I’ve had people ask me (on more than one occasion!), “Why do I need a trust? I have a will, and I don’t have a lot of money. A trust seems like overkill. It costs a lot and it’s just more headaches, right?” Right?!?
So here’s the skinny: a properly drafted and funded trust can be useful in ways that a will can’t. A trust can
- Avoid probate: Because a trust is a separate legal entity, you can title your assets (house, bank accounts, etc.) in the name of the trust. You maintain complete control over the assets as the Trustee while you’re alive. When you die, there’s no need to go to probate court because you didn’t own anything; the trust owns everything and the trust is still alive. Avoiding probate is a great way to keep the nitty gritty details of your life and your assets out of the public eye of the courtroom.
- Plan for incapacitation: It happens more often than you think. A will can distribute your possessions to your family and friends after you die, but as long as you’re alive, the will doesn’t do anything. If you become unable to manage your money (the legal term is incapacitated), a trust will allow someone you choose to step in and take care of you and your things.
- Save taxes: Right now, you can leave quite a large estate to your beneficiaries (the people, such as your children, you choose to inherit your assets) and your beneficiaries won’t have to pay estate tax on that inheritance. But the exemption amount (the amount you can pass onto future generations without paying taxes) has fluxuated by millions of dollars in the last couple of decades, and it’s set to go back down in 2026. A properly drafted trust can help protect more of your estate so that you can pass more of your assets onto the people you want to have them.
- Spare your heirs time, cost, and headache: If you decide to stick with your will because it’s time-consuming, costly, and too complex to form a trust, you’re actually just passing that cost and headache onto your heirs. Once you die, your personal representative has to petition the court to open probate, submit the will, deal with any contests (that’s where your second cousin twice removed says he was supposed to get everything, so your will must be a fake), marshal your assets (that’s fancy talk for gather your belongings and money), and get the judge’s permission to give your stuff away. All that takes time, effort, and money. So you can take the time to create your own trust, or you can pass the headache onto someone else (and multiply the cost and burden while you’re at it).
If you’re single, childless, and of small means and you intend to stay that way your whole life, maybe you don’t need a trust. But if you have a spouse and/or children and you want to provide for yourself and for them, a trust is a great tool for doing exactly that!