Are There Any Disadvantages to Trusts?

Trusts are an alternative estate planning tool to the probate process. The latter involves recognizing a will and appointing someone (known as an executor) to administer the estate and distribute its assets. The assets are distributed to the beneficiaries of the will.



However, probate isn’t ideal for all families. Families with lots of assets or complex family dynamics will stray away from the inevitably cumbersome probate process. Trusts are the preferred alternative in these situations because they’re better arrangements for complex families. Still, they aren’t perfect, and people should know about their disadvantages before choosing an estate planning tool. Here are what trusts are and their disadvantages.

What Are Trusts?

A trust is an estate planning arrangement set up by someone with some assets that are managed by another person for someone else’s benefit. The person with the assets and who sets up the trust is known as the settlor. The entrusted assets are managed by a trustee. Lastly, the trustee manages the assets for the benefit of another party, known as the beneficiary.

What Are the Disadvantages of Trusts?

The probate process can be costly, involving appraisal, court, attorney, and other fees. Trusts circumvent these costs, but they still cost money. Most of the expenses concerning trusts are accrued during the planning and structuring stages. Besides that, there can still be costs after the trust is set up, such as fees for transferring titles and compensation for the trustee.



Managing trusts requires diligent record-keeping. All property and assets transferred out of and into the trust need to be recorded. Bookkeeping is generally a detail-oriented process, and some record-keeping is necessary for trusts. However, this becomes a greater disadvantage if the trust’s financial holdings are frequently traded, taking up significant time and requiring extreme focus.

Trusts don’t bar the decedent’s creditors from claiming their debts. Typically, estates settle a decedent’s debts before distributing assets to the beneficiaries. If this isn’t done, and the decedent’s creditors find the assets or beneficiaries, they can file a lawsuit to collect what’s owed to them. Creditors don’t have a stipulated time frame to file a lawsuit, unlike with probate, where they have a maximum of six months.

If you’re looking for a trust or probate attorney, get in touch with us at Mike Massey Law. We provide estate planning attorneys in Travis, Houston, and other places throughout Texas.

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Mike Massey JD, MBA, MPA just might be the 195th most interesting person in Texas. He has 4 college degrees and he's working on a 5th:  BBS Accounting; MPA Master's in Professional Accounting; JD Law Degree; MBA Master's in Business Administration; BBS in Biblical Studies (in progress).

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