Trusts may seem like a vague financial tool reserved for the ultra-wealthy, but that’s not the case. Trusts can be a financially advantageous estate planning tool for families, business owners, and individuals who want clearer direction for managing assets during life and transferring them after death.
To help provide clarity on the benefits of having a trust, the Morrisville CPAs from Steward Ingram & Cooper, PLLC, are sharing the main advantages of a trust, types of trusts to choose from, and details you should understand before discussing a trust with an estate planning attorney.
Table of Contents
What Is a Trust?
A trust is a legal arrangement that holds and manages assets for one or more people:
- The person who creates the trust is the grantor
- The people or organizations meant to receive money, property, or other assets are the beneficiaries
- The grantor names a trustee to manage the trust’s assets and follow the trust agreement
- A successor trustee takes over if the original trustee dies, resigns, or cannot serve
- A co-trustee may share management duties or help with major decisions.
What Can Go in a Trust?
A trust may hold real estate, bank accounts, investments, artwork, business interests, and other assets. The trust document is only part of the estate plan. In many cases, assets must be transferred or retitled into the trust.
How Do Trust Terms Work?
A trust can set rules for when beneficiaries receive assets and how the trustee may use them. For example, a family property could be held for one beneficiary to live in, while the trust limits whether it can be rented or sold. Terms may also allow staged distributions at certain ages or payments for education, healthcare, housing, or other stated purposes.
Types of Trusts
Trusts are usually categorized by when they take effect, whether the grantor can change them, and what goal they are meant to serve.
Revocable Living Trusts
A revocable trust, also called a living trust, can be changed or dissolved by the grantor during their lifetime. This is one of the most common trusts used in estate planning because it can help manage assets during life and allow properly funded assets to pass to beneficiaries outside the probate process.
A revocable trust does not automatically reduce estate taxes. Because the grantor usually keeps control over the trust’s assets, those assets are still part of the taxable estate.
Irrevocable Trusts
An irrevocable trust cannot be changed once it is established, except in limited circumstances. When properly structured and funded, it may be used for tax planning, asset protection, or both.
The tradeoff is control. Assets placed in an irrevocable trust are typically no longer treated as the grantor’s personal assets for the purpose of filing estate taxes, but the grantor usually cannot take them back or revise the trust as freely later.
Testamentary Trusts
A testamentary trust is created through a will and only takes effect after death. This type of trust may be used to manage assets for minor children, beneficiaries who need staged distributions, or family members who should not receive a full inheritance at once.
Because it is created through a will, a testamentary trust usually does not avoid probate.
Other Trusts for Specific Planning Goals
Some trusts are designed for narrower estate planning needs. A special needs trust may provide support while helping account for eligibility for benefits such as Medicaid. A spendthrift trust can limit access to a lump sum by distributing assets over time.
Marital trusts and bypass trusts may be used in planning for a surviving spouse or blended family. Charitable remainder trusts and charitable lead trusts can support charitable giving while setting income or distribution terms for a beneficiary or charitable organization.
Advantages of a Trust in Estate Planning
The value of a trust depends on how it is written, funded, and managed. A revocable trust and an irrevocable trust may serve very different purposes, so the right structure depends on the assets involved, the family situation, and the tax planning goals. Here are the six main advantages of a trust:
Avoid Probate for Properly Funded Assets
Probate is the court-supervised process used to administer certain assets after death. It can involve filings, creditor notices, debt payment, court approval, and waiting periods before beneficiaries receive property.
Assets titled in a properly funded living trust may pass under the trust agreement instead of through probate. That can reduce delay, probate fees, and court involvement for the assets held in the trust. Funding matters, though. Assets left outside the trust may still need to go through the probate process.
Potentially Reduce or Eliminate Estate Taxes
A trust does not automatically reduce estate taxes. For many families, a revocable living trust is mainly a probate and management tool, not a tax-saving tool. Because the grantor usually keeps control, assets in a revocable trust are generally still included in the taxable estate.
Certain irrevocable trusts work differently. When assets are transferred into a properly structured irrevocable trust, they may no longer be treated as the grantor’s personal assets for estate tax purposes. That is the mechanism behind many trust-related tax benefits, but it also means the grantor gives up control.
2026 Federal Estate and Gift Tax Limits
For 2026, the federal estate tax exemption is $15 million per individual. A married couple may be able to preserve up to $30 million through available exclusions and portability when handled correctly. The annual federal gift-tax exclusion is $19,000 per recipient for 2026.
Most people will not owe federal estate tax. Still, depending on your financial situation, estate tax liability planning may matter for families with growing investments, life insurance, real estate, business interests, or property in more than one state. North Carolina does not currently have a separate state estate or inheritance tax, but state rules vary.
Provide Flexibility and Control Over Distribution
A trust can give the grantor more control over when beneficiaries receive assets and how those assets may be used. This can be helpful when a beneficiary is a minor child, a young adult, or someone who may need support managing a large inheritance.
Instead of distributing everything at once, the trust may allow payments at certain ages or milestones. It may also authorize payments for education, healthcare, housing, or other stated purposes. For small business owners, a trust can help separate financial benefits from day-to-day control of the company.
Maintain More Privacy
Assets that pass through probate can become part of the public record. That may include information about the estate, the people involved, and the property being transferred.
Trust assets are usually handled outside that public court process. This can be useful for families who prefer to keep financial accounts, real estate, family wealth, or asset distribution details more private. Privacy is not absolute, especially if a dispute ends up in court, but a trust may reduce how much information becomes publicly available.
Avoid Family Disputes Over the Estate
A will can be challenged after death, and a dispute may delay asset distribution while the court reviews the issue. Trusts can also be challenged, but a well-drafted and properly funded trust may give the trustee clearer instructions and reduce uncertainty among family members.
This can matter in blended families, situations involving a surviving spouse, or cases where one child is expected to receive a different type or timing of distribution than another. A trust cannot remove every source of conflict, but it can make the grantor’s intentions easier to follow.
Support Certain Asset Protection Goals
Certain irrevocable trusts may help protect assets from creditors or legal judgments. The level of asset protection depends on the trust’s structure, the timing of transfers, state law, and how much control the grantor keeps.
A revocable trust does not protect the grantor’s own assets from personal creditors. Asset protection planning should be reviewed with an estate planning attorney before assets are transferred, especially when creditor concerns, business risk, or legal exposure are part of the discussion.
Trust vs. Will: When Does a Trust Make More Sense?
A will directs how certain assets should be handled after death, but it usually has to move through probate before those assets are distributed. A trust may make more sense when the estate plan needs more privacy, more control, or a smoother process for managing assets during life and after death.
A trust may be worth considering if you:
- Want properly funded assets to avoid probate
- Own real estate or other property in more than one state
- Have privacy concerns about what becomes part of the public record
- Have minor children or beneficiaries who should receive assets in stages
- Need to account for a blended family or more complex distribution wishes
- Own a business and want clearer succession planning
- Want a successor trustee to manage trust assets if you become incapacitated
A trust is not always a replacement for a will. Many estate plans use both. The trust manages assets that have been transferred into it, while a will can address remaining assets, name guardians for minor children, and handle other legal instructions.
Potential Disadvantages of Trusts
A trust can be useful, but it is not always the simplest or lowest-cost estate planning choice. The tradeoffs usually come down to setup cost, administration, funding, and how much control the grantor is willing to give up.
Higher Setup and Administration Costs
Creating a trust usually costs more upfront than a basic will because it requires a legal document tailored to the family’s assets and goals. Some trusts also involve ongoing recordkeeping, trustee responsibilities, trust accounts, and income tax filings.
Funding the Trust Takes Follow-Through
A trust only works as intended when the right assets are moved into it. That may mean retitling real estate, updating bank or investment accounts, and reviewing beneficiary designations. This is a common place where estate plans fall short.
Irrevocable Trusts Limit Control
An irrevocable trust may offer tax planning or asset protection benefits, but the grantor gives up control over the assets placed in it. Once the trust is funded, changing the terms or taking assets back may be limited or unavailable.
A Trust Does Not Replace Every Estate Planning Document
A trust does not eliminate the need for a complete estate plan. Many people still need a will, financial power of attorney, healthcare directive, and updated beneficiary designations for retirement accounts and life insurance.
How a CPA Fits Into the Trust and Estate Planning Process
A trust is a legal document, so an estate planning attorney should draft it and explain how the terms work. A CPA’s role is different. A certified public accountant can help connect the trust to the client’s larger tax picture, financial records, and reporting needs.
Before a trust is created or funded, a CPA may help review the tax impact of:
- Transferring real estate, investments, or business interests
- Making gifts to beneficiaries or future generations
- Planning around trust income and future distributions
- Coordinating the trust with the client’s broader tax planning goals
After the trust is in place, a CPA can usually assist with trust income tax filings, beneficiary reporting, financial statements, and records the trustee needs to manage the trust’s assets. This can be especially helpful when a trust involves investment income, business ownership, multiple beneficiaries, or ongoing distributions.
Schedule a Consultation About Trust and Estate Tax Planning
If you are considering a trust, serving as a trustee, or updating an estate plan after a change in family, business, or financial circumstances, Steward Ingram & Cooper, PLLC can help you understand related tax and financial reporting considerations. Our Raleigh-Durham CPAs work alongside legal counsel to help clients evaluate trust income tax filings, gifts, transfers of assets, and broader tax planning questions.
To learn more, schedule a consultation by calling (919) 872-0866 or filling out the form below. We serve Morrisville, Raleigh, Durham, Wilson, Wake Forest, and the surrounding areas of the Triangle.