A new client from Manhattan recently sat in my office and said, “I’ve been told I absolutely need a trust.” It’s a statement I hear often. The internet and well-meaning friends have positioned the revocable living trust as a cure-all for avoiding probate and protecting assets. While a trust is an essential instrument for many of the families I represent, it is not a universal remedy. Sometimes, it is the wrong choice.
A trust is a powerful tool for generational stewardship. But its power is in its proper application. Rushing to create one without understanding its obligations can create more problems than it solves. Before my firm drafts any trust, we have a frank discussion about the downsides.
Relinquishing Control Over Your Assets
The most significant drawback, particularly with irrevocable trusts, is the loss of control. To achieve certain goals—like protecting assets from creditors or minimizing estate taxes—you must legally transfer ownership of your assets to the trust. You cannot easily take them back. You are no longer the owner; the trust is. The trustee, a fiduciary you appoint, manages them for your beneficiaries.
This is a profound legal and emotional step. For an entrepreneur who built a business from the ground up or a family that has held property for generations, handing over the deed can be a difficult decision. Even with a revocable trust, where you typically name yourself as the initial trustee and retain full control, you are creating a separate legal structure. This structure comes with its own rules and formalities that must be respected for the trust to be effective.
The Ongoing Administrative Burden
A trust is not a document you sign and file away. It is a living entity that requires active management. The single most common point of failure I see is an “unfunded” trust. Creating the trust agreement is only the first step; you must then retitle your assets in the name of the trust. This means changing the deed to your home, updating bank and brokerage accounts, and assigning ownership of other property. It is a meticulous, time-consuming process.
If you fail to fund the trust properly, the assets left outside of it will likely still have to go through probate in Surrogate’s Court—the very outcome you were trying to avoid. Furthermore, the person you name as a successor trustee has significant responsibilities. They have a fiduciary duty to manage the trust assets prudently, account for all transactions, file annual tax returns for the trust, and communicate with beneficiaries. It is a demanding role, not an honorary title.
When a Trust Complicates, Not Simplifies
For some estates, a trust is simply overkill. A New York resident with a modest estate, straightforward assets, and clear beneficiaries may be better served by a properly executed will and the strategic use of beneficiary designations on accounts. The cost, complexity, and administrative requirements of a trust may not be justified.
A trust can also become a source of family conflict if not structured with intention. A poorly chosen trustee can mismanage funds or favor one beneficiary over another, leading to disputes that end up in court. When a trustee fails in their duty—whether through incompetence or self-dealing—beneficiaries may have to petition for their removal. New York’s Surrogate’s Court Procedure Act § 711 provides the legal grounds for such a proceeding, but it is a costly and emotionally draining process that proper planning should seek to avoid.
The decision to create a trust should be a deliberate one, based on a clear-eyed assessment of its benefits weighed against its very real costs and responsibilities. It is about choosing the right legal structure for your specific legacy, not just the one that is most talked about.
If you are considering a trust, the first prudent step is not to draft one, but to map your assets and goals. We can schedule a legacy planning session to review your circumstances and determine if a trust truly serves your family’s future.
