What is a Trust

A trust is one of the most misunderstood tools in estate planning—and if you're like most mid-career professionals, you probably think it's only for the wealthy. But here's the reality: trusts are increasingly becoming essential planning tools for families just like yours, with expanding incomes, college-bound kids, and competing financial priorities.

In fact, only 11% of Americans currently have a trust as part of their estate plan, while 55% lack any estate planning documents at all—despite 83% recognizing that estate planning is important (Trust & Will, January 2025). This gap represents both a widespread misconception and a significant opportunity for families to protect what they've built.

Let me clear up the confusion and show you what trusts actually are, how they work, and whether one might make sense for your family's situation.

What Exactly is a Trust?

💡 At its core, a trust is a legal arrangement where you transfer ownership of your assets into a separate entity that holds them for your beneficiaries.

Think of it like this: you create a container for your assets, and you write detailed instructions for how and when those assets get distributed. This container operates independently from your personal estate, following your specific wishes even after you're gone.

The Three Key Players

Every trust involves three essential parties:

1. The Grantor (You): The person who creates the trust and transfers assets into it

2. The Trustee: The person or institution responsible for managing the trust assets according to your instructions

3. The Beneficiaries: The individuals or organizations who will ultimately receive the assets

You can actually serve as your own trustee during your lifetime with certain types of trusts, maintaining control while still gaining the estate planning benefits Trust & Will.

The Two Main Types of Trusts Most Families Use

When you're starting to explore trusts, you'll encounter two primary categories that serve very different purposes:

🔄 Revocable Living Trusts: Flexibility and Control

A revocable trust (also called a living trust) lets you maintain complete control during your lifetime. You can:

✅ Change the terms whenever you want

✅ Add or remove assets as your financial situation evolves

✅ Name different beneficiaries as family circumstances change

✅ Cancel the trust entirely if needed

This flexibility makes revocable trusts ideal for mid-career professionals whose financial lives are still evolving—new job opportunities, growing investment portfolios, children heading to college, and changing family dynamics.

The trade-off? Because you maintain control, revocable trusts don't provide asset protection from creditors, and the assets remain part of your taxable estate. They're primarily valuable for avoiding probate and ensuring smooth, private asset transfer to your heirs.

🔒 Irrevocable Trusts: Protection and Tax Benefits

Irrevocable trusts work very differently. Once you create one and transfer assets into it, you generally can't make changes without beneficiary consent or court approval.

Why would you want this lack of flexibility? Because giving up control provides significant benefits:

📊 Asset Protection: Assets in an irrevocable trust are protected from most creditors and lawsuits since you no longer legally own them

📉 Tax Advantages: These assets are removed from your taxable estate, potentially reducing estate tax liability for larger estates

🛡️ Medicaid Planning: Properly structured, irrevocable trusts can help with long-term care planning and Medicaid eligibility

For mid-career professionals, irrevocable trusts typically make sense when you have specific asset protection needs, significant estate tax concerns, or advanced planning goals Mutual of Omaha.

Why Trusts Matter: The Probate Problem

One of the primary reasons families establish trusts is to avoid probate—the court-supervised process of distributing your estate after death.

Here's why that matters:

⏱️ Time: Probate typically takes 9-24 months to complete, during which your family may have limited access to assets (Growth Law, February 2025)

💰 Cost: Probate can consume up to 10% of your estate's value in court fees, attorney expenses, and administrative costs (Fighter Law, August 2025)

📰 Privacy: Probate is a public process, meaning anyone can access records showing what you owned and who received it

A properly funded trust bypasses probate entirely, allowing your assets to transfer privately and efficiently to your beneficiaries according to your specific instructions.

The 1 Trust Mistake That Defeats the Entire Purpose

🚨 Here's the critical mistake I see constantly: people create a trust but never actually fund it.

Creating the trust document is only half the job. "Funding" the trust means legally transferring ownership of your assets—real estate, bank accounts, investment accounts, vehicles—into the trust's name.

An unfunded trust is like buying a safe but leaving all your valuables sitting on the kitchen counter. The protection simply doesn't exist.

According to estate planning experts, failing to fund the trust remains the single most common and costly mistake in 2025 Charles Schwab. When assets aren't transferred into the trust, they remain subject to probate, completely defeating one of the trust's main purposes.

Other Critical Trust Mistakes to Avoid

Beneficiary Designation Conflicts: Retirement accounts (401(k)s, IRAs) and life insurance policies pass directly to named beneficiaries, regardless of your trust instructions. These must be coordinated properly or they'll bypass your trust entirely (Charles Schwab, August 2025).

Choosing the Wrong Trustee: Selecting a family member without financial expertise—or someone with conflicts of interest—can lead to mismanagement and family disputes. Consider whether a professional trustee might better serve your family's needs (LegalZoom, May 2025).

Neglecting Updates: Trusts aren't "set and forget" documents. Life changes—marriages, divorces, births, deaths, significant financial changes—require trust updates. Experts recommend reviewing your trust every 3-5 years (Charles Schwab, August 2025).

Using DIY Templates: Generic online forms often miss state-specific requirements and nuances that could render your trust ineffective. Working with an experienced estate planning attorney ensures your trust is properly structured and legally sound.

Does Your Family Need a Trust?

For mid-career professionals with expanding incomes and families, here are the key situations where a trust typically makes sense:

✅ You own real estate in your name (especially in multiple states)

✅ You want to avoid the delays and costs of probate for your family

✅ You have minor children and want to control when and how they receive assets

✅ You value privacy and want to keep your estate matters confidential

✅ You have a blended family with specific distribution wishes

✅ You own a business that needs structured succession planning

✅ You're concerned about potential creditor claims or lawsuits

For many families I work with, the peace of mind alone—knowing everything is organized, documented, and will transfer smoothly—makes a trust worth the initial investment.

What Does a Trust Cost?

This is often the first question I hear, and the answer depends on complexity:

Basic Revocable Living Trust: Typically $1,200-$3,000 when drafted by an attorney, depending on your location and specific needs

Complex or Irrevocable Trust: $3,000-$7,000+ for trusts requiring advanced tax planning or asset protection strategies

Online Services: Under $500 for document preparation, though these lack personalized legal advice and may miss important state-specific details

Ongoing Costs: Professional trustee fees (if used) and periodic legal reviews every few years

While these costs might seem significant, consider that probate can consume up to 10% of your estate's value and take 9-24 months to complete. For most families, a trust represents a small upfront investment that saves substantial time, money, and stress later.

Key Takeaways: What You Need to Remember About Trusts

🎯 Trusts aren't just for the wealthy—only 11% of Americans have one, but they're valuable planning tools for middle-class families with assets to protect

🎯 Revocable trusts offer flexibility and probate avoidance; irrevocable trusts provide asset protection and potential tax benefits

🎯 Creating the trust is only half the work—you must fund it by transferring assets into the trust's name

🎯 Coordinate beneficiary designations on retirement accounts and life insurance with your trust instructions

🎯 Review and update your trust every 3-5 years and after major life changes

🎯 Work with experienced professionals—the cost of errors far exceeds the cost of proper guidance

Next Steps: Getting Your Estate Planning Started

If you're a mid-career professional navigating expanding income, college planning for your kids, and the competing priorities that come with this life stage, a trust might be exactly what your family needs.

The key is understanding your specific situation, goals, and concerns—and then structuring a plan that protects what you've built while providing flexibility for what's ahead.

For help determining if a trust makes sense for your situation and creating a comprehensive estate plan that fits your family's unique needs, I invite you to schedule a complimentary consultation. Together, we'll review your current situation, discuss your goals, and develop a clear action plan.

Schedule your consultation today to take the first step toward protecting your family's financial future.

About the Author

Balanced Life Planning is a registered investment adviser serving mid-career professionals navigating expanding incomes and competing priorities. We specialize in helping families with college-bound children create comprehensive financial plans that balance current needs with long-term goals.

Sources & References

1. [Trust & Will - What is a Trust](https://trustandwill.com/learn/what-is-a-trust)

2. [Mutual of Omaha - What is a Trust and How Does it Work in Estate Planning](https://www.mutualofomaha.com/advice/financial-planning/leave-a-financial-legacy/what-is-a-trust-and-how-does-it-work-in-estate-planning)

3. [Charles Schwab - 4 Common Trust Mistakes](https://www.schwab.com/learn/story/4-common-trust-mistakes)

4. Trust & Will Estate Planning Report (January 2025)

5. Fighter Law Estate Planning Statistics (August 2025)

6. Growth Law Estate Planning Statistics (February 2025)

7. LegalZoom - Top Five Mistakes to Avoid Writing a Living Trust (May 2025)

8. Charles Schwab - 4 Common Trust Mistakes (August 2025)

Disclaimer

DISCLOSURE: The information contained herein has been obtained from sources believed to be reliable but cannot be guaranteed accuracy. Balanced Life Planning is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only, are subject to change from time to time and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization's initial and ongoing certification requirements to use the certification marks.