Do You Actually Need a Trust? (Let’s Do the Math)
A reader sent me a question after the estate planning post, and it deserves a full answer — because the honest response might surprise you.
The question was essentially this: if the federal estate tax exemption is $15 million, why do I need a trust? Good question. It’s not one that always gets a clear answer in estate-planning conversations, so let me give it one.
This isn’t an argument against trusts. It’s an argument for understanding what problem you’re actually solving.
Important note before we go any further.
This post is about revocable living trusts only — the kind most people are talking about when they say “I need a trust.” Irrevocable trusts are a completely different tool with different rules. They can provide estate tax savings, asset protection, and Medicaid planning benefits that revocable trusts cannot. But they also mean giving up control of your assets permanently. That’s a separate conversation, and I’ll cover it in a future post.
The tax savings myth.
A revocable living trust provides no federal tax savings. None. It doesn’t reduce estate taxes. It doesn’t change income taxes. It doesn’t create gift-tax advantages. And it doesn’t affect capital gains treatment or the step-up in basis at death. The IRS treats a revocable trust as if you still own everything outright — because you do.
If someone is selling you a trust based on tax savings, be skeptical.
The exemption reality check.
The federal estate tax exemption for 2026 is $15 million per person — $30 million for a married couple. Under the One Big Beautiful Bill Act, signed into law last July, this amount is permanent with no sunset provision and indexed for inflation going forward. A future Congress could always change the law, but as it stands today, well over 99% of estates will never owe a dollar in federal estate tax. The reader is right: for this audience, the federal tax argument for a trust is essentially irrelevant.
But that doesn’t mean a trust is useless. It means you need to evaluate it for what it actually does — which is avoid probate.
Where a trust actually saves money: probate.
Probate is the legal process of transferring assets after someone dies. Every state handles it differently, and the costs vary dramatically. This is where the math gets interesting.
Linda is 52 and lives in California. She owns a home worth $700,000 with a $300,000 mortgage, has $200,000 in retirement accounts with beneficiary designations, and $50,000 in savings. Her retirement accounts pass directly to her beneficiaries and skip probate entirely. But the home and savings — about $750,000 — go through probate. And here’s the part that surprises people: California calculates probate fees on gross estate value. That $300,000 mortgage doesn’t reduce the number. The home counts at its full $700,000.
California sets mandatory statutory fee schedules for both the attorney and the executor under Probate Code §10810. These aren’t negotiable. Both the attorney and the executor receive 4% on the first $100,000, 3% on the next $100,000, and 2% on the next $550,000. For Linda’s $750,000 probatable estate, that’s $18,000 for the attorney and $18,000 for the executor — $36,000 in statutory fees alone. Add the $435 court filing fee, appraisal costs, and publication fees, and you’re looking at roughly $37,000 or more before a single asset changes hands.
A revocable living trust costs $1,500 to $4,000 to set up with a local attorney. In California, the math isn’t close. The trust pays for itself many times over.
Marcus is 58 and lives in Massachusetts. He owns a home worth $450,000 — paid off — has $300,000 in retirement accounts with beneficiary designations, and $75,000 in savings. Like Linda, his retirement accounts skip probate. His probatable estate is the home and savings — about $525,000.
Massachusetts works very differently. The court filing fee for informal probate is $390. There are no statutory percentage fees — attorney fees are hourly or flat-rate and negotiable. For a straightforward estate like Marcus’s — assuming no disputes and informal probate — total probate costs might run $5,000 to $10,000 depending on the attorney and the complexity.
A trust still costs $1,500 to $4,000. The savings exist, but they’re more modest — potentially a few thousand dollars. For Marcus, the trust decision is closer to a toss-up on pure math, though there are other reasons it might still make sense, which I’ll get to.
When probate costs aren’t the real cost
Diane’s mother passed away a couple of years ago and left behind a small piece of property — worth roughly $40,000 to $50,000 — that was never placed in a trust or clearly titled for succession. Nobody thought it would be a problem. It was a modest asset. The family assumed it would work itself out.
Two years later, they’re still in court trying to resolve ownership. They’ve gone through multiple attorneys and spent $2,000 to $3,000 in legal fees so far — and they’re not done. Some family members want to see it through and get the resolution. Others think the property isn’t worth the time, the money, or the stress anymore. The family isn’t fighting over millions. They’re spending thousands to settle an asset that’s barely worth the legal bills.
A trust would have cost a fraction of what they’ve already spent, and the family would have had closure two years ago. This is the kind of situation nobody plans for and everybody regrets. It doesn’t happen because families are careless. It happens because the right paperwork wasn’t in place.
Other situations where a trust saves real money
Beyond probate costs, there are specific circumstances where a trust provides value that a will simply can’t match.
If you own real estate in more than one state, you’ll face separate probate proceedings in each state without a trust. That’s called ancillary probate, and it multiplies costs and complexity. A trust avoids this entirely.
If you become incapacitated, a trust allows your successor trustee to step in and manage your finances without a court-supervised conservatorship — which can cost thousands in legal fees and take months to establish.
If you have a blended family, a trust gives you control over how and when assets flow to different sets of children, which a will handles much less precisely.
If you have a child with a disability, a special needs trust protects their eligibility for SSI and Medicaid — benefits that can be disqualified by even small amounts of money in the wrong account. (If you missed my recent post on how disability benefits actually work, this is one of the central issues.)
And if you have young adult children, a trust lets you specify ages or milestones for distributions rather than handing an 18-year-old a lump sum they may not be ready for.
The state tax surprise
Here’s something most people don’t know, and it catches families off guard. The federal exemption is $15 million, and that number gets all the headlines. But some states have their own estate taxes with much lower thresholds — and they operate completely independently of the federal rules.
Massachusetts has a $2 million estate tax exemption. It’s not indexed for inflation, and it hasn’t changed since 2023. That might sound like a comfortable margin, but consider the math. The statewide median single-family home sale price hit $638,000 in 2025. In Greater Boston, it was close to $800,000. Add retirement accounts, savings, and a life insurance policy, and families are closer to $2 million than they think — especially when you factor in a parent’s home that’s appreciated dramatically over decades.
Massachusetts taxes estates on a graduated scale starting at about 0.8% just above the $2 million threshold and climbing to 16% for estates over $10 million. A revocable trust doesn’t reduce state estate taxes either, but avoiding probate means assets transfer faster, taxes get settled sooner, and the family isn’t paying legal fees on top of the tax bill.
About a dozen states plus the District of Columbia have their own estate taxes, and five states levy separate inheritance taxes — paid by the person receiving the assets, not the estate. Maryland is the only state with both. If your parents live in one of these states, this matters even if their estate is nowhere near $15 million.
State estate taxes deserve their own post — and they’re coming. For now, know that your state may have rules that are very different from the federal numbers you hear about.
What a will plus beneficiary designations can do
Before you write a check for a trust, it’s worth understanding what simpler tools already accomplish. Beneficiary designations on retirement accounts, life insurance policies, and bank accounts — called transfer-on-death or payable-on-death designations — pass assets directly to your heirs, skipping probate entirely. Joint ownership of property passes automatically to the surviving owner. For many people with straightforward situations, a solid will plus properly set beneficiary designations handles the majority of assets outside of probate. The gap between “will plus beneficiary designations” and a full trust may be smaller than you think.
The decision framework
So should you get a trust? Here’s how to think about it.
If you’re in a high-probate-cost state like California, Florida, or New York, a trust is likely worth it — the savings are clear. If you own property in more than one state, a trust is almost certainly worth it. If you have minor children, a trust is likely worth it because it controls how money is managed and distributed. If you have a child with a disability, a specialized trust isn’t optional — it’s essential. If you’re in a lower-probate-cost state with a straightforward estate and good beneficiary designations in place, a will may be enough. And if you’re on the fence, the $1,500 to $4,000 for a trust from a local attorney is reasonable insurance against the kind of surprises that hit Diane’s family.
Watch out for these mistakes
A few things trip people up.
Assuming a revocable trust saves on taxes — it doesn’t. Setting up a trust but never funding it — meaning you never retitle your assets into the trust — which makes the trust useless.
Ignoring beneficiary designations on retirement accounts, which often matter more than the trust itself.
Not checking your specific state’s probate costs before deciding whether a trust is worth it.
Paying for a trust when a simpler approach would accomplish the same goals.
Confusing revocable and irrevocable trusts, which are different tools with very different implications.
The bottom line
A revocable trust isn’t a tax strategy. It’s a logistics and control strategy. Whether it’s worth paying for depends on your state, your assets, and how much friction you want your family to face when you’re gone.
Look up your state’s probate costs. Then look at what you’d pay a local attorney for a trust. The math will tell you the answer — not a sales pitch.
You might also like:
“The Estate Plan You Need Today” — the five documents that protect your family