estate planning tool) that lets you transfer assets to a separate entity to be managed on behalf of your beneficiaries. In a trust, you (the grantor) appoint a trustee – a person or institution – to hold and manage property for the benefit of someone else (your beneficiaries). In practical terms, you place money, property, or other assets into the trust, and the trustee ensures those assets are distributed to your loved ones according to your instructions.
Many people create a trust alongside a will as part of a comprehensive estate plan. For example, you might have a last will and testament to cover general wishes and name guardians for minor children, and also use a trust to handle specific assets or provide ongoing management. Unlike a will, a trust can take effect during your lifetime (if it’s a living trust) and can continue after your death without needing court processes. The exact rules of a trust depend on the type of trust you choose, but all trusts share a common goal: making sure your assets are handled and passed on in the way you want.
Benefits of Including a Trust in Your Estate Plan
Including a trust in your estate plan can offer several important benefits that a will alone might not provide. Here are some key advantages of adding a trust:
Avoiding Probate Delays and Costs: Assets placed in a trust typically do not go through probate, the often time-consuming court process to validate a will. This means your beneficiaries can receive their inheritance faster and with fewer legal fees. Bypassing probate also avoids the public probate court filings – which leads to the next benefit, privacy.
Greater Privacy: Unlike wills that become part of the public record during probate, trusts generally remain private. The details of who inherits what, and when, stay confidential within the trust document. If you value keeping your family’s financial affairs out of public view, a trust is a helpful tool.
Control and Customization: Trusts let you set rules and conditions on how your assets are used by your heirs. For example, you can specify that a child will only receive funds when they reach a certain age or milestone (like graduating college), or limit distributions to a certain amount per year. This level of control can protect young or financially inexperienced beneficiaries from mismanaging a large inheritance. In short, a trust allows you to custom-tailor your estate plan to fit your wishes and your beneficiaries’ needs.
Flexibility (With Revocable Trusts): If you create a revocable living trust, you retain the flexibility to change its terms or even cancel the trust during your lifetime. This means you can adapt your estate plan if your circumstances or wishes change – for instance, if you have a new child or grandchild, or if you change your mind about who should inherit what. Revocable trusts essentially evolve with you, providing peace of mind that your estate plan can be kept up-to-date.
Potential Tax Advantages and Asset Protection: Certain types of trusts can help reduce estate taxes or protect assets from creditors. For example, an irrevocable trust (one that generally cannot be changed after creation) can remove assets from your taxable estate, potentially lowering estate tax exposure. Some trusts are designed to shield assets for beneficiaries – such as a special needs trust that preserves a disabled person’s eligibility for government benefits, or trusts that protect assets from a beneficiary’s creditors or divorce. Note: Tax and asset protection benefits depend on trust type and current laws, so it’s wise to consult an estate planning attorney or tax professional for guidance.
Incapacity Planning: With a trust, you can outline how your assets should be managed if you become incapacitated (unable to make decisions due to illness or injury). For example, your chosen trustee can step in to manage the trust assets for your benefit if you’re incapacitated, without the need for a court-appointed guardian. This can simplify financial management during difficult times and ensure your bills and needs are taken care of according to your instructions.
Easing the Burden on Loved Ones: By having a clear trust in place, you spare your family from having to guess your wishes or navigate complicated court processes. Your trustee will carry out the instructions you’ve laid out, which can reduce family stress and conflict. In essence, a trust can streamline the inheritance process, making it easier on your loved ones during an already emotional time.
As you can see, trusts offer a range of benefits that complement a standard will. Avoiding probate, maintaining privacy, and gaining more control are often the top reasons people choose to include a trust in their estate plan.
Trust vs. Will: Do You Need Both?
It’s not necessarily “trust versus will” – in many cases, you might want both. Trusts and wills serve different purposes in an estate plan, and they often work together to cover all your bases.
A will is a foundational document that allows you to do things like name an executor (the person to carry out your wishes) and appoint guardians for minor children. It also specifies who should receive your property when you die. However, any assets passed on through a will generally must go through probate, which is public and can take months or even years to finalize.
A living trust, on the other hand, can hold your major assets (like real estate, bank accounts, investments). Those assets in the trust will avoid probate entirely and can be distributed to your beneficiaries according to the trust terms, often much faster. Moreover, a trust can apply rules or manage assets over time, which a will cannot do – a will typically results in one-time transfers outright to beneficiaries.
Importantly, having a trust does not eliminate the need for a will. Even if you set up a revocable trust to cover most of your assets, you should still have a “pour-over will” – a type of will that directs any assets you forgot to place into the trust (or any new assets acquired later) to be added to the trust upon your death. A will is also the document where you would name guardians for children and handle other matters a trust might not cover. In summary, a comprehensive estate plan often includes both a will and one or more trusts. By creating both, you ensure that all assets and wishes are accounted for: the trust handles specific assets with efficiency and control, while the will covers anything left outside the trust and legal appointments like guardianship.
Key Differences Between Wills and Trusts
Effective Date: Wills take effect only after death (and after probate), whereas living trusts take effect as soon as you create and fund them (and can continue after death without probate).
Probate: Wills must go through probate (a court process), but assets in a trust bypass probate entirely, allowing for faster, private distribution.
Privacy: A will becomes public record during probate; a trust agreement remains private.
Control Over Distribution: Wills usually distribute assets in a lump sum or simple transfer. Trusts can stagger distributions over time or impose conditions (e.g., age requirements, usage restrictions).
Incapacity: A will does not function if you become incapacitated – you’d need a power of attorney for that. A living trust can specify how to manage assets if you’re incapacitated, using your trustee.
Changes: Wills are relatively easy to change (you create a new will or add a codicil). Revocable trusts are also changeable while you’re alive, but irrevocable trusts generally cannot be changed once established.
Knowing these differences, you can see why many people use a combination of a will and a trust in their estate planning.
Types of Trusts: Revocable vs. Irrevocable
Not all trusts are the same. It’s important to understand the basic types of trusts so you can choose one that fits your goals. The two main categories are revocable and irrevocable trusts:
Revocable Living Trust: This is the most common type of trust for estate planning. “Revocable” means you can change or cancel the trust at any time while you’re alive, as long as you’re mentally competent. You maintain control of the assets in a revocable trust – in fact, you can name yourself as the trustee initially. A revocable living trust is primarily used to avoid probate and to manage your assets if you become incapacitated, not to save on taxes (since the assets are still considered yours during your lifetime). Upon your death, the trust becomes irrevocable, and the successor trustee you’ve named will distribute assets to your beneficiaries according to your instructions. This kind of trust offers flexibility and peace of mind that your affairs are in order.
Irrevocable Trust: An irrevocable trust generally cannot be altered or revoked once it’s created (with rare exceptions). When you transfer assets into an irrevocable trust, you effectively give up ownership and control of those assets – the trust owns them, and a trustee manages them (you might name someone else as trustee, though sometimes people name themselves trustee of an irrevocable trust with special provisions). Why would anyone do this? Because irrevocable trusts can provide benefits like estate tax reduction and asset protection. Since the assets are no longer technically yours, they may not count toward your estate for tax purposes, and they might be out of reach of creditors or lawsuits. Irrevocable trusts are useful for high-net-worth individuals aiming to minimize estate taxes, or for specific purposes like setting up a life insurance trust (to exclude insurance proceeds from taxation) or a spendthrift trust to protect an heir’s inheritance from their creditors. However, irrevocable trusts are a big commitment – you give up the right to change your mind later – so they’re typically used in more complex estate plans with professional guidance.
Testamentary Trust: This is a trust that is established by your will upon your death (the trust terms are written into the will). Because it’s part of the will, it does not avoid probate – the will still has to go through probate, and then the trust is funded. Testamentary trusts are often used to manage assets for young children or others after you pass away. For example, your will could state that if both parents die, a trust is created to hold assets for the children until they reach a certain age. While not useful for avoiding probate, testamentary trusts can be a fallback mechanism to ensure managed distribution of assets after death.
In addition to revocable living trusts, there are many specialized trusts—such as credit shelter trusts, charitable trusts, and irrevocable life insurance trusts—that serve specific estate planning goals. These are especially useful in high-value estates. Learn how high-net-worth individuals can strategically use trusts to protect and grow generational wealth.
Who Should Consider a Trust in Their Estate Plan?
You might be wondering if you personally need a trust, or if a simple will would suffice. Truth is, not everyone needs a trust – it depends on your situation and goals. Here are some situations where including a trust can be especially beneficial:
You have substantial assets or a high-value estate: The larger your estate, the more potential benefit a trust can offer in terms of avoiding hefty probate costs and possibly reducing estate taxes. High-net-worth individuals often use trusts to manage and preserve wealth across generations.
You own real estate in multiple states: If you have a vacation home, rental properties, or other real estate in different states, a revocable living trust can save your heirs from going through separate probate proceedings in each state (which would be required if those properties were passed via a will). Placing out-of-state property into a trust is a common way to simplify the transfer.
You’re a business owner: Family businesses or shares in a privately held company can be tricky to transfer through a will. A trust can hold business interests and facilitate a smoother transition of management or ownership if something happens to you. It may also avoid an interruption in the business operations that could occur during probate.
You have minor children or dependents with special needs: If your beneficiaries are young or have special needs, a trust is practically a must. A trust allows a responsible trustee to manage and use funds for the child’s benefit (for education, living expenses, medical care, etc.) until they are old enough or capable of handling money responsibly. Likewise, a special needs trust can provide for a disabled loved one without jeopardizing their eligibility for government assistance programs.
Blended family or specific inheritance goals: If you have children from a previous marriage or specific instructions (for example, you want certain assets to eventually go to your grandchildren or you want to provide for a second spouse while preserving some assets for children from a first marriage), a trust gives you the precision to do that. You could, for instance, set up a trust that provides income to your spouse during their lifetime, and then passes the remaining principal to your children. This ensures everyone is taken care of as you intend, which might not happen with a basic will alone.
Concerns about heirs managing a lump sum inheritance: Maybe you worry that an heir might spend their inheritance irresponsibly if they get it all at once. By using a trust, you can stagger the inheritance (e.g., partial distributions at certain ages or milestones) or make the trustee responsible for doling out funds as needed for the beneficiary’s well-being. This can protect the inheritance from being squandered and ensure it lasts longer. If you simply left a lump sum through a will, you’d have no control after you’re gone.
You value privacy and simplicity: If the idea of your estate going through public probate and your family dealing with court makes you uncomfortable, a trust is worth considering. The privacy, speed, and streamlined nature of trust administration (especially for a revocable living trust) can be major benefits regardless of your wealth level. Even people with modest assets may choose a living trust just to make things easier for their surviving spouse or children.
On the other hand, if your estate is relatively simple—like a single home and one bank account passed to a single heir—you might not need a trust at all. A properly executed will or even named beneficiaries on your accounts may be enough. Here’s how beneficiary designations can simplify your estate planning.
Tip: It can be helpful to consult with an estate planning attorney to evaluate your needs. They can tell you if your circumstances merit a trust, and if so, what kind of trust would serve you best. Estate laws vary by state, and professional advice ensures you make an informed choice.
How to Get Started with Setting Up a Trust
If you’ve decided that a trust might be right for you, what are the next steps? Setting up a trust involves a few key steps, and while it’s possible to DIY with online forms for simple cases, it’s generally recommended to work with a professional for this process:
Define Your Goals: First, be clear on why you want a trust. Is it to avoid probate, to control distributions to heirs, to reduce taxes, or to care for a special needs dependent? Your goals will influence the type of trust you need.
Choose the Right Type of Trust: Based on your goals, decide between a revocable trust or irrevocable trust, or any specialized trust. For most people, a revocable living trust is the go-to for general estate planning because of its flexibility and probate-avoidance. If you have more specific needs (like tax planning or asset protection), an attorney might suggest an irrevocable trust or additional trust instruments.
Select a Trustee: You’ll need to appoint a trustee to manage the trust. Many people name themselves as trustee of a revocable living trust (since you maintain control during your life) and then name a successor trustee (a person or trust company) to take over after death or if you become incapacitated. Think carefully about who is trustworthy and capable to serve as your successor trustee – it could be a responsible family member, a close friend, or a professional fiduciary or bank/trust company.
Draw Up the Trust Document: This is where an estate planning attorney is especially helpful. They will draft the legal trust agreement, making sure it complies with state laws and captures your wishes accurately. The document will name the trustee(s), beneficiaries, and detail how assets in the trust should be managed and distributed. It can include any special instructions or conditions you want to set.
Fund the Trust: Simply signing trust papers isn’t enough – you must transfer your assets into the trust’s name (this is called “funding” the trust). This means retitling assets like real estate, bank accounts, investment accounts, etc., so that the owner is now your trust (e.g., changing the deed of your house from “John Doe” to “John Doe, Trustee of the Doe Family Trust dated 1/1/2025”). For any assets not easily retitled (like personal possessions), you can assign them to the trust through the document or a separate assignment. Properly funding the trust is crucial; any asset left out will not be protected by the trust and could end up in probate.
Update Beneficiaries and Create a Pour-Over Will: For assets like life insurance or retirement accounts, you might name the trust as a beneficiary if appropriate, so those funds go into the trust at your death. Also, have your lawyer draft a simple pour-over will. This will acts as a safety net to catch any assets you didn’t get into the trust during your life – it directs them into your trust at death. The combination of a funded trust and a pour-over will ensures all bases are covered.
Maintain and Review Your Estate Plan: Once your trust is set up, remember to review it periodically. Life events like marriage, divorce, the birth of a child, significant changes in finances, or moving to a different state are all reasons to update your estate plan. With a revocable trust, you can easily amend it to reflect your new circumstances or wishes. Make sure any new assets you acquire are also placed into the trust (or have the trust named as beneficiary when appropriate) so that the plan remains effective.
Setting up a trust might sound complex, but with the right support, it becomes a smooth process—and it’s just one piece of a solid estate plan. Tools like life insurance can work alongside your trust to provide long-term security for your loved ones. Learn how life insurance strengthens your estate planning strategy.
FAQ: Trusts and Estate Planning
(Below are some frequently asked questions about trusts. For website owners, consider adding FAQ schema markup for this section to enhance your SEO – this can help these Q&As show up in search results.)
Q: Do I need a trust if I already have a will?
A: It depends on your goals. A will is a great start – it can distribute your assets and name guardians for kids – but a will alone must go through probate and doesn’t allow control of assets after death. A trust can complement your will by avoiding probate for the assets in the trust and by managing your estate with more detail. In fact, a solid estate plan often includes both a will and a trust, using the will to cover anything not in the trust. Think of a will as a broad plan for your estate and a trust as a targeted tool for specific needs (like holding a house or investments for beneficiaries). Having both gives you the best of both worlds.
Q: What’s the difference between a revocable living trust and an irrevocable trust?
A: A revocable living trust is changeable and cancelable by you, the grantor, at any time while you’re alive. You keep control over the assets and can even use them as you normally would (since you might also be the trustee initially). It’s mainly used to avoid probate and make estate administration easier, not to save on taxes, because the assets are still considered yours. An irrevocable trust is generally permanent – once you place assets into it, you relinquish direct control and can’t easily take those assets back. The benefit is that those assets are usually no longer counted as yours, which can protect them from estate taxes and sometimes from creditors. Revocable = flexible but no tax benefit; irrevocable = inflexible but potential tax and asset protection benefits.
Q: Does a trust replace a power of attorney or living will?
A: No, a trust doesn’t replace those documents – they serve different purposes. A power of attorney lets someone make financial or legal decisions on your behalf while you’re alive (for assets that might not be in your trust or other matters), and a healthcare directive/living will addresses medical decisions if you can’t communicate. A trust only governs assets that have been transferred into it and directives about those assets. For a complete plan, you’ll typically want a will, possibly a trust, a durable power of attorney, and healthcare directives. These tools work together: for instance, if you become incapacitated, your power of attorney agent can handle things outside the trust, while your trustee handles what’s inside the trust.
Q: How much does it cost to set up a trust?
A: The cost can vary widely based on complexity and attorney fees. A simple revocable living trust drafted by an attorney might range from a few hundred to a few thousand dollars, depending on your location and the lawyer’s experience. There may also be costs for transferring assets (like deed recording fees for real estate). While it’s an upfront expense, remember that a trust can save your estate money later by avoiding probate court costs (which can be a percentage of your estate value). If budget is a concern, you can shop around or even consider reputable online services for a basic trust, but use caution – making sure the trust is set up correctly and fits your situation is crucial. Often, spending on a qualified estate attorney now can prevent costly issues for your heirs down the road.
Q: Can I be my own trustee?
A: Yes, with a revocable living trust, it’s very common for the person creating the trust (the grantor) to also serve as the initial trustee. This way, you continue to manage your assets just as you do now. The trust document will name a successor trustee to take over when you die or if you become unable to serve (for example, due to incapacitation). While you’re alive and well, being your own trustee doesn’t change much in day-to-day life – you can buy, sell, spend, or invest assets in the trust freely. Just remember to formally transfer those assets into the trust’s name. For irrevocable trusts, grantors often do not serve as trustee (since the trust is meant to be independent of the grantor), though there are exceptions. Always choose a responsible, honest person (or professional) as a trustee, because that person will have a lot of power over the trust assets.
By understanding these aspects of trusts and estate planning, you’re better equipped to make informed decisions about your own estate plan. Including a trust isn’t necessary for everyone, but for many people it can provide peace of mind, security, and efficiency in carrying out their wishes. Consider your personal situation, educate yourself on your options, and don’t hesitate to seek professional advice. Your estate plan is ultimately a gift to your loved ones – it spares them difficult decisions and ensures your legacy is handled the way you want. So whether your plan involves a simple will or a complex set of trusts, the important thing is to have a plan. Happy planning, and here’s to the peace of mind that comes with knowing you’ve taken care of the future!