Who Actually Needs a Living Trust? (And Who Doesn’t!)
You’ve probably heard that you need a living trust—but is that really true?
Let’s talk about why that may or may not be the case.
This is a somewhat contentious subject..
I see many people rushing to set up a living trust, thinking it’s a magical tool that can help them save on taxes, protect their assets, or build wealth.
But in reality, a living trust often isn’t necessary—and in some cases, it’s a complete waste of time and money.
So who actually benefits from a living trust, and who can safely skip it?
Let’s talk about it!
What in the World is a Living Trust??
A living trust, also known as a revocable trust, is essentially a legal “container” created during an individual's lifetime to hold and manage assets.
The person who creates the trust, known as the grantor, retains control over the assets and can alter or revoke the trust at any time. Upon the grantor's death, the assets are transferred to the designated beneficiaries by the successor trustee, bypassing the probate process.
Common Misconceptions About Living Trusts
Living trusts are often oversold as the ultimate estate planning tool, even when they don’t provide significant benefits to the person creating them.
Here’s where people commonly misunderstand what a living trust does:
“A Living Trust Saves Me on Taxes” – Not true. A revocable living trust does not reduce income taxes, estate taxes, or capital gains taxes. Your assets are still considered part of your taxable estate because you have a retained interest in the trust and have ultimate control of everything.
“It Protects My Assets from Creditors” – Again, not correct. Because a living trust is revocable, creditors can still go after assets inside it because you retain an interest in the trust and its assets.
“It Replaces a Will” – Not entirely. You will likely still need a will for certain assets and decisions, like naming guardians for minor children.
“It’s the Best Way to Avoid Probate” – Possibly? However, for many, simpler strategies like beneficiary designations on retirement accounts or transfer-on-death accounts work just as well without the complexity of a trust. These beneficiary designation also bypass probate.
Who Probably Doesn’t Need a Living Trust?
For many people, a living trust just isn’t necessary, and a well-structured estate plan without one is more than sufficient:
Your Estate Is Simple – If your assets already have beneficiary designations (like retirement accounts, life insurance policies, and payable-on-death accounts), a trust might be overkill.
You’re Okay with Probate – In many states, including Washington, probate is relatively “simple” and not as expensive or time-consuming as people fear.
You Don’t Mind Court Oversight for Incapacity – If you’re comfortable with a power of attorney handling your affairs, a trust may not be needed.
You’re Not Ready for the Upfront Cost and Maintenance – Setting up and maintaining a living trust can be expensive and requires ongoing effort to ensure assets are properly titled in the trust’s name.
Who Might Actually Need/Want a Living Trust?
We’ve covered why you may not need one, but what about the flip side?
There are certain situations where having one makes a lot of sense:
You Own Property in Multiple States – Without a trust, each state may require its own probate process, which can be costly and time-consuming.
You Want to Avoid Probate in a High-Cost State – In states with expensive or lengthy probate processes, a trust can speed up asset transfers to your heirs.
You Want to Plan for Incapacity – A trust allows a successor trustee to step in and manage your finances if you become incapacitated, avoiding the need for court intervention.
You Have Complex Family Dynamics – If you want to set specific rules on how and when heirs receive their inheritance (e.g., protecting assets from a child who may not be in a position to make smart financial decisions or ensuring assets pass to children from a previous marriage), a trust provides more control.
Control is of Great Importance to You - A trust lets you control when and how assets are distributed to your beneficiaries after you are no longer around. This may be important to you if you have minor children or beneficiaries whom you would like to ensure are in the right place in life to receive a significant inheritance.
The Big Takeaway
A living trust can be a powerful tool, but it’s not a magic bullet for estate planning.
Don’t assume you need one just because you heard it’s a good idea. The right estate planning approach depends on your unique situation, and in many cases, a well-structured will, power of attorney, and beneficiary designations are all you need.
Want to find out what’s best for you and your estate? While I’m not an estate planning attorney, I'm well-versed in the practical matters of estate planning. Thus, I would be happy to have an initial conversation to get you thinking about this.
Have any questions about what you’ve read? Let’s talk about them!
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