At what net worth do I need a trust?

How much money do you need to start a trust?

Trusts are financial and estate-planning vehicles used to protect assets and limit taxes. Throughout history, they’ve often been seen as a tool for the extremely wealthy only, but that isn’t really the case. Depending on the type of trust and what you intend to use it for, a trust can have valuable benefits for families of modest means. More and more people are beginning to use trusts to ensure that when they pass the transfer of assets to their loved ones goes smoothly and without incident.

There is no minimum

You can create a trust with any amount of assets, as long as they have some value and can be transferred to the trust. However, just because you can doesn’t necessarily mean you should. Trusts can be complicated. The help of an attorney is usually required to set one up, and trusts come with costs and complexities.

What can go in a trust?

Many think that just cash or investments can go into a trust, but the truth is that you can put nearly any type of asset into one, including a mix of:

• Real estate
• Bank accounts
• Investments
• Business interests
• Life insurance policies
• Retirement accounts
• Personal property
• Intellectual property
• Digital assets

How much money should you have for a trust?

That will really depend on what goals you have. Some trusts do not need to be large to fulfill their intended purpose. Others might not make sense unless your estate is sizable. That said, your estate doesn’t need to be huge. Based on data from the Federal Reserve, the median size of a trust fund is around $285,000.¹

Ensure that it’s worth the cost

Even though anyone can set up a trust with any amount of assets, creating a trust does involve some upfront and ongoing costs. This can limit the value of some trusts, as different types can be more expensive to maintain than others. For example, if you want to create a trust to avoid probate, you should compare the cost of creating a trust with the cost of probate in your state. If the cost of probate is low or negligible, creating a trust may not be worth it. If the cost of probate is high or unpredictable, though, creating a trust may be a smart move.

Here is a brief overview of the costs you can expect:

Setup fees: You will usually need to hire an attorney to draft the trust document and advise you on the legal aspects of the trust. Sometimes, the lawyer charges a flat fee, but you could have to pay by the hour. In addition, you may need to pay some fees to register the trust with the court or the state, depending on the type and location of the trust.

Trustee fees: A trustee is there to manage the trust and ensure that your wishes are followed. This can sometimes be a family member, but for more complicated trusts, you may want a professional. A professional’s fee is generally around 0.5%–1% of the total assets of the trust.

Tax preparation fees: Depending on the type and income of the trust, you may also need to account for taxes and pay a tax professional for guidance.

What else do you need to set up a trust?

Besides money, you also need some other things to start a trust. The trust document outlines the parties, terms and conditions, and instructions of the trust. A trustee will need to be appointed to oversee the application of the trust. Beneficiaries and assets will need to be listed. You also have to follow the legal procedures to transfer the assets to the trust. This can be a complicated process. Learn more about how to set up a trust.

Who needs a trust?

There isn’t really a simple answer to that question. If you have a high enough net worth to be subject to estate taxes, a trust is likely a good solution, but a trust can benefit people in other specific situations, as well. The best way to see if you might benefit from setting up a trust is to speak with a qualified estate planning professional.

Benefits of trusts

There are many types of trusts that do different things, but commonly they are used to help in estate planning to:

Avoid probate: Probate is the legal process of settling your estate after your death. It can be time-consuming, expensive, and public, depending on the state and the size of your estate. By creating a trust, you can bypass probate.

Reduce taxes: Trusts can help you reduce or eliminate various taxes, such as estate, gift, income, or capital gains taxes, depending on the type and structure of the trust.

Protect assets: Trusts can help you guard assets from creditors, lawsuits, divorce, or other threats.

Control assets: Trusts can help you control how, when, and to whom your assets are distributed.

Types of trusts

There are many different trusts designed to help in different situations. It’s important to understand the difference between revocable and irrevocable trusts. Other types, like special-needs trusts, can help with financial planning for families dealing with disabilities. Depending on your finances and situation, finding the right trust is paramount. Learn more about the most common types of trusts.

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¹“Survey of Consumer Finances (SCF),” U.S. Federal Reserve, November 2023.

Neither New York Life Insurance Company (NY, NY), nor its agents, provides tax, legal, or accounting advice. Please consult your own professionals before making any decisions.