Do You Need a Trust?
- Steven C. Balch, CFP®
- Dec 2
- 5 min read
When I talk with clients about estate planning, one of the biggest misconceptions I hear is this:
“Trusts are just for wealthy people.”
Not true.
Trusts can be beneficial for a wide range of reasons, especially for those who want to simplify the transfer of assets, reduce stress on loved ones, and protect what they’ve built. In many cases, a trust can be just as important as a will.
Let's break down how trusts work, why they matter, and how to choose between the two most common types: revocable and irrevocable trusts.
What Exactly Is a Trust?
A trust is a private legal document that serves as a separate legal entity and holds assets for your benefit or for the benefit of others.
Here’s how it works:
You (the grantor) create the trust and decide what goes into it: your home, bank accounts, investments, and more.
You select a trustee who manages the assets. This could be you (while alive), a spouse, a relative, or a professional.
You name beneficiaries, who will receive the assets according to your instructions.
Think of a trust as a container you can put certain assets into, and you get to decide how and when those assets are used.
Why Use a Trust?
Even for individuals and families, trusts offer major advantages. Here are the big ones:
1. Avoiding Probate
Probate is the court process of settling your estate after death. It’s public, slow, and can cost significant time and money.
A trust:
keeps your affairs out of court
keeps your finances private
transfers assets faster and with fewer headaches
For families with children, real estate in multiple states, or blended families, avoiding probate alone is a huge benefit.
2. Protecting Your Assets
Depending on the type of trust, you can protect assets from:
lawsuits
creditors
long-term care costs (in certain cases)
bad financial decisions by heirs
A properly structured trust creates a legal barrier between your assets and anyone who might try to come after them, something a simple will cannot do.
3. Keep Wealth in the Family
Trusts also give you control over how wealth passes from one generation to the next. You can ensure:
Assets stay in the bloodline, even if a child divorces
Inheritances aren’t spent too quickly
Grandchildren benefit from family wealth
Your values (financial and otherwise) are carried forward
In other words, a trust helps your legacy last beyond your lifetime.
Revocable vs. Irrevocable Trusts: What’s the Difference?
There are many types of trusts, but most individuals and families start by choosing between revocable and irrevocable. Here's a simple comparison:
Revocable (Living) Trust
Best for: probate avoidance, flexibility, and simple estate planning
A revocable trust is flexible while you're alive. You can change it, add or remove assets, or revoke it entirely.
Benefits:
You maintain complete control of your assets.
You avoid probate, keeping things private and efficient.
Great for passing assets to children smoothly.
Can hold certain assets that irrevocable trusts cannot (like some retirement accounts).
Limitations:
No tax benefits. Your assets still count toward your estate.
No asset protection. Creditors and lawsuits can still reach the assets because you control them.
Does not reduce exposure to estate taxes.
Simple takeaway: Revocable trusts are about convenience and control, not tax planning or asset protection.
Irrevocable Trust
Best for: tax planning, asset protection, legacy planning
An irrevocable trust is much more restrictive. Once assets go in, you generally can’t take them back. You also can’t make changes unless the beneficiaries agree.
Benefits:
Assets are removed from your estate, potentially reducing or eliminating estate taxes.
Provides creditor protection and protects assets from lawsuits.
Can help with long-term care planning when structured properly.
Can ensure assets stay in the bloodline for generations.
Limitations:
You lose control over the assets.
You can’t freely make changes.
Not appropriate for everyone, especially those who may need access to the assets later in life.
Simple takeaway: Irrevocable trusts prioritize protection and tax savings over flexibility.
Which Trust Is Right for You?
The answer depends entirely on your goals.
Use a revocable trust if you want:
to avoid probate
privacy
simple, flexible estate planning
a more straightforward process for your family
Use an irrevocable trust if you want:
to protect assets from creditors
to reduce estate taxes
to pass wealth to future generations with strict rules
long-term care or Medicaid planning
to ensure assets stay in the family
Some individuals and families end up using both as each trust plays a different role in a well-designed estate plan.
Final Thoughts
Estate planning isn’t just about documents. It’s about:
protecting your family
passing on your values
keeping more of what you’ve worked for
reducing stress and conflict
Trusts can play a powerful role in that process, no matter your level of wealth.
- Steve Balch, CFP®
When You’re Ready to Take the Next Step, Here’s How I Can Help You:
Work with me.
If you’re a high-income earner or retiree looking to learn how I help individuals like you retire confidently and take control of your financial life, click here to schedule a call with me.
Ask me a financial question.
If there’s something you’ve been wondering about financially - taxes, investments, retirement, or anything else - send me a message on LinkedIn. I’m happy to discuss and help you find clarity.
Download my free eBook — How to Reduce Your Lifetime Tax Bill.
This guide is filled with actionable tax-planning strategies to help high-income earners and retirees keep more of what they’ve worked hard for. You’ll learn practical ways to minimize taxes, optimize withdrawals, and build a smarter, more efficient retirement plan. Download here.
Frequently Asked Questions About Trusts
Do I need a trust if I already have a will?
A will is important, but it does not avoid probate. A trust helps keep your estate private, speeds up the process, and reduces stress for your family. Many families use both.
How much money do you need to have for a trust to make sense?
There’s no minimum amount. Trusts are useful if you own a home, have children, have assets in multiple states, or want to avoid probate. They are not only for the ultra-wealthy.
Does a trust protect my assets from creditors or lawsuits?
A revocable trust does not, because you still control the assets. An irrevocable trust can, because the assets are no longer legally yours.
Can a trust help reduce estate taxes?
A revocable trust does not reduce taxes. An irrevocable trust can remove assets from your estate and reduce or eliminate estate taxes, depending on its structure.
Who should serve as my trustee?
You can serve as your own trustee while you’re alive if you use a revocable trust. After you pass, a spouse, trusted family member, or professional trustee can step in.
Do trusts affect my income taxes?
Revocable trusts have no impact on your taxes while you're alive. Irrevocable trusts may be treated differently for tax purposes, depending on how they are drafted and who receives the income.
Can you put retirement accounts like IRAs or 401(k)s into a trust?
Not directly. Retirement accounts generally cannot be retitled into a trust, but your trust can be named as a beneficiary. This requires careful planning to avoid unintended tax consequences.
What assets should go into a revocable trust?
Common assets include your home, taxable investments, bank accounts, vacation properties, and business interests. Your attorney will create a complete “funding” list.
How long does a trust last?
A trust can last many years, sometimes decades. You can design it to last for your spouse’s lifetime, your children’s lifetimes, or even multiple generations.
Is it expensive to set up a trust?
The cost depends on complexity, but many families find the benefits, avoiding probate, protecting assets, and reducing stress, far outweigh the upfront cost.
Comments