What Is a Trust? Do I Need One?
Written by Law on Call Staff | Last Updated August 20, 2025
While a bit intimidating at first, trusts are powerful estate planning tools. If you want to create rules about how your assets will be passed down and save your estate money on taxes, it’s worth looking into whether a trust is right for you.
Below, we’ve provided a starting point and answered common questions to help you decide if it’s time to consider adding a trust to your estate plan.
Main Takeaways
- Trusts are useful estate planning tools for those with substantial assets or who want to dictate specific rules for asset distribution.
- Most trusts avoid the probate process, which may mean fewer taxes and faster asset distribution.
- Some trusts allow for amendments before their creator’s death. Others do not.
Trust Definition
A trust holds assets before they’re passed down to beneficiaries. Think of a trust as the container and assets as the contents. Tangible property like houses and jewelry can be placed in a trust, as can intangible property, like stocks and business interests.
This estate planning method establishes a fiduciary relationship: trustor (trust creator) gives trustee (trust manager) the authority to handle assets for the trustor’s beneficiaries (those for whom the trust was created).
Trusts are especially useful for those with large estates. They help ensure efficient asset distribution to beneficiaries, often avoid probate court, and bypass or reduce certain taxes.
Common Terms
We’ve broken down some important trust terms to help paint a clearer picture of what’s involved with this estate planning tool.
- Trust Agreement
A trust agreement (also called a trust instrument) is the legal document that establishes a trust. At a minimum, it names a trustor, trustee, and beneficiaries. It also describes the assets that fund the trust and how those assets will be distributed. - Trustor
Also called a grantor or settler, the trustor is who creates a trust. - Trustee
Named by the trustor, a trustee manages the trust and ensures beneficiaries receive property as intended. There can be one trustee or multiple, and they can be a person or business entity. - Successor Trustee
Person or entity who replaces the trustee if unwilling or unable to serve. - Beneficiaries
Recipients of the trust’s property, aka the people or entities the trust was created to benefit. - Fiduciary Relationship
Occurs when one party is obligated to act for the benefit of another party. In relation to trusts, a fiduciary relationship occurs between trustee and beneficiary. - Probate
Legal process through which assets are distributed upon someone’s death. Probate determines a will’s validity, settles debts, and identifies estate taxes for payments. It can be expensive and time consuming. While wills go through probate, many trusts do not. - Wills
Wills are legal documents that detail people’s wishes upon death. An important distinction between wills and trusts is that wills don’t actually hold assets, while trusts do. Wills simply explain how assets should be distributed.
Types of Trusts
We’ve broken down several common categories of trusts below, each useful in different situations.
Revocable Trusts
Revocable trusts (aka living trusts or revocable living trusts) are established during the trustor’s lifetime. While revocable trusts become active the moment they’re signed, they can be altered or revoked by the trustor any time prior to their death. Once the trustor dies, revocable trusts are permanent.
How revocable trusts work:
- The trustor and trustee are often the same person.
- Property used to fund revocable trusts must be placed in the name of the trust. For example, a house placed in a trust doesn’t belong to the trustor—technically, it belongs to the trust.
- Since the trustor/trustee are usually the same, they typically retain control of the property until their death, and can even sell it without revoking the trust.
Benefits:
- Flexibility. Revocable trusts can be changed throughout the trustor’s life.
- Avoiding probate. This saves beneficiaries time and money.
Irrevocable Trusts
Irrevocable trusts are active during the trustor’s lifetime and cannot be easily altered. Many states only allow alterations if all beneficiaries consent. Because of this, the amendment process can be convoluted and difficult.
How irrevocable trusts work:
- Assets in an irrevocable trust are no longer the trustor’s property. They belong to the trust until they pass to beneficiaries after the trustor’s death or some other named date/condition.
- Unlike revocable trusts, which allow trustors to retain control of assets, irrevocable trusts require trustors to relinquish control of any assets placed in the trust.
Benefits:
- Taxation. It’s harder for assets to be taxed or claimed as debt payments by the trustor’s creditors.
- Avoiding probate. Just like their revocable counterparts, irrevocable trusts skip probate.
Testamentary Trusts
Testamentary trusts are created via the terms of a will. As such, testamentary trusts are irrevocable. They can’t be altered once the trustor dies.
How testamentary trusts work:
- Testamentary trusts become active after the trustor dies and their will has gone through probate.
- Since testamentary trusts are set out in a will, they are subject to the same probate process as wills.
Benefits:
- Conditionals. Testamentary trusts allow for specific rules regarding when assets should be distributed or how they should be used. This can be especially useful if beneficiaries are young.
- Creditor shield. They can help shield assets from a beneficiary’s creditors.
Don’t leave anything up to chance.
Requirements of a Valid Trust
Several requirements must be met for a trust to be valid. While individual states or institutions may have additional requirements, some essentials are true across the board.
Every trust must name specific parties and transfer assets into the name of the trust. So, a trust isn’t solely made up of the trust agreement—it also includes paperwork that transfers asset ownership, such as deeds and titles.
What parties are named in a trust?
To be valid, a trust must identify the following parties:
- Trustor (creator)
- Trustee (manager)
- Successor Trustee (backup manager)
- Beneficiaries (recipients of assets)
How do I fund a trust?
Funding a trust means transferring property into the name of the trust. Simply drafting a trust agreement is insufficient—you also need to include documents that transfer ownership.
While an ownership transfer needs to occur for all trust assets, the paperwork varies by property type and specific state/institutional rules.
Common trust assets and transfer paperwork:
- Real Estate
A deed is necessary when transferring ownership of a house or other real estate into a trust. This transfers title—and thus, ownership—to the trust. - Vehicles
Before funding a trust, vehicles with a title need to get a new one that identifies the trust as the owner. Vehicle registration needs to be changed as well. - Other Property
Not all property has a title. In fact, most is title-less. If you want to place property such as jewelry, collectibles, clothing, or furniture into a trust, trust ownership needs to be assigned through a document (often called a property schedule) that describes the items. - Financial Accounts
Specific paperwork for transferring bank and financial accounts varies by financial institution. In addition to filing required paperwork, you may need to provide them with details about the trust. - Business Interest
How business interests are transferred into a trust depends on the business type, your role in it, and rules set forth in foundational documents such as bylaws or operating agreements. For example, if you have business partners, you may need their written consent before transferring ownership/interest.
Frequently Asked Questions
Whether you need or want a trust comes down to your specific situation. Healthy, middle-aged people are perhaps less likely to need a trust than older people or those in poor health. Wealth is also an important factor. Those with more assets may be more inclined to create a trust than those of moderate or lower wealth. Other factors include marital status and your need (or lack thereof) for specific rules around asset distribution.
At Law on Call, we can help you determine which type of trust (if any) is right for you.
You do not necessarily need a trust and a will, but many people choose to have both documents in place. A will tends to be a more simple document that states what assets should go to whom. A trust, on the other hand, tends to be more detailed and actually holds assets prior to their distribution. Most people with estate plans have a will at a minimum.
Creating a trust agreement often doesn’t take too long. The more time consuming piece is transferring property into the trust. Depending on what you’re transferring, this process can take upwards of weeks or months. Trusts may also need maintenance and updates as situations change, such as going through a divorce or acquiring assets.
At Law on Call, we can draft your trust, review a trust you already have in place, and/or update your trust as needed.
No. Some trusts must go through probate, specifically testamentary trusts. Since testamentary trusts are set forth in a will, and wills go through probate, testamentary trusts are subject to the same process. Revocable and irrevocable trusts bypass probate. However, if any assets are left out of these trusts, the left-behinds may end up in probate.
All kinds of assets can be transferred to a trust, from a house to a stamp collection to your interest in a business. As long as it’s an asset that you own, there are few limits on what can be placed in a trust.
A trust’s assets are owned by the trust itself. The trustee is the steward of the assets. While some sources say that the trustee is the owner of a trust’s assets, this isn’t accurate. If a trustee were deemed to own the assets, it’s only in the sense that the trustee has the right and responsibility to manage the trust’s assets. The trustee does not have the right to do with the assets what they want for their own benefit.