When Robin Williams and Joan Rivers died in 2014, they had already taken steps to look after their families by setting up trusts. That didn't happen by accident – it required careful planning, diligence, and close work with their estate lawyers and financial advisors.
Is it time to talk to your clients about setting up a trust? Use this article as a framework for that conversation. We'll go over what a trust is, what the different types are, and how to make it part of a solid estate plan.
A trust is a fiduciary relationship where one party – the grantor – gives a second party, the trustee, the right to hold title to property or assets. The trustee holds these assets on behalf of a third party called the beneficiary.
These three parties are named in a trust, and each has a specific role:
While trusts are considered an investment vehicle, they are primarily a legal entity that names these three parties and their responsibilities.
A trust contains two main components:
Trusts serve important estate planning goals, such as reducing taxes. But here's the key benefit: trusts typically avoid probate, which saves time and money. And for your high-profile clients, avoiding probate means records are kept private.
We'll go over other benefits of trusts in a later section.
These are the two broad categories of trusts. Most clients start with revocable trusts, and some eventually use irrevocable trusts for specific tax goals.
Revocable trusts, also called living trusts revocable living trusts, are created during the grantor's lifetime. The grantor can:
The grantor has full control of the trust. This means having free access to the assets in the trust. This flexibility is the main appeal. They can adjust the plan as circumstances change.
With that flexibility comes one restriction: a revocable trust is subject to estate taxes. Since the grantor controls and benefits from the assets, the IRS includes them in the taxable estate. In effect, a revocable trust is primarily a probate avoidance tool.
An irrevocable trust works differently; once it has been set up, it cannot be changed at all. This restriction comes with these benefits:
A client who sets up an irrevocable trust loses control forever. They cannot access the money for personal needs later. This permanence calls for careful planning. Read our guide on irrevocable trusts for more.
There are other options to discuss with clients, depending on what type of trust suits their needs best. Here are a few of them:
These are just a few of the strategies you can take when discussing estate planning with your clients.
In 2024, a survey on estate planning found that respondents knew the basic differences between trusts and wills but missed out on the small but important details. This presents an opportunity for advisors like you to educate clients on trusts and wills.
A will is a legal document that directs who receives assets after death. Think of it as your client's instruction letter to the court – a will:
Here's a downside: a will goes through probate court. It is reviewed by a judge but can be contested by others, such as family members excluded from the will. The entire process becomes public record. Anyone can access the will and see what was owned and who inherited what.
Probate involves costs. Court fees and attorney fees reduce what beneficiaries stand to receive. The process takes time. In many states, it can take months or even years.
A trust, meanwhile, is a legal contract. It can operate during the grantor's lifetime. Assets held in a trust bypass probate entirely, so beneficiaries access assets much faster. The process remains completely private. Court involvement is minimal or nonexistent.
Trusts offer control that wills cannot match. The grantor can specify exactly when distributions take place. They can specify to whom distributions go. They can leave everything to a spouse or split assets between spouse and children. They can stagger distributions based on age.
Here's one big difference: Wills only work after death. Unlike irrevocable trusts, wills and revocable living trusts can be updated. They should be reviewed and revised after major life events:
The best practice is to use both wills and trusts. A trust delivers efficiency, privacy, and control for key assets; a will names guardians and ensures everything else follows the same plan.
| Feature | Will | Trust |
|---|---|---|
| What it is | Instruction letter to the court | Legal contract |
| Takes effect | After death only | During lifetime or after death |
| Probate | Yes – court reviews and approves | No – bypasses probate |
| Privacy | Public record | Private |
| Time to settle | Months to years | Much faster |
| Cost | Court fees, attorney fees | Minimal ongoing costs |
| Can be changed? | Yes (anytime before death) | Yes (revocable trusts)No (irrevocable trusts) |
| Names guardians | Yes (minor children, pets) | No |
| Controls timing | Limited – all at once after death | Precise – by age, purpose, conditions |
| Incapacity planning | None | Yes – successor trustee steps in |
| Best for | Naming guardians, catching leftover assets | Major assets, privacy, control, avoiding probate |
Trusts aren't just for the ultra-wealthy; they are recommended for anyone who:
If your client meets the conditions above, here are some reasons to set up a trust:
Trusts are fundamental to comprehensive financial planning. They offer control, privacy, and probate avoidance for clients. For independent advisors and RIAs, understanding how a trust works helps you guide clients through important decisions.
Your role includes understanding trusts even if you don't create them. Help clients recognize when a trust makes sense. Know when to refer to professionals. Coordinate your financial advice with their legal strategy. The best estate plans integrate financial planning, tax strategy, and legal structure seamlessly.
Trusts aren't exclusively for ultra-wealthy clients. Any client with substantial assets or specific control goals should consider one. With proper planning, a trust becomes the centerpiece of a solid estate plan.
As financial crisis recedes, companies say investors have an increased risk tolerance and more need for stocks' higher returns.
Sunset Financial Services has 268 affiliated reps and $2.4 billion in client assets.
Analysts highlight the leading IBD's string of regulatory issues
Guggenheim says the global rise of the middle class could yield returns for U.S. investors.
Do trusts lead to spoiled children? Here's what experts say.
American Spectrum Advisors, the adviser to the American Spectrum REIT I Inc., this month offered to buy 1.6 million shares of the moribund REIT for $1.25 per share. The shares were originally sold for $10 per share.
New rules proposed by Finra will make fees more transparent, but could result in lower upfront commissions for brokers, Bruce Kelly reports.
Phillips Edison-ARC Shopping Center REIT Inc. has hired advisers to evaluate alternatives.
<i>Breakfast with Benjamin:</i> Looking past all the geopolitical risk. Plus: U.S. investors finally start diversifying overseas, what's not to like about a marijuana ETF, how the Millennial generation slept through the bull market run, and a tribute to a fund industry critic.
Demand overshoots supply, supporting higher occupancy and rents.
Financial professional Megan Graf makes a career shift to the online advice world, seeing it as an investment in her future. She calls it getting on her rocket ship.
There are four essential starting-point considerations for every adviser deciding which alternative investments they might offer, and under which compensation arrangement.
Facing new pressure to overhaul trading after Michael Lewis's book "Flash Boys," the regulator may require brokers to reveal exactly where stock trades are executed. The change would limit deals brokers make with exchanges at the expense of investors' interests.
