Trusts often get talked about in hushed tones, like some mysterious legal secret reserved for billionaires with vacation homes in the Hamptons. The truth is that trusts are one of the most versatile tools in estate planning. They are useful for everyone from young families buying their first home to retirees planning for grandkids. But despite how common trusts are, myths about them are everywhere. They’re either seen as impossibly complex, wildly expensive, or only for “rich people.” Let’s unpack the biggest misconceptions about trusts and set the record straight.
Misconception #1: Trusts are only for the wealthy
One of the most persistent myths about trusts is that they’re exclusive to people with sprawling estates and yachts. Sure, trusts are a staple of high-net-worth estate planning, but they’re just as valuable for middle-class families. A revocable living trust, for example, allows anyone, yes, even someone with a modest home and a couple of bank accounts, to bypass probate and keep their affairs private.
What is probate? Probate is the legal process that takes place after someone dies to make sure their debts are paid and their remaining assets are distributed to the right people. Think of it as the court’s way of supervising the “wrap-up” of someone’s financial life. During probate, a judge confirms whether there’s a valid will, and then appoints someone (an “executor” or “administrator”) to manage the estate and to oversee tasks like paying off creditors, filing final taxes, and transferring property to heirs or beneficiaries.
Probate can take months (sometimes years) and cost thousands of dollars in court and attorney fees. Avoiding that process isn’t just beneficial for the wealthy, it’s a relief for anyone who wants their heirs to receive their inheritance quickly and quietly. In fact, according to Section 402 of the Uniform Trust Code, the only real requirement for creating a trust is having property to put in it and a lawful purpose, not millions in assets (UTC §402).
Misconception #2: Setting up a trust means losing control of your assets
Here’s where terminology trips people up. With a revocable living trust, you (the “grantor”) almost always serve as the initial trustee. This means that you keep full control of the trust. You can sell your house, spend your savings, or even dissolve the trust entirely if you change your mind. Revocable trusts are like wearing a raincoat! You don’t need a raincoat until you do, but it’s there for protection without restricting movement.
The confusion usually comes from irrevocable trusts, which are harder, and sometimes impossible, to change. People create irrevocable trusts for specific benefits like protecting assets from creditors or reducing estate taxes. In those cases, you do give up control, but that’s the trade-off for those extra layers of protection. Courts have upheld this distinction repeatedly, including the Courts of Appeals for the Seventh Circuit in the 2001 case, Cook v. Commissioner, which held that the taxpayer’s lack of control over an irrevocable trust was key to tax treatment (Cook v. Commissioner (2001)).
Misconception #3: Trusts avoid all taxes
Ah, the holy grail of misconceptions. Setting up a trust does not automatically shield you from taxes. With a revocable living trust, for example, the IRS treats the trust assets as if you still own them. You still file taxes the same way, and income from trust assets is reported under your Social Security number. This is because with a revocable trust, you retain the ability to control and manage the assets in the trust throughout your lifetime. Some downsides come with the enormous upside of accessibility, and taxation is one of them.
Irrevocable trusts can sometimes reduce estate or gift taxes, but only in specific situations and with careful planning. Even then, the trust itself may be subject to its own income tax rules. The U.S. Supreme Court confirmed in 2002 that federal tax liens could attach to a taxpayer’s interest in trust property, illustrating how nuanced tax and trust law can be (United States v. Craft (2002)). Trusts are great for probate avoidance, privacy, and control, but they’re not a tax cheat code.
Misconception #4: Trusts are complicated and expensive
This one has a kernel of truth. Trusts can be more complex than a basic will, and yes, they cost more upfront. But “complicated and expensive” is relative. In most states, a straightforward revocable trust might cost $1,500–$3,000 to set up. The more complicated your estate, the more expensive and complex the creation of the trust will be. If you’re dealing with multiple properties or business interests, or have a blended family or want specific clauses and language dictating how and when your assets are given to beneficiaries, then the cost of drafting and managing your trust will be higher. Creating a trust might sound expensive, but consider that the cost of probate can be exponentially more costly. In Illinois, for example, probate can run 5–7% of the estate’s value in legal fees and court costs.
The complexity myth also stems from confusion over funding the trust. Setting up the trust is only step one. After you create the trust, you must retitle assets into it. Forgetting to do this is a common mistake and can lead to probate despite having a trust. But once the trust is properly funded, managing it is usually no more complicated than managing your own accounts, which is exactly what you’ll do in the case of a revocable trust.
Misconception #5: Trusts are ironclad and can never be challenged
Trusts offer more protection against disputes than wills, but that doesn’t mean they’re untouchable. Beneficiaries, or sometimes even disinherited family members, can challenge a trust on similar grounds to a will. Some of the reasons a person might contest a will include:
- Lack of capacity – arguing the person creating the trust didn’t fully understand what they were signing
- Undue influence – claiming someone manipulated or pressured the grantor
- Fraud – claiming that the grantor was misled about what they’re signing or about the trust’s contents
- Improper execution – this can include failing to meet signature or witness requirements
- Contesting trust amendments – Courts also look closely at trust amendments, which are often contested if they dramatically change beneficiaries late in life
The burden of proof to challenge a trust isn’t uniform across the U.S. Some states require challengers to prove claims like fraud or undue influence by a preponderance of the evidence which is essentially “more likely than not.” While other states, like Illinois, set a higher bar such as clear and convincing evidence which is a much tougher standard to meet. A handful of states even shift the burden to the party defending the trust if certain “red flags” are present. The bottom line is that while trusts are harder to contest than wills, they aren’t invincible. If someone can meet their state’s evidentiary standard and show that real problems like coercion, lack of capacity, or fraud, courts absolutely can and do set trusts aside.
Misconception #6: A trust covers everything, so you don’t need other documents
Trusts are powerful, but they’re not a one-and-done solution. A trust won’t appoint guardians for minor children, handle healthcare decisions, or give someone authority to manage your finances if you’re incapacitated. There are several additional estate planning documents that you should consider. Most comprehensive estate plans include:
- A pour-over will to catch any assets you forgot to put into the trust,
- Powers of attorney for finances and healthcare, and
- Advance healthcare directives to outline medical wishes
Even with a trust, these documents close gaps in your planning. Without them, your loved ones could end up in court seeking guardianship. This heartache and other headaches could be avoided through creating a well-rounded estate plan. Talk with an estate planning attorney to find out which supplemental documents you should include in your estate plan.
Misconception #7: You can just “set It and forget It”
Trusts aren’t rotisserie chickens. Life changes constantly. Marriage, divorce, births, new property purchases, business sales all happen in a person’s life, and oftentimes, more than once. Your trust needs to evolve with your life. A trust that isn’t updated can become as problematic as no trust at all. For example, if you remarry and never revise your trust, your children from a prior marriage could be unintentionally disinherited or forced into litigation with your new spouse. Regular reviews and after major life changes keep your trust relevant and enforceable. This principle shows up in many court disputes where outdated trusts fail to reflect a grantor’s actual intentions leading to emotional turmoil and legal battles.
The bottom line on misconceptions about trusts
Trusts aren’t just for the ultra-rich, nor are they magically immune from taxes or legal challenges. If they’re done right, trusts are flexible tools that can protect your family, simplify your estate, and give you peace of mind. Understanding what trusts can and can’t do is the first step toward building a plan that fits your life. If you’re considering a trust, start with a conversation about your goals. Do you want to avoid probate? Protect a child’s inheritance? Plan for incapacity? Your answers will guide the type of trust you need and whether a revocable, irrevocable, or specialized trust (i.e. special needs trust) is right for you. And don’t let the myths scare you. With the right guidance, setting up a trust can be straightforward and surprisingly empowering. After all, the real secret isn’t that trusts are complicated, it’s that they’re often the simplest way to protect what matters most.
Mathew Kerbis is The Subscription Attorney. He helps people and business owners with their daily and ongoing legal needs. As part of his service to clients, he helps them plan for marriage with premarital agreements, a/k/a prenups. Mathew is a proud member of the HelloPrenup attorney network where he has agreed to affordable fixed fee pricing for HelloPrenup clients without needing to subscribe to his law firm.
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