Not Everyone Needs a Trust: Understanding When It’s Necessary and When It’s Not

Many people who contact our office regarding estate planning think they need a revocable trust.  This is no surprise as there is an entire industry online trying to convince you a trust is essential.  However, we find that for many of our clients a basic will based estate plan will be sufficient for their needs while still avoiding probate.  Here are some of the factors we look at in determining if a trust is needed for our clients:

1. Simple Estate

If your estate is straightforward—with minimal assets, assets that can be transferred outside of probate, uncomplicated family dynamics, and no significant potential for disputes—a will might suffice. Wills are simpler and less expensive to set up and manage compared to trusts.

2. Limited Assets

Trusts are typically beneficial when dealing with substantial assets, complex financial situations or complicated family dynamics.  If none of these factors apply to you and your assets can be easily transferred through beneficiary designations and transfer on death deeds, a trust may not be unnecessary for you. 

3. Privacy Concerns

Unlike wills, which become public record after probate, trusts allow for greater privacy. If maintaining the confidentiality of your estate plans isn’t a priority for you, the added complexity of a trust may not be warranted.

4. Probate Avoidance

One of the primary reasons for using a trust is to avoid probate, the court process of validating a will and administering an estate.  However, there are numerous ways in which probate can be avoided such as beneficiary designations and transfer on death deeds.  A trust is not the only way to avoid having to probate your assets.  See our blog regarding probate avoidance options here.

5. Cost Considerations

Creating and maintaining a trust can involve significant costs, including legal fees and administrative expenses. For simpler and smaller estates, these costs may outweigh the benefits a trust provides over a simple will.

6. Management Preferences

Trusts require ongoing management to ensure assets are properly funded and administered according to your wishes. If you prefer a simpler approach that requires less ongoing oversight, a will may be more appropriate.

7. Tax Avoidance

Many people believe that a trust can result in tax avoidance to their heirs, however, unless your estate is greater than the current federal estate and gift tax exclusion of $13.61 million per individual or $22.77 million for a married couple (as of January 1, 2024), a trust may not provide any tax benefits.  Further, many of the tax benefits that do exist for your family members such as stepped-up basis in appreciated property apply to other types of transfers of property from a decedent, be it from a will, a beneficiary designation or a trust. 

Conclusion

While trusts offer valuable benefits in many estate planning scenarios, they are not necessary for everyone. Understanding your specific financial situation, family dynamics, and goals is crucial in determining whether a trust aligns with your needs. Minter & Pollak, LC provides free consultations on all estate planning clients to be able to discuss your specific needs to help you make the right decision for you regarding whether or not a trust is needed. 

Ultimately, the decision to establish a trust should be based on a comprehensive evaluation of your circumstances and objectives. By weighing the advantages and potential drawbacks carefully, you can make an informed choice that best safeguards your legacy and meets your estate planning goals. 

For additional information regarding estate planning please see our blog.

 Call our office today at 316-265-0797 or click here to schedule a free consultation to discuss if a trust is right for you and your family.

Photo by Javier Allegue Barros on Unsplash.