Trusts

Trusts are among the most powerful and versatile tools in estate planning. Unlike a will, which only takes effect after death and requires court supervision, a trust can work for you during your lifetime, protect you during incapacity, and distribute your assets after death — all without the cost, delay, and public scrutiny of probate.

But trusts are not one-size-fits-all. The right trust for your family depends on your goals, your assets, your family dynamics, and your concerns. Understanding the different types of trusts — and what each one can accomplish — is the first step toward making an informed decision.

Revocable Living Trusts

The revocable living trust is the most common trust used in estate planning, and for good reason. It offers a combination of flexibility, privacy, and efficiency that no other single document can match.

How it works. You create the trust, transfer your assets into it, and serve as your own trustee. You maintain complete control over everything — you can buy, sell, spend, and invest exactly as you do now. Nothing changes in your day-to-day life.

The trust names a successor trustee — someone you choose to step in if you become incapacitated or pass away. When that happens, the successor trustee manages and distributes assets according to the trust’s terms, without going to court.

Why families choose it. The primary benefits of a revocable living trust include:

• Probate avoidance. Assets in the trust pass to beneficiaries without probate — saving time, money, and privacy
• Incapacity protection. If you become unable to manage your affairs, your successor trustee steps in immediately — no guardianship proceeding required
• Privacy. Unlike a will, which becomes a public record during probate, a trust is a private document
• Speed. Distributions can begin immediately after death, rather than waiting months for probate to conclude
• Control. You can set conditions on distributions — age thresholds, educational requirements, incentive provisions

The critical step most people miss. Creating a trust is only half the job. The trust must be funded — meaning your assets must be re-titled in the trust’s name. A house, bank accounts, investment accounts, and other assets must all be transferred. An unfunded trust provides exactly zero benefit. This is the most common estate planning mistake I see, particularly when people create trusts online without professional guidance.

Irrevocable Trusts

An irrevocable trust, once established, generally cannot be changed or revoked. You give up control over the assets transferred to the trust. In exchange, you receive benefits that a revocable trust cannot provide.

Asset protection. Assets in an irrevocable trust are no longer legally yours. This means they are generally protected from your personal creditors, lawsuits, and judgments. For professionals in high-liability fields or anyone concerned about potential claims, this protection can be significant.

Medicaid planning. Irrevocable trusts are a key tool in Medicaid planning. Assets transferred to an irrevocable trust more than five years before a Medicaid application are not counted as your assets for eligibility purposes. This can mean the difference between qualifying for benefits and spending everything on nursing home costs.

Tax planning. Certain irrevocable trusts can reduce estate tax exposure for high-net-worth families by removing assets from the taxable estate. While the federal estate tax exemption is currently high, these trusts remain valuable for families who may be affected by future changes in tax law.

The trade-off. The fundamental trade-off with irrevocable trusts is control. Once you transfer assets, you generally cannot take them back or change the trust’s terms. This is a serious decision that requires careful consideration and should only be made with professional guidance.

Special Needs Trusts

A special needs trust (also called a supplemental needs trust) provides for a disabled beneficiary without jeopardizing their eligibility for government benefits like Medicaid and Supplemental Security Income (SSI).

Government benefit programs have strict asset and income limits. A direct inheritance or gift to a disabled beneficiary can disqualify them from benefits they depend on for basic care. A special needs trust solves this by holding assets in a way that does not count as the beneficiary’s own resources.

What the trust can pay for. A special needs trust can supplement — but not replace — government benefits. It can pay for things like:

• Additional therapies and medical care not covered by Medicaid
• Education and vocational training
• Recreation, travel, and entertainment
• Personal items, clothing, and electronics
• Vehicle modifications and transportation
• A companion or personal aide

What the trust cannot pay for. The trust generally cannot pay for food or shelter without potentially reducing SSI benefits. Careful trust administration is essential to avoid unintended consequences.

Types of special needs trusts. There are first-party special needs trusts (funded with the disabled individual’s own assets, such as a personal injury settlement) and third-party special needs trusts (funded by family members or others). The rules differ significantly between the two, including whether the state must be repaid from the trust after the beneficiary’s death.

Charitable Trusts

For families with philanthropic goals, charitable trusts offer a way to support causes you care about while receiving tax benefits and providing for your family.

Charitable remainder trusts (CRTs) provide income to you or your family for a period of time, with the remaining assets going to charity at the end of the term. You receive an income tax deduction when the trust is established.

Charitable lead trusts (CLTs) work in the opposite direction — the charity receives income from the trust for a set period, and the remaining assets pass to your family. This can be an effective way to transfer wealth to the next generation while reducing gift and estate taxes.

These trusts are specialized tools that are most appropriate for families with significant assets and strong charitable interests. They require careful planning to ensure the tax and financial benefits justify the complexity.

Trust Funding — The Step You Cannot Skip

I cannot emphasize this enough: an unfunded trust is worthless. Creating the trust document is only the beginning. Every asset you want protected by the trust must be properly transferred into it.

Real estate. Your home and any other real property must be re-titled by recording a new deed that transfers ownership from you individually to you as trustee of your trust.

Bank accounts. Checking, savings, and money market accounts should be retitled in the trust’s name or made payable on death to the trust.

Investment accounts. Brokerage accounts, mutual funds, and other investment accounts should be transferred to the trust. Some accounts (like retirement accounts and IRAs) generally should not be transferred to a trust — they should use beneficiary designations instead.

Business interests. If you own a business, your ownership interest may need to be assigned to the trust, depending on the entity type and governing documents.

Personal property. A general assignment of personal property can transfer tangible items (furniture, jewelry, art) to the trust en masse.

I make trust funding part of every trust-based estate plan I create. We do not stop at signing the trust document — we ensure every asset is properly titled so the trust actually works when your family needs it.

Trusts vs. Wills — Choosing the Right Approach

Not everyone needs a trust. For some families, a properly drafted will combined with appropriate beneficiary designations provides adequate protection. For others, a trust-based plan offers clear advantages.

Factor	Will	Trust
Probate required?	Yes	No
Public record?	Yes (when filed with court)	No
Effective during your lifetime?	No	Yes
Incapacity protection?	No	Yes
Cost to create?	Lower	Higher
Ongoing administration?	None	Must keep funded
Names guardians for children?	Yes	No (need a pour-over will)

The right answer depends on your specific circumstances — your assets, your family, your concerns, and your goals. During our initial consultation, I will help you understand which approach makes the most sense for your situation. I will never recommend a trust when a simpler solution would serve you just as well.