Do I need a trust?

Trusts have been around since ancient Rome when people used them to transfer property under specific conditions to avoid restrictive inheritance laws. Over time, this concept evolved into the modern legal tool we call a trust.

At its core, a trust is a legal arrangement involving three roles:

• Settlor (also called trustor or grantor): creates the trust and transfers assets

• Trustee: manages the assets

• Beneficiary: receives the benefits of the trust

  
  

Sometimes, the settlor can also be the beneficiary. The rules for how the trustee manages the assets are spelled out in a legal document called the trust instrument.

Despite their long history, trusts are often misunderstood. Many people assume they’re complicated, too expensive, or only for the ultra-wealthy. Others believe a trust automatically shields assets from long-term care costs, taxes, or creditors. In reality, only certain specialized trusts provide those protections, and they aren’t always the right fit for most estate planning goals. Some online estate planning software may unnecessarily direct people to trusts simply because they cost more and generate revenue.

This post explores reasons you may or may not need a trust as part of your estate plan to help you prepare before meeting with an estate planning attorney. Please note: this article is for general information only and is not legal advice. Consult an estate planning attorney to determine whether a trust is appropriate for your situation.

I. Are Trusts Too Expensive?

Trusts are generally longer and more complex than wills, so drafting one usually costs more in legal fees. The cost varies widely depending on your region, the attorney’s experience, and the type of trust. Simple trusts may cost around $1,000, while complex trusts with sub-trusts or larger estate plans can exceed $5,000.

Drafting costs aren’t the only expense. Because a trust often continues beyond the settlor’s lifetime, it requires ongoing administration. Costs may include:

• Trustee fees

• Legal counsel, CPAs, or investment advisors

• Property-related expenses such as real estate taxes

• Higher fees if an institutional trustee is involved

• Legal fees if disputes arise between beneficiaries and the trustee

  
  

That doesn’t mean a trust requires millions of dollars. Some trusts are designed to terminate upon the settlor’s death, keeping administration costs low. Ideally, a trust is funded with income-generating assets that help offset expenses.

When deciding whether a trust is worth the cost, ask yourself: What benefit will I gain from including a trust in my estate plan, and is that benefit worth the expense? In some cases, a will may achieve the same goals at a lower cost.

II. Can a Trust Help Me Avoid Inheritance Taxes?

Trusts can sometimes reduce inheritance taxes, but the strategy comes with some trade-offs. In Pennsylvania, assets placed into an irrevocable trust at least one year before death are excluded from inheritance tax. An irrevocable trust cannot be changed once created, and the settlor gives up ownership and direct control of the assets. The trust document can spell out what the trustee can and cannot do with property transferred to the trust, but the settlor generally cannot remove property from the trust or demand distributions that are not already spelled out in the trust document. Irrevocable trusts must follow specific legal requirements to avoid inheritance taxes.

Because these trusts require advance planning and a loss of direct control, many people decide it’s simpler to pay the inheritance tax. If used as a tax-minimization strategy, irrevocable trusts must be carefully drafted and are generally more expensive than simpler trusts.

When weighing this option, consider:

• The value of your estate

• The potential inheritance tax owed

• The cost of giving up control over your assets

  
  

For example:

• If your beneficiaries are your children, the inheritance tax rate in Pennsylvania is 4.5%. Paying that tax may be worth keeping control of your assets until death.

• If your beneficiaries are friends or non-relatives, the tax rate is 15%. In that case, an irrevocable trust may be more appealing.

III. Should I Leave a Trust for My Minor Children?

This is one situation where a trust can greatly benefit families. Most parents of minor children create wills that leave assets to the surviving spouse. But it’s also important to plan for what happens if the surviving spouse dies before the children reach adulthood.

Without additional planning, children receive their inheritance outright at age 18. Under the Uniform Transfers to Minors Act, assets can instead be held in a custodial account until age 21.

Parents who want to delay inheritance or set conditions on how funds are used should consider a trust. A trust allows you to specify how assets are managed and when they are distributed, providing additional guardrails.

Grandparents may also use trusts to ensure gifts are used for specific purposes—such as funding education or a home purchase—or to delay distribution until grandchildren reach a later age.

IV. Do I Want to Control How My Beneficiaries Use Their Inheritance?

Trusts can be used to delay a minor’s inheritance and to place reasonable restrictions on how funds are used. They can also protect beneficiaries from creditors or from irresponsible behavior such as gambling or addictions.

However, you should weigh whether the desire for this control justifies the expense and complexity of long-term trust administration.

V. Do Any of My Beneficiaries Receive Public Benefits?

This is one situation where a trust is often necessary. If a person with a disability is receiving public benefits, an inheritance could make them ineligible. A special needs trust allows family members to gift funds without disrupting eligibility.

There are different types of special needs trusts. In most cases, a third-party special needs trust is the best option when leaving a bequest to a disabled loved one. Unlike other types, it does not have to repay Medicaid after the beneficiary’s death.

Because these trusts must follow strict legal requirements, it is important to consult with a qualified estate planning attorney.

VI. Will I Need to Qualify for Medicaid?

Trusts can sometimes help individuals meet Medicaid’s income limits. This type of planning isn’t for everyone, as it involves removing assets from your countable estate.

Many Medicaid planning strategies—such as a Medicaid asset protection trust—must be implemented at least five years before applying. Advance planning is essential if Medicaid eligibility may be part of your future needs.

Transferring assets to an irrevocable burial trust does not violate Medicaid’s five-year look-back period. This type of trust can serve as a last-minute estate planning tool to reduce countable assets when applying for Medicaid.

Medicaid planning is complex, and it isn’t the right fit for everyone. For individuals with significant net worth, the strategy may not make sense. But for those who expect to rely on Medicaid to cover long-term care expenses, proactive trust planning can help preserve some assets.

VII. Will My Estate Be Subject to Federal Estate Taxes?

Far fewer estates are now subject to federal estate taxes, thanks to the One Big Beautiful Bill Act (OBBBA) passed in July 2025. Before this law, the exclusion limit was scheduled to drop to $5 million in 2026, meaning estates over that amount would owe federal estate tax.

With the OBBBA, the higher exclusion limit has been made permanent. In 2025, federal estate tax applies only to assets over $13.99 million. In 2026, the threshold rises to $15 million. This means federal estate taxes are owed only on the portion of an estate exceeding $15 million.

Of course, Congress could change or repeal the exclusion limit in the future. But for now, individuals with estates around $5 million no longer need to worry about the limit reverting. Thus, most people do not need to worry about federal estate taxes. For those who do, however, trusts are a critical part of estate planning. These trusts are complex and require guidance from an experienced estate planning attorney. They are worth the cost, since federal estate tax rates range from 18% to 40%.

Conclusion

These are just a few considerations when deciding whether to include a trust in your estate plan. Each person’s situation is unique, and the decision depends on highly individual factors. An estate planning attorney can help you navigate the costs and benefits of including a trust in your estate plan based on your specific situation.