How Much Does It Cost to Set Up a Trust?

Setting up a trust can cost anywhere from a few hundred dollars to several thousand. It all depends on factors like complexity, legal assistance and administrative requirements. Basic trust documents are available through online services for a few hundred dollars, while working with an attorney usually ranges between $2,000 and $5,000 or more ¹ . You may also encounter additional expenses, such as court filing fees or trustee management charges. Since costs can vary widely depending on your unique situation, it’s important to account for both upfront setup costs and ongoing maintenance fees when planning.

A financial advisor with estate planning expertise can help you make strategic decisions like setting up a trust.

What Is a Living Trust?

A trust is a legal entity that allows one party, known as a trustee, to manage assets on behalf of designated beneficiaries.

Common in estate planning, trusts help individuals control the preservation, management and distribution of their wealth. The person who establishes the trust, called the grantor, sets the terms for asset management. It determines how and when beneficiaries receive distributions.

There are two main categories of trusts based on timing: living trusts and testamentary trusts.

• A living trust takes effect during the grantor’s lifetime. Living trusts can be either revocable, allowing changes, or irrevocable, meaning you cannot modify them once established.
• A testamentary trust is created through a will and becomes effective after death.

Holding assets in a trust can help in several ways.

• Bypassing probate
• Potentially reducing estate taxes
• Providing legal safeguards against creditors and disputes
• Passing down generational wealth
• Enabling charitable giving
• Enforcing business succession

However you use them, trusts offer a flexible way to manage assets according to specific instructions.

What Can You Put in a Living Trust?

You can put virtually anything that you own into a living trust.

As an example, some types of trusts can help your heirs avoid probate court and estate taxes while protecting your home from creditors. However, while trusts can avoid probate costs, they still must file tax returns and value assets after you die.

You should also note that financial experts sometimes recommend not transferring certain assets to a trust. One example includes retirement accounts, such as IRAs, 401(k)s and 403(b)s. This transfer could trigger income taxes if you treat the retirement assets as a cash out.

Health savings accounts (HSAs) and medical savings accounts (MSAs) are other examples of assets that do not transfer to living trusts. Money for these accounts is pre-tax, so you don’t pay taxes on them, and putting them in a trust does not give you additional tax benefits. However, you can name a trust as a beneficiary to facilitate the distribution of assets after you die.

Finally, if you have assets in another country, you may want to confirm with an estate lawyer in that country whether you can move these international assets to a U.S.-based trust.

How Much Does a Trust Cost?

If you hire an attorney to set up your trust, you may pay between $2,000 and $5,000. However, the overall cost will depend on whether you are single or married, the complexity of the trust and which state you and your assets are in.

Fees for living trusts in Ohio, for example, are likely to be different from those for in New York. Other factors include the probate or estate planning lawyer’s time and expertise. Highly complex trusts for high-net-worth individuals cost upwards of $5,000 to $7,000.

Aside from creating a trust, there will be additional costs for drafting documents transferring property and assets into the trust. These additional costs can range from $350 to several thousand dollars. This is due to both fees and the time it takes to complete the associated paperwork.

There are multiple advantages to using an attorney, though. This route ensures that the correct preparation of your trust and legal documents. However, this can be an expensive option for some, so it’s also wise to consider the DIY approach when creating a living trust.

The DIY method is significantly less expensive than hiring an attorney. Still, this approach can be a bit riskier because you aren’t hiring a professional to set up the trust for you. If you choose this option, you can typically use online software to build your trust, which will only cost you only a few hundred dollars.

There is a middle ground between hiring a lawyer to do the work or taking the DIY route: paying a lawyer to review the trust you prepare using an online service like LegalZoom.

What’s the Difference Between a Living Trust and a Trust Fund?

A living trust is a legal arrangement you create during your lifetime to manage and distribute your assets according to your wishes. You remain in control of the trust while you’re alive, and the assets it holds can pass to beneficiaries without probate. This makes it a popular tool for people who want privacy, flexibility and a smoother transition of their estate after death.

A trust fund, on the other hand, refers to the assets that are placed inside any type of trust, not just a living trust. It’s the pool of money, property or investments set aside for beneficiaries under specific rules you’ve outlined. Trust funds can be created through living trusts, testamentary trusts or other trust structures for long-term financial support, such as funding a child’s education or providing ongoing income to a family member.

In short, the living trust is the legal structure, and the trust fund is what it holds. Understanding the distinction can help you decide which type of trust best fits your financial goals. A financial advisor or estate planning attorney can help you determine the most appropriate trust strategy based on your needs and budget.

Type of Trusts

These are the most common trust types and the benefits they offer.

Each trust serves a distinct purpose, so it’s important to match the structure with your goals — whether that’s maintaining flexibility, reducing taxes, providing for a loved one or supporting a cause you care about.

Do You Need a Trust, or Will a Will Do?

A trust is not the right tool for every situation, and for some people, a straightforward will accomplishes everything they need at a fraction of the cost. Before committing to the expense and complexity of setting up a trust, it helps to think honestly about what you are trying to achieve.

A will is likely sufficient if your estate is relatively simple. If you own assets in one state, have a clear idea of who should receive what and are not concerned about the time or cost of probate in your state, a will can get the job done.

Many states have streamlined probate processes that are far less burdensome than people expect. This removes one of the most commonly cited reasons for setting up a trust in the first place.

A trust starts to make more sense in specific circumstances.

• Probate. If you own real estate in multiple states, your heirs could face separate probate proceedings in each state without one, adding to both the cost and delay.
• Privacy. If privacy matters to you, a trust has a clear advantage. This is because wills become public record due to probate court while trusts do not.
• Control. If you have a blended family, a dependent with special needs or want to place conditions on when and how beneficiaries receive money, a trust gives you a level of control that a will cannot match.

Cost is worth weighing directly. A simple will typically runs a few hundred dollars when drafted by an attorney. A trust can cost several times that amount before accounting for the additional work of transferring assets into it. For someone with a modest, uncomplicated estate, that difference is hard to justify on the basis of convenience alone.

One thing worth knowing is that most people who set up a trust still need a will alongside it. Assets that are never formally transferred into the trust have to go somewhere. A will serves as a backstop to catch anything you leave out. The two documents tend to work together rather than one replacing the other entirely.

Bottom Line

Setting up a trust can be a powerful way to protect your assets, streamline estate transfers and provide long-term support for the people you care about. Understanding the difference between the trust structure itself and the trust fund it holds can help you choose the right approach for your goals and budget.

Tips for Estate Planning

• Some financial advisors specifically offer estate planning services. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, start now.
• If you’re passing a large estate to your beneficiaries, you may run into estate taxes. It’s important to do your research on the federal estate tax and state estate tax rates so you won’t be blindsided.

Photo credit: ©iStock.com/AndreyPopov, ©iStock.com/undefined undefined, ©iStock.com/cagkansayin