At What Net Worth Do I Need a Trust?
- Megan Waters, CFP®
- Jun 23
- 14 min read
Updated: Jun 25
While there's no magic number for when you need a trust, you may consider one when your net worth exceeds $1 million or if you have complex family situations.
The decision depends more on your specific circumstances, goals, and estate planning needs than a specific dollar amount.
At What Net Worth Do I Need a Trust: An Introduction
Sarah, a hypothetical investor, thought she had everything figured out. At 58, with a net worth of $1.8 million, she assumed her simple will would be enough to protect her family’s future. Then her financial advisor asked a question that stopped her in her tracks: “Have you considered setting up a trust?”
Like many successful individuals approaching retirement, Sarah had built substantial wealth through decades of hard work and smart investing. But she’d never really thought about whether she needed more sophisticated estate planning tools.
The question of “at what net worth do I need a trust” is one that puzzles many affluent Americans. It’s a common misconception that trusts are only for the ultra-wealthy or those with estates worth tens of millions.
In reality, the decision to establish a trust depends on much more than just a number on your balance sheet. Your family situation, the types of assets you own, your tax concerns, and your legacy goals all play crucial roles in determining whether a trust makes sense for you. Your personal situation—including your unique financial circumstances and family dynamics—should always be considered when deciding if a trust is right for your needs.
Let’s explore when a trust becomes not just beneficial, but potentially essential for protecting your wealth and ensuring your wishes are carried out exactly as you intend. In these cases, having a comprehensive estate plan that incorporates trusts and other legal tools is key to managing and distributing your assets according to your goals.
Key Takeaways
There’s no universal net worth threshold for needing a trust - the decision depends on your unique circumstances and goals
You may consider a trust when your net worth exceeds $1 million
Trusts offer benefits beyond tax savings, including privacy, probate avoidance, and asset protection
Different types of trusts serve different purposes - from revocable living trusts to irrevocable life insurance trusts
State laws significantly impact trust benefits, making local expertise essential
The cost of setting up a trust typically ranges from $1,500 to $5,000 but can save much more in taxes and fees. Some professionals charge a flat fee for trust creation, while others may charge hourly rates.
Regular trust reviews and updates are crucial as laws and personal circumstances change
A comprehensive estate plan often includes trusts as a core component for managing and protecting assets.
Ongoing costs, such as trustee fees and legal reviews, should be considered when evaluating the long-term value of a trust.
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Understanding Trusts: The Basics
A trust is essentially a legal arrangement where you transfer ownership of your assets to a separate entity managed by a trustee for the benefit of your chosen beneficiaries.
Think of it as a protective container for your wealth that comes with its own set of rules and instructions.
A trust is established through a trust agreement or trust document, which is a legal document that outlines the terms, parties involved, and instructions for managing and distributing the trust assets.
Unlike a will, which only takes effect after death, many trusts can provide benefits during your lifetime. They offer a level of control and flexibility that simple estate planning documents cannot match.
The three key players in any trust are the grantor (you), the trustee (who manages the assets), and the beneficiaries (who receive the benefits). In many cases, you can serve as your own trustee during your lifetime, maintaining complete control over your assets.
Net Worth Thresholds and Estate Taxes: When to Consider a Trust
While there’s no magic number that automatically triggers the need for a trust, certain net worth levels do warrant serious consideration. The old rule of thumb suggested trusts were only necessary for estates exceeding the federal estate tax exemption, currently $13.99 million per person in 2025.
However, this outdated thinking overlooks the many non-tax benefits of trusts.
There is certainly no net worth minimum required to create a trust, but you may consider establishing a trust when your net worth reaches $1 million or more.
Why $1 million?
At this level, the cost of establishing and maintaining a trust becomes relatively minor compared to the potential benefits. Your estate likely includes multiple types of assets that could benefit from centralized management. When evaluating the need for a trust, consider your personal property, total assets, and complex assets such as business interests or real estate.
Pro Tip: Don’t wait until you hit a specific net worth number to explore trust options. If you own a business, have minor children, or face unique family situations, a trust might make sense regardless of your current wealth level. Additionally, your state's probate threshold may influence whether a trust is necessary, as estates below this threshold may avoid probate.
For those with net worth between $1 million and $5 million, a revocable living trust often provides the ideal balance of flexibility and protection.
As Mark Fonville, CFP® at Covenant Wealth Advisors in Richmond, VA, explains, “Many of our clients are surprised to learn that trusts aren’t just about taxes. Even if you’re well below the estate tax threshold, a trust can provide invaluable benefits for asset management, privacy, and ensuring your wishes are followed precisely.”
Once your net worth exceeds $5 million, more sophisticated trust strategies often come into play. If you are looking to manage sudden wealth, this might include irrevocable trusts for asset protection, charitable remainder trusts for philanthropy, or generation-skipping trusts for long-term family wealth preservation.
Trust Planning by Net Worth:
Under $1M: Trusts are optional. Consider only for unique cases (e.g., disabled beneficiaries, out-of-state property). New York Life Guide and The Wiser Group both note that trusts may be helpful even for estates starting at $100K, but are more situational under $1M.
$1M–$3M: Consider a revocable trust for probate avoidance and control. RBC Wealth recommends revocable trusts once estates reach the $1M threshold due to added complexity.
$3M–$5M: Add irrevocable trusts to protect high-risk assets or prepare for estate tax changes. As outlined by Forbes, gifting and asset protection strategies often become optimal here.
$5M–$10M+: Estate tax exposure looms. Irrevocable trusts become essential. Investopedia notes this range is where high-net-worth estate tax planning becomes critical.
$10M+: Sophisticated trust planning is a must. Combine revocable and irrevocable structures for multi-generational planning. Investopedia stresses advanced structures like GRATs, DAPTs, and dynasty trusts at this tier.. Consider only for unique cases (e.g., disabled beneficiaries, out-of-state property).
Benefits Beyond the Numbers
The decision to establish a trust extends far beyond simple net worth calculations. Trusts offer numerous advantages that can benefit families at various wealth levels.
Probate Avoidance: One of the most immediate benefits is that trusts can help bypass probate and the lengthy probate process, avoiding the need for probate court involvement. Probate can take months or even years, during which your beneficiaries may have limited access to inherited assets. According to professionals, probate costs typically range from 3% to 7% of the estate’s value.
Privacy Protection: Unlike wills, which become public record during probate, trusts remain private documents. Trusts allow for private distribution of assets, ensuring confidentiality for beneficiaries. This confidentiality can be invaluable for protecting your family from unwanted attention or solicitation.
Incapacity Planning: A properly structured trust can seamlessly manage your assets if you become incapacitated, without the need for court-appointed guardianship. Trusts play a key role in ensuring assets are managed and distributed according to your wishes, even if you become incapacitated. This feature alone can save thousands in legal fees and preserve family harmony during difficult times.
For individuals with many assets, trusts can simplify the legal process and distribute assets efficiently to beneficiaries.
Types of Trusts for Different Needs
Understanding the various trust options helps you make informed decisions about which might best serve your needs. Each type offers unique advantages depending on your circumstances.
Revocable Living Trusts: The most common type, these trusts allow you to maintain full control during your lifetime. You can modify or revoke them at any time, making them ideal for those who want flexibility. They’re particularly useful for avoiding probate and managing assets during incapacity.
Irrevocable Trusts: An irrevocable trust is a trust that, once established, cannot be easily changed or revoked. While less flexible, they offer superior asset protection and potential tax benefits, making them valuable for shielding assets from creditors and reducing estate taxes. They’re often used for Medicaid planning or protecting assets from creditors.
Pro Tip: Consider starting with a revocable trust that includes provisions to become irrevocable upon certain triggering events. This hybrid approach offers maximum flexibility while ensuring future protection.
Charitable Remainder Trusts: For the philanthropically inclined, these trusts allow you to support favorite charities while receiving income during your lifetime. Charitable trusts are a key tool for charitable giving and tax-efficient philanthropy, providing significant tax deductions and helping reduce estate taxes.
Special Needs Trusts: If you have a family member with disabilities, these trusts can provide supplemental support without jeopardizing government benefits. They require careful structuring to comply with complex regulations.
Complicated trusts, such as asset protection trusts and trust funds, may be necessary for high-net-worth individuals or those with unique estate planning needs. These arrangements often involve greater management complexity, higher trustee fees, and detailed legal and tax considerations. Professional guidance is essential to ensure these complicated trusts provide the intended protections and benefits.
At the end of your planning, remember that joint tenancy with right of survivorship is another method to avoid probate, but it lacks the flexibility and control of a trust.
State-Specific Considerations
Trust laws vary significantly by state, making local expertise crucial. Some states offer particularly favorable trust environments with enhanced asset protection or tax benefits.
Virginia, for example, has modernized its trust code to provide flexibility and strong protections for trust assets. The state allows for directed trusts, where different parties can handle investment and distribution decisions separately. A trust company can also serve as a professional trustee, managing the trust's assets according to the grantor's instructions.
State estate taxes also play a role in trust planning. While Virginia doesn’t impose a state estate tax, neighboring states like Maryland do. State laws may affect the calculation of your taxable estate and influence your trust planning decisions. This geographic consideration becomes important if you own property in multiple states or plan to relocate in retirement.
Some states have adopted the Uniform Trust Code, which standardizes many trust provisions and procedures. Understanding whether your state follows this code can impact how your trust operates and what protections it offers.
Pro Tip: If you own real estate in multiple states, a trust can help avoid ancillary probate proceedings in each state where you hold property. This single benefit often justifies the cost of establishing a trust.
Cost-Benefit Analysis
The financial aspect of trust planning involves weighing upfront costs against long-term benefits. Establishing a basic revocable living trust typically costs between $1,500 and $3,000, while more complex trusts can run $5,000 or more; some attorneys may charge a flat fee for trust creation.
Compare these costs to potential probate expenses, which often reach 3% to 7% of your estate value. For a $2 million estate that is probated, probate could cost $60,000 to $140,000, not including the time delays and loss of privacy.
Ongoing trust administration costs vary based on complexity and whether you use professional trustees. Trustee fees and professional's fees are important ongoing costs to consider when you create a trust, as these can be a percentage of the trust's assets and may impact the overall cost-effectiveness of the trust. Many people serve as their own trustee initially, incurring minimal ongoing expenses beyond occasional legal reviews.
As Matt Brennan, CFP® at Covenant Wealth Advisors in Reston, VA, notes, “The cost conversation often focuses too heavily on setup fees. When clients understand the comprehensive benefits - from creditor protection to ensuring their grandchildren’s education funding - the value proposition becomes clear.”
When funding a trust, even a simple bank account or multiple bank accounts can be included as assets, making it easy to create a trust regardless of the size or type of your holdings.
To fully understand the tax and cost implications of creating and maintaining a trust, it is recommended to consult a tax professional or seek accounting advice.
Common Misconceptions
Several myths about trusts prevent people from exploring these valuable planning tools. Let’s address the most common misconceptions.
“Trusts are only for the ultra-wealthy”: This outdated belief stems from when trusts were primarily used for estate tax avoidance. Today’s trusts serve many purposes beyond tax planning, making them relevant for middle-class millionaires.
“I’ll lose control of my assets”: With a revocable living trust, you maintain complete control during your lifetime. You can buy, sell, or transfer assets just as you would with personal ownership.
“Trusts are too complicated”: While trusts involve legal complexity, your daily interaction with them can be quite simple. Once established and funded, they often require less ongoing attention than managing multiple investment accounts.
“My will is sufficient”: Wills serve important purposes but have limitations. They don’t avoid probate, provide no incapacity planning, and become public record. Trusts address these shortcomings while still working in conjunction with your will. For simple estates, a will may be enough since the estate can often be settled quickly and with minimal cost. However, more complex situations benefit from the additional protections and flexibility that trusts provide.
Pro Tip: Don’t let perfect be the enemy of good. Start with a basic trust structure that addresses your immediate needs. You can always add complexity later as your wealth and circumstances evolve. Trusts can also help you preserve more money for your heirs by minimizing taxes and legal costs.
Working with Professionals
Establishing an effective trust requires coordinating several professional advisors. Your team typically includes an estate planning attorney, financial advisor, and possibly a CPA for tax considerations. It is essential to work with an estate attorney to navigate the legal aspects of creating a trust, ensuring all legal requirements are met and minimizing potential issues.
Choose an estate planning attorney with specific experience in trust creation and administration. Look for someone who regularly updates their knowledge as tax laws and regulations change. The American College of Trust and Estate Counsel maintains a directory of qualified specialists.
Your financial advisor plays a crucial role in funding the trust and ensuring your investment strategy aligns with trust provisions. At Covenant Wealth Advisors, the planning team coordinates closely with clients’ attorneys to ensure seamless implementation.
Don’t overlook the importance of properly funding your trust. A trust without assets is like a safe without anything inside - it serves no practical purpose. Creating a trust involves transferring various types of assets, including intellectual property, into the trust. Work with our advisors to retitle accounts and property into the trust’s name.
Regular reviews keep your trust current with changing laws and life circumstances. Plan to review your trust every three to five years or after major life events like marriage, divorce, or significant changes in net worth. Financial tools and strategies should be updated as your family members and circumstances change.
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FAQ Section
Q: Can I set up a trust myself using online services? A: While online services offer basic trust templates, they can’t provide the customized advice necessary for effective estate planning. Given the complexity of trust law and the significant assets involved, working with an experienced attorney is strongly recommended. The cost savings from DIY approaches are minimal compared to the risks of improper structuring.
Q: What types of trusts are there? A: There are many types of trusts, including revocable trusts, irrevocable trusts, and asset protection trusts. Revocable trusts and asset protection trusts serve different purposes in estate planning—revocable trusts offer flexibility and control, while asset protection trusts are designed to shield assets from creditors, lawsuits, and long-term care costs.
Q: How do trusts affect my income taxes? A: Revocable living trusts are typically “grantor trusts” for tax purposes, meaning you report income on your personal tax return just as you would without a trust. Irrevocable trusts may have their own tax obligations and can sometimes provide tax benefits. Your specific situation will determine the tax implications, making professional guidance essential.
Q: How do trusts affect estate taxes? A: Trusts can be used as part of estate planning strategies to minimize estate taxes. The value of your taxable estate may determine whether estate taxes apply, and using trusts and gifting techniques can help reduce the overall value subject to taxation.
Q: What happens to my trust when I die? A: Upon your death, your successor trustee takes over management of the trust assets. They’ll follow your written instructions for distributing assets to beneficiaries. This process typically happens much faster than probate and without court involvement. Your trust can continue operating for years if you’ve included provisions for minor children or other long-term planning goals.
Q: Do I need a trust if I already have beneficiary designations on my accounts? A: Beneficiary designations work well for simple situations but have limitations. They don’t provide management for minor children, offer no incapacity planning, and can’t include specific conditions or timing for distributions. Trusts provide much more control and flexibility, especially for complex family situations or when you want to protect beneficiaries from their own potential poor decisions.
Q: How is a trust managed, and what are the costs? A: A trust fund is managed by a trustee, who is responsible for following the terms of the trust and managing the assets for the benefit of the beneficiaries. Ongoing costs, such as trustee fees and administrative expenses, are part of maintaining a trust fund and should be considered when deciding if a trust is right for you.
Q: How often should I update my trust? A: Review your trust every three to five years or after significant life events. Changes in tax laws, family circumstances, or net worth may necessitate updates. Regular reviews with your attorney ensure your trust continues serving its intended purpose and takes advantage of any new planning opportunities.
Conclusion
The question "at what net worth do I need a trust" doesn't have a one-size-fits-all answer. While the $1 million threshold serves as a useful guideline, your specific circumstances matter more than any arbitrary number.
Trusts offer benefits that extend far beyond tax planning. From avoiding probate and protecting privacy to managing incapacity and protecting beneficiaries, trusts provide solutions to real-world challenges faced by successful individuals and families.
The key is starting the conversation with qualified professionals who can assess your unique situation. Whether your net worth is approaching $1 million or already exceeds $10 million, exploring trust options ensures you're making informed decisions about protecting and preserving your wealth.
Don't wait for a specific net worth target to begin trust planning. The best time to establish a trust is before you need it, when you have the clarity and flexibility to make thoughtful decisions about your legacy.
Would you like our team to just do your retirement planning for you? Contact us today for a free retirement roadmap experience.
About the author:
Financial Advisor
Megan Waters is a CERTIFIED FINANCIAL PLANNER™ professional and Financial Advisor at Covenant Wealth Advisors. Megan has over 14 years of experience in the financial services industry. Raised in Williamsburg, VA, Megan graduated from the Honors College at the College of Charleston with a BS in Economics and a minor in Environmental Studies.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.
