Do I Need a Trust?
For many families, the honest answer is:
No — you probably don’t.
But for grandparents and families with several million dollars or more, a properly designed trust can provide long-term protection, structure, and multi-generational oversight.
The key question isn’t “Should I avoid probate?”
The real question is:
“Do I want my assets protected and professionally managed after I’m gone — or distributed outright with no guardrails?”
If You Have Under $1 Million and a Simple Situation
If:
- Your estate is modest
- Your beneficiaries are financially responsible adults
- Most of your assets are IRAs or retirement accounts
- You are simply passing assets to children
A trust may not be necessary.
Probate Is Often Overstated
Probate is frequently portrayed as disastrous. In many states, it is:
- Straightforward
- Reasonably paced
- Not especially expensive
For smaller, uncomplicated estates, a will plus proper beneficiary designations often accomplishes the goal efficiently.
If you are primarily concerned with taxes rather than control or protection, broader retirement tax planning may be more impactful than creating a trust.
If Most of Your Wealth Is in IRAs
If most of your wealth is in traditional IRAs or retirement plans:
- Those accounts already transfer by beneficiary designation.
- Naming a trust can complicate distribution rules.
- Trust tax brackets are highly compressed.
Unless there is a strong protection reason, routing retirement accounts through a trust can create unnecessary tax complexity.
You can read more about how retirement accounts are taxed in our article on Net Investment Income Tax (NIIT) and Medicare surtaxes, which often affect retirees differently than expected.
When a Trust May Make Sense
Trust planning becomes more appropriate when families have several million dollars or more and want to protect assets across generations.
The issue is not probate.
The issue is protection.
An outright inheritance exposes assets to:
- Divorce settlements
- Remarriage complications
- Spendthrift behavior
- Lawsuits and liability claims
- Poor investment decisions
- Special needs situations
Once assets are distributed outright, they belong fully to the beneficiary — and are vulnerable.
For example, if an adult child later remarries, inherited assets received outright may become entangled in a future divorce. We’ve written separately about the financial complexities of getting remarried later in life, and similar risks apply across generations.
A properly structured trust can:
- Shield assets from creditors
- Protect against claims in divorce
- Prevent a new spouse from redirecting inherited wealth
- Provide oversight for beneficiaries who struggle with money
- Support special needs family members without jeopardizing benefits
For families with meaningful wealth, this protective structure often outweighs the added complexity.
What Is a Dynasty Trust?
A Dynasty Trust is designed to:
- Last for multiple generations
- Keep assets protected for children and grandchildren
- Avoid repeated exposure to creditors and divorces
- Maintain professional management long-term
Instead of leaving assets outright to children — who then control them completely — a Dynasty Trust keeps assets inside a protective structure for decades.
For families with several million dollars who expect wealth to last beyond one generation, this can be a powerful planning tool.
How Beneficiaries Receive Money: HEMS and Unitrust Standards
A common misconception is that trusts “lock up” money.
In reality, trusts define how and when beneficiaries receive funds.
Two common distribution approaches:
1. HEMS Standard
Trustees may distribute funds for:
- Health
- Education
- Maintenance
- Support
This gives flexibility while maintaining protection.
2. Unitrust Distribution
The trust distributes a fixed percentage (for example, 3–5%) of the trust’s value each year.
This creates:
- Predictable income
- Long-term sustainability
- Ongoing asset protection
These standards balance access with discipline.
The Tax Reality of Trusts (2026)
Trusts are generally less favorable for income taxes than individuals.
In 2026:
- Trusts reach the top 37% federal income tax bracket at $16,000 of taxable income (2026)
- Trusts may also be subject to the Net Investment Income Tax (NIIT).
- Trusts can owe state income taxes depending on structure and location.
- Trusts pay tax on retained (undistributed) income.
This means:
You must have strong non-tax reasons to create a trust.
Tax savings alone are rarely the reason.
Protection, control, and continuity are.
For families focused primarily on minimizing lifetime taxes, coordinated retirement income planning and tax strategy often deliver more immediate value.
A Trustee Solution for Multi-Generational Planning
A trust requires a trustee to administer it.
A Registered Investment Advisor (RIA) cannot serve as trustee due to conflict-of-interest concerns.
However, we can serve as the investment advisor to a trust while working with an independent corporate trustee such as:
Schwab Trust Company is based in Nevada.
Nevada trusts:
- Do not pay Nevada state income tax
- Offer strong asset protection statutes
(Although beneficiaries may still owe taxes on distributed income depending on their state of residence.)
This structure provides:
- Independent fiduciary oversight
- Long-term continuity
- Professional administration for generations
- Coordinated investment management
So, Do You Need a Trust?
You may benefit from trust planning if you:
✔ Have several million dollars or more
✔ Want assets protected from divorce or creditors
✔ Are concerned about remarriage risks
✔ Have a spendthrift or financially inexperienced heir
✔ Need structure for a special needs beneficiary
✔ Want professional oversight across generations
You may not need a trust if you:
✖ Have a simple estate under $1 million
✖ Have financially responsible adult heirs
✖ Have most wealth in retirement accounts
✖ Are primarily concerned about probate
Trusts are powerful tools — but they introduce complexity and stricter tax rules.
They should exist to solve meaningful problems, not to follow estate planning trends.
If you are a grandparent with several million dollars and want to explore whether a trust fits into your broader retirement and tax strategy, we can help you evaluate the tradeoffs clearly and objectively.
You can request an introductory conversation here:
👉 https://goodlifewealth.com/appointment/
These meetings are educational and focused on planning — including trustee structure, asset protection considerations, and long-term investment management — so you can decide what structure best supports your family.
