The role of trusts in estate settlement is one of the more complex subjects we’ll wrestle with in the Executor Adviser. This can be an overwhelming topic, so I’d like to offer you a general overview of the potential value of trusts in your planning.
Trusts are an area where it would be wise to consult an estate attorney. I would strongly recommend against a do-it-yourself approach to trust creation.
Let’s start with some basics. This process starts when the grantor (the person doing the estate planning) works with an attorney to create trusts within their estate. We’ll talk about the benefits of trusts in more detail below, but the reasons generally relate to simplifying estate settlement, minimizing taxes, and a desire for privacy. It is important to understand that if your loved one is already deceased there is no way to create trusts at that point. Trusts must be created by the individual or couple planning their estate.
Trust setup requires a bit of an all-or-nothing approach to be effective for most people. If one of your goals is to keep the estate out of probate court (which can be both expensive and time-consuming) you need to have all assets subject to probate in that trust. This would include things like investment accounts, real estate, automobiles, jewelry, and any other valuable collectibles.
Attorney Chuck Durante’s advice?
“The time and effort to create a trust should be followed by attention to make certain that all assets — business interests, liquid investments or personal-use property that are intended to pass through the trust are titled in the trust.”
The Benefits of Trusts
Avoiding probate court.
If all the assets in your estate that would be subject to probate court are in trusts, you can avoid the time-consuming, expensive and often frustrating probate court process. Some financial assets, like those in retirement accounts are typically not subject to probate court if a beneficiary has been named.
Managing estate taxes.
If your assets are above the limit of the current government exemption level for estate taxes, a trust allows you to move assets out of your estate prior to your death so you save taxes. The limit is currently high by historical standards at a hefty $11.58 million per individual, but these limits will be cut by almost half in 2026 and could go significantly lower in the future.
Keeping the estate private.
Probate files are public records. If you’d rather not have the specifics of your estate in the public eye, putting your assets into trust will very effectively do this.
“Different families will use trusts for different purposes,” Durante says. “Some want to minimize estate tax exposure. In other cases, they can be important devices to protect beneficiaries from losing the assets due to debts, misfortune or poor decisions, or to keep assets from leaving the family due to a surviving spouse’s remarriage. In all cases, trusts maintain the same privacy after our deaths that we want to have during our lives.”
Common Types of Trusts
Revocable Living Trust
This commonly used trust is somewhat flexible, as you can change or even “revoke” it. It also allows you (the grantor) to spell out exactly how your estate will be distributed to your beneficiaries when you die. A revocable living trust also doesn’t require a separate tax return so has limited complexity after it is set up.
This trust is less flexible but offers the advantage of taking assets out of an estate. This is particularly helpful if you are concerned that you will have more assets than the then current government-imposed limit when you die. This type of trust is often most helpful when you create it years or even decades before you pass away so the growth of the assets in the trust is out of the estate.
Charitable Remainder Trust
This trust provides guaranteed income to a family member, after which it passes to charity. It provides many tax advantages, solid asset protection and a lasting legacy.
“In America, unlike much of the world, the principle of freedom of disposition governs,” Durante says. “One can leave property to any persons, under almost any conditions, as he or she desires. A trust provides ways to dispose of property creatively, to employ legitimate tax advantages not available otherwise, and do so with professional management or family control, as the situation requires.”
Where to Find Help with Trusts
Trusts can be complex and if one is set up improperly you might lose the benefits you were trying to secure. Find an attorney licensed in the state of residence of the will writer, preferably one that specialized in estate planning, so your trust isn’t the first one they have created. It is perfectly acceptable to ask about fees and timing before you decide to proceed. It is also fine to ask for references if the attorney is someone with whom you’ve never worked.
Trusts can be an amazing resource in estate planning and settlement but be prepared to engage, do a bit of work, and spend a little money to get them properly set up within an estate.
Have a question about executorship? Get an answer by sending an email to [email protected].
Patrick O’Brien is CEO and co-founder of Executor.org, a free, comprehensive online resource that helps executors manage their responsibilities and duties in this complex role. The free tools include a helpful step-by-step interactive guide for executors and invaluable tips on everything from planning a funeral and keeping beneficiaries happy to dealing with grief and managing estate assets.