Do You Really Need a Trust? The Honest Truth About Estate Planning in 2025

The Trust Dilemma: Essential Protection or Unnecessary Expense?

Let’s face it – when it comes to estate planning, there’s a ton of confusion out there. I’ve spent countless hours researching trusts, and I’m gonna give it to you straight: some people absolutely need a trust, while others are wasting their money.

Truth is, attorneys sometimes recommend trusts when they’re not actually necessary. Why? Well, $$$, obviously. But on the flip side, many folks who really could benefit from a trust don’t realize it until it’s too late.

So let’s dig into the big question: Do you really need a trust? The answer is… it depends. (I know, super helpful, right?) But seriously, by the end of this article, you’ll have a much clearer picture of whether a trust makes sense for your specific situation.

What Exactly Is a Trust, Anyway?

Before we go any further, let’s make sure we all agree on what a trust is.

A trust is essentially a fiduciary arrangement that specifies how your assets should be distributed – typically without involving probate court. Unlike wills (which only take effect after death and usually require court authentication), trusts can be structured to:

• Take effect before death
• Take effect after death
• Take effect if you become incapacitated
• Transfer property with specific conditions
• Potentially minimize estate taxes
• Preserve assets for minors
• Benefit charities

The two main types you’ll hear about are

1. Revocable living trusts – Can be changed during your lifetime
2. Irrevocable trusts – Cannot be changed after they’re created

The Benefits of Having a Trust: Beyond Probate Avoidance

Probate is the court process that verifies your will and oversees the distribution of your assets. Most people know that trusts can help you avoid probate. But there’s way more to it than that.

Specificity and Control

With a trust, you can be super specific about how, when, and to whom your assets are distributed This level of control just isn’t possible with simpler estate planning tools.

Brad Reeves, an assistant branch manager at Charles Schwab, says, “In a word: specificity.” You can be very specific about how, when, and to whom your assets are given when you set up a trust. “.

Protection During Incapacity

One of the worst things about wills is that you have to die first. If you become incapacitated, your will has zero legal effect.

George Pennock, director of tax, trust, and estates for Schwab Wealth Advisory, explains: “A trust not only identifies who may benefit from trust resources but also defines how and when, including in cases of incapacity. Anyone concerned about facing a stroke, dementia, or Alzheimer’s may want to consider using a trust.”

Privacy Protection

Wills become public documents after you die. That means anyone can access information about your assets and who received them – info you might prefer to keep private.

As Lauray Kennedy from Schwab Private Wealth Services points out: “A will is a public document that could be scrutinized or contested, as well as give the public access to information that you might wish to keep private.”

So Who Actually Needs a Trust?

Let’s get down to it – here are the situations where you probably DO need a trust:

1. You Have Young Children

If you have minor children, a trust might be essential. Without one, the court will appoint someone to manage the assets you left to your kids until they reach 18. And then? Those kids get everything at once, whether they’re ready for it or not.

With a trust, you can:

• Designate a trusted person to manage assets for your children
• Delay full inheritance until an age you think is appropriate (like 25 or 30)
• Ensure the trust provides for living and education expenses in the meantime

2. You’re Older or Have Health Concerns

If you’re over 70 or facing health issues, a trust becomes more important. As Nolo points out: “A trust can be beneficial because it can protect your assets if you become incapacitated—unlike a will.”

3. You Have Substantial Assets

The wealthier you are, the more your heirs can save by avoiding probate. If you’ve got significant assets, a trust might make financial sense simply to avoid probate costs.

As Nolo explains: “At the risk of oversimplifying, the wealthier you are, the more you can save for your inheritors by avoiding probate.”

4. You Own Property in Multiple States

If you own real estate in different states, your executor would need to handle separate probate proceedings in each state – a nightmare scenario for your loved ones.

5. You Have Special Situations or Beneficiaries

You might need a trust if:

• You want to keep money in your bloodline (protecting against divorces)
• You have beneficiaries with special needs
• You don’t fully trust your kids with money (yes, this happens!)
• You want to leave money to charity

As Joe Schmitz from Peak Retirement Planning notes: “We had a client who allowed her kids to take out only $20,000 per year from her estate. We also had a client take a more extreme approach and didn’t allow her children to touch the money until they were 60.”

6. You’re Concerned About Long-Term Care Costs

An irrevocable trust might be worth considering if you’re worried about protecting assets from long-term care expenses. This is commonly used in Medicaid planning.

Who Probably DOESN’T Need a Trust

On the flip side, you might NOT need a trust if:

1. You’re Young and Healthy With Modest Assets

If you’re under 55-60, in decent health, and don’t have millions in assets, a trust might be premature. A will would likely serve you well enough for now.

Nolo states: “Living trusts often don’t make sense for middle-income people without young children who are in decent health and younger than 55 or 60.”

2. Most of Your Assets Already Avoid Probate

Many assets can transfer to beneficiaries without probate through other methods:

• Retirement accounts with named beneficiaries
• Life insurance policies
• Payable-on-death bank accounts
• Property held in joint tenancy

If most of your estate consists of these assets, a trust might be unnecessary.

3. You’re Married and Plan to Leave Everything to Your Spouse

As Nolo explains: “If you’re married, and you and your spouse plan to leave the bulk of your property to one another, there is less reason to obsess about avoiding probate at an early age.”

Most states let surviving spouses use expedited probate procedures that are faster and cheaper than standard probate.

4. You Have a Large Net Worth and Can Self-Insure

If you can easily cover potential long-term care costs without insurance, you might not need an irrevocable trust for that purpose.

5. The Majority of Your Wealth is in IRAs

Putting IRAs in trusts can create tax complications. As Kiplinger warns: “If you pass away and leave your IRA to a trust, then you would pay ‘trust rates,’ which could be as much as 37%. Instead, if you leave your IRA to a person rather than a trust, your beneficiary would pay only federal income tax rates, which for most is 12% to 24%.”

The Drawbacks of Trusts: What No One Tells You

Before you rush to create a trust, consider these potential drawbacks:

1. Upfront Costs

Trusts are typically more expensive to set up than wills. An attorney-drafted trust can cost over a thousand dollars.

2. Ongoing Maintenance

Unlike wills, trusts require active management. You need to ensure assets are properly transferred into the trust (called “funding” the trust), which can be a hassle.

3. Complexity

Trusts are more complex to establish and modify than wills. As Brad Reeves from Schwab notes: “A trust can be more expensive and complicated to draft than a will… You could end up paying thousands of dollars just to talk through your situation.”

4. You Still Need a Will

Even with a trust, you’ll need a simple “pour-over” will as a backup for any assets not transferred to your trust.

Making Your Decision: Trust or No Trust?

So how do you decide? Here’s a simple framework:

1. Consider your age and health

   • Younger than 55 with good health? Probably don’t need a trust yet
   • Over 70 or have health concerns? Trust might be wise

2. Evaluate your assets

   • Substantial wealth? Trust likely makes sense
   • Modest assets that already avoid probate? Trust may be unnecessary

3. Think about your beneficiaries

   • Young children? Trust offers protection
   • All adult beneficiaries? Less urgent need for trust

4. Review your goals

   • Want privacy and detailed control? Trust helps
   • Simple wishes to leave everything to spouse? Will might suffice

My Personal Take

In my experience, I’ve seen too many people create trusts they don’t need, and too many who need trusts but don’t create them. The key is honest assessment of your situation.

I think middle-class families with young kids are the most underserved – they often don’t think they need a trust, but could really benefit from one. Meanwhile, some wealthy retirees get sold complex trust arrangements when simpler solutions would work fine.

Bottom line: work with professionals who will be honest about whether you need a trust or not. Don’t just take their word for it – understand WHY they’re recommending what they recommend.

Next Steps: If You Do Need a Trust

If you’ve decided a trust makes sense, here’s what to do next:

1. Determine which type of trust you need (revocable living trust is most common)

2. Choose your trustee carefully – this person will manage your assets

   • Consider naming a spouse, trusted family member, or corporate trustee
   • For co-trustees, consider including a tiebreaker for disagreements
   • Involve your trustee early so they understand their responsibilities

3. Work with qualified professionals

   • Estate planning attorney
   • Financial advisor who understands trusts
   • Tax professional for complex situations

4. Fund your trust – this critical step is often overlooked

   • Transfer asset titles to the trust
   • Update beneficiary designations
   • Keep records organized

Remember, even the best trust is worthless if you don’t actually transfer your assets into it!

So, do you really need a trust? Maybe. Maybe not. The answer depends entirely on your unique situation, goals, and concerns.

Don’t let anyone pressure you into creating a trust you don’t need. But also don’t dismiss the idea without careful consideration – especially if you have young children, significant assets, or special circumstances.

Ultimately, the right estate plan gives you peace of mind that your wishes will be carried out and your loved ones protected. Whether that requires a trust or not is something only you can decide – armed with the right information and honest guidance.

What’s your experience with trusts? Have you created one, or decided against it? I’d love to hear your thoughts in the comments!

Disadvantages of a trust include high establishment and maintenance costs, the complexity of the setup and ongoing administration, loss of control over assets placed in the trust, and potential tax liabilities. Additionally, some trusts do not offer asset protection from creditors during the grantor’s lifetime, and modifying the trust terms can be difficult.