How Much Money Do You Need for Trust Planning?

Many people believe that trust planning is only necessary for those with large estates, but this is far from the truth. Trusts are valuable regardless of the amount of wealth you have. While estate size can matter, especially when it comes to estate tax planning, most trusts are set up for reasons that have nothing to do with estate taxes.

The Misconception About Estate Value and Trust Planning

A common misconception is that you need to have a high net worth to set up a trust. While individuals with larger estates may use trusts for tax benefits, the majority of people establish trusts for reasons unrelated to the size of their estate. Trusts offer much more than potential tax savings.

People often turn to trust planning to:

• Avoid probate
• Control how and when beneficiaries receive their inheritance
• Protect assets from creditors or irresponsible spending
• Plan for incapacity
• Maintain privacy, as trusts are designed to keep estate details out of public records

Trust Planning for Non-Tax Purposes

For many families, the most important aspects of trust planning have little to do with the value of their estate. Trusts ensure a smooth transfer of assets after death, makes incapacity planning easier, and provides flexibility in managing assets. Whether your estate is worth $100,000 or $10 million, trusts are beneficial.

For example:

• Avoiding Probate: Trusts allow heirs to avoid the costs and delays of probate.
• Incapacity Planning: Trusts allow a trusted individual to manage your assets if you become incapacitated, without needing a court-appointed guardian.

Is Estate Size Relevant in Trust Planning?

The size of your estate does become relevant in specific circumstances, particularly if you’re concerned about estate taxes. Currently, federal estate taxes only apply to estates valued at more than $13.61 million (as of 2024). If your estate is at or above the federal estate tax exclusion amount, you should contact Book Law Firm for a more complex, tax-motivated estate plan. Most people fall well under this threshold, which means they don’t need to use trust planning solely for estate tax purposes. However, even if your estate is nowhere near this amount, trusts are still a smart decision.

Most people use trust planning for other reasons, such as avoiding probate and ensuring their assets are distributed according to their wishes. These benefits make trust planning worthwhile for people of all income levels.

Final Thoughts on Trust Planning

You don’t need to be wealthy to take advantage of trust planning. The decision to create a trust should be driven by your estate planning goals, not just the value of your estate. Trusts can help avoid probate, protect assets, and manage wealth for future generations, making them versatile tools for estates of any size.