Why You Need (or Don’t Need) a Trust
If you’ve ever been told, “You need a trust,” and didn’t quite know what that meant, you’re not alone.
It’s something people hear from well-meaning friends, financial advisors, or maybe even their parents. But rarely does anyone slow down and explain why you might need one or whether it makes sense for your situation.
That’s what this week’s Tuesday Triage episode is all about.
I created it for people like Lauren, a listener and mom of three living in California, who reached out and asked if I could break it down: What is a trust? What does it actually do? And how do you know if it’s right for your situation?
A trust is a written agreement in which the grantor, the person creating the trust, enters into a contract with the trustee to manage assets the grantor contributes to the trust for the benefit of the beneficiary.
With a revocable trust, the grantor, trustee, and beneficiary are often the same person, at least while the grantor is alive and competent. Revocable trusts are the most common types of trusts, and they’re what people are usually referring to when they say, “You should get a trust.”
But the real question is: why?
What revocable trusts do…and what they don’t
Let’s clear up a couple of common misconceptions:
A revocable trust won’t save you money on taxes.
A revocable trust won’t protect your assets from creditors.
But that doesn’t mean it isn’t helpful. It absolutely can be helpful in the right situations.
Two big reasons to consider a revocable trust:
To make managing your assets easier, now and later. A trust can be a practical way to keep everything in one place and simplify things if you ever need help from a loved one or a professional down the line. That’s especially useful if you're facing aging, illness, or any kind of change in mental capacity.
To avoid probate. Probate is the legal process for transferring probate assets after someone dies. In some states, it's fairly quick and affordable. In others, like California, it can be lengthy and expensive, especially if your estate includes real estate or valuable assets.
For California residents, like Lauren, avoiding probate might mean avoiding tens of thousands of dollars in statutory probate fees.
But here’s the part that gets missed...
Creating a trust is only part of the puzzle. You also have to fund it, meaning you need to transfer your assets into the trust. That includes updating account titles, deeds, and paperwork.
If you don’t fund the trust, you won’t avoid probate.
Even if you do everything right when you set up the trust, life changes. You might forget to put a new account in the name of the trust. Or you might sell your house and not title the new one in the name of the trust. These missteps can unintentionally undo your efforts.
So, do you need a trust?
Maybe. Maybe not. It depends on your assets, your goals, your state of residence, and what kind of support you or your family may need down the road.
A revocable trust can be an incredibly useful tool, but only when used intentionally, and with a clear understanding of what it’s meant to do.
Listen here to learn more:
