Why You Should Have a Trust

Many people believe that having a will is sufficient for estate planning. They assume trusts are only for the ultra-wealthy or those with complicated family situations. This assumption can be costly, not just financially, but also in terms of stress, time, and the legal entanglements that are left for loved ones. In reality, a well-structured trust can be one of the most powerful tools in your estate planning arsenal, even if your estate isn’t large.

What Is a Trust?

A trust is a way to manage your money and property by putting it in the care of someone you choose, called a trustee, for the benefit of others, called beneficiaries. When you set up a trust, you’re creating a plan for how your assets should be handled while you’re alive and after you pass away.

Trusts can be simple or detailed, depending on your goals. Some people use them to pass things on to family easily, while others use them to protect wealth over the long term. There are two main types: revocable (which you can change or cancel) and irrevocable (which you generally can’t change once it’s set up). Each serves different purposes.

Revocable vs. Irrevocable Trusts

Understanding the difference between these two types of trusts is essential to choosing the right structure for your goals.

• Revocable Trust (Living Trust) – A revocable trust, also called a living trust, is flexible and easy to change. You stay in full control of it while you’re alive—you can update it, cancel it, or remove things from it whenever you want. You can also act as your own trustee, so you keep managing your money and property just like you always have.

• Irrevocable Trust – An irrevocable trust usually can’t be changed or canceled once it’s set up, unless the people receiving the trust (the beneficiaries) agree. When you move assets into an irrevocable trust, they no longer belong to you personally. This can help protect your assets from lawsuits or creditors and may also reduce taxes.

The revocable trust is generally the best place to start when it comes to estate planning because it offers the core benefits of having a trust, and also becomes irrevocable when you pass away.

Key benefits of Having a Trust

1. Avoiding Probate – One of the biggest reasons people use a trust is to avoid probate—the court process for handling a person’s money and property after they die. Probate can take 6 to 18 months, is public, and can be expensive with legal fees and court costs.

A trust lets your assets go directly to your loved ones, without going through court. It’s faster, private, and avoids the hassle, especially helpful if you own property in more than one state.

2. Keeping Your Affairs Private – If you go through the above probate process, anyone can see what you owned and who got what. A trust protects your loved ones by keeping your financial and family matters private from the public eye.

3. Planning for Incapacity – If you get seriously ill or injured and can’t manage your own finances, a revocable living trust lets someone you trust (called a successor trustee) step in and take over without needing court approval. Without a trust, your family might have to go to court to get permission, which can be stressful, costly, and time-consuming.
4. Protecting Your Assets – Irrevocable trusts are a strong way to protect your assets from things like lawsuits, creditors, or even divorce. If you’re a business owner, doctor, or just want to safeguard your wealth, an irrevocable trust can help keep your assets out of reach. Warning: An irrevocable trust isn’t a great fit for everyone because there are many specific rules that you must follow with an irrevocable trust, which can be quite restrictive.

5. Saving on Taxes – Certain irrevocable trusts can lower or even eliminate estate taxes by removing assets from your personal estate. Tools like Charitable Remainder Trusts, GRATs, or Irrevocable Life Insurance Trusts (ILITs) are often used to pass on wealth in a smart, tax-efficient way.
6. Controlling When and How Inheritance Is Given – Want your kids to get their inheritance only after graduating college, turning a certain age, or showing they can handle money responsibly? A trust lets you set those rules.

Common Misconception

“But I Already Have a Will. Isn’t That Enough?” A will only becomes effective after your death, and only after going through probate; therefore, you still have to go through probate. Having a will doesn’t offer any support during your life if you become incapacitated, doesn’t protect your privacy, and does not protect you from creditors or taxes.

Here are a few scenarios where relying solely on a will falls short: 

• Scenario 1: Kids under 18 – If you have kids under 18 and only have a will, the state will create a basic trust for them—and they’ll get full access to the money, with no limits, as soon as they turn 18; with your own trust, you can protect them from poor decisions and set clear rules for how and when the money is used.
• Scenario 2: Real Estate in Multiple States – Your will must go through probate in each state where you own property. A living trust bypasses this entirely, saving your heirs from dealing with multiple court systems.
• Scenario 3: Protecting a Child with Special Needs – Leaving assets directly to a special-needs child via a will could disqualify them from government benefits. A special needs trust ensures they receive financial support without compromising eligibility for vital assistance.
• Scenario 4: Second Marriages or Blended Families – A trust can help ensure that children from a prior marriage are not unintentionally disinherited if the surviving spouse remarries or changes their will.

Final Thoughts

Trusts give you more privacy, control, and protection than a will alone. A revocable trust is great if you want something flexible and easy to manage, while an irrevocable trust can help protect your assets and reduce taxes. Adding the right trust to your plan can make sure your wishes are followed and your loved ones avoid extra stress and legal hurdles.

If you’re unsure which type of trust is right for you, our financial planning team is here to help—just reach out with your questions here.