What a Trust Does Not Do

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A trust is one of the most powerful tools in estate planning, but it is not a cure-all. Many people in Atlanta and across Georgia set up a trust expecting it to solve every financial and legal problem they might face. The truth is, a trust does a lot of things well, but it also has real limits. Understanding what a trust does not do is just as important as knowing what it does. At Slowik Estate Planning, located in Atlanta, Georgia, we help clients build complete estate plans that account for both the strengths and the gaps in trust planning.

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A Revocable Living Trust Does Not Protect Assets From Creditors

One of the biggest misunderstandings about trusts is the idea that putting assets into a revocable living trust shields them from creditors. This is simply not true. A revocable living trust is one you can change or cancel at any time during your life. Because you keep that control, the law treats the assets inside the trust as still belonging to you personally.

Under Georgia law, specifically the Revised Georgia Trust Code of 2010 (O.C.G.A. Title 53, Chapter 12), a revocable trust does not create a barrier between you and your creditors. If someone wins a lawsuit against you, a court can reach the assets in a revocable trust just as easily as assets in your own name. The trust does not change your ownership in any meaningful legal sense while you are alive and in control of it.

Now, an irrevocable trust is a different story. When you transfer assets into a properly structured irrevocable trust, you give up ownership and control. At that point, those assets are generally beyond the reach of future creditors, as long as the transfer was not made to defraud anyone. O.C.G.A. § 53-12-80 through § 53-12-83 addresses spendthrift and discretionary trusts, which can offer meaningful protection for trust beneficiaries against their own creditors in certain circumstances.

The key point here is this: the type of trust matters enormously. Many people assume that any trust provides asset protection. That assumption can lead to serious financial harm if you are counting on protection that your trust document does not actually provide. If creditor protection is one of your goals, you need a plan built with that specific purpose in mind. Reach out to Slowik Estate Planning in Atlanta, Georgia, to discuss whether an irrevocable trust structure fits your situation.

A Trust Does Not Automatically Avoid All Taxes

Another common belief is that placing assets in a trust eliminates taxes. This is not accurate, and the rules around trust taxation are worth understanding before you make any decisions.

A revocable living trust is what the IRS calls a “grantor trust.” Under Internal Revenue Code § 671, the income, deductions, and credits of a grantor trust flow directly to you as the grantor. You still report all trust income on your personal tax return. The trust itself does not pay income taxes. So a revocable trust does not reduce your income tax bill at all.

What about estate taxes? A revocable trust is included in your taxable estate at death. The assets do not escape federal estate tax just because they are held inside a trust. For 2026, the federal estate tax exemption is set at a significant amount, but this is an area where the law can change, and proper Estate Tax Planning in Atlanta Georgia is essential for anyone with a larger estate.

There is also an important issue with irrevocable trusts and the step-up in basis. IRS Revenue Ruling 2023-2 confirmed that if you transfer assets to an irrevocable trust and those assets are not included in your gross estate at death, the assets do not receive a step-up in basis under Internal Revenue Code § 1014. This means your beneficiaries could face larger capital gains taxes when they sell those assets. This is a real trade-off that requires careful thought. An irrevocable trust can help with estate taxes in some situations, but it may create capital gains tax issues in others. Slowik Estate Planning can help you weigh these trade-offs carefully.

A Trust Does Not Replace a Will or Cover Everything You Own

Some people believe that once they create a trust, they no longer need a will. This is a mistake. A trust only controls the assets that have been properly transferred into it, a process called “funding” the trust. Any asset that remains outside the trust, titled in your own name without a beneficiary designation, will likely go through probate at your death.

Georgia’s probate process is governed by O.C.G.A. Title 53, Chapter 5. Probate can take time and cost money. A trust is designed to help avoid probate, but only for the assets that are actually inside it. If you forget to transfer your bank account, a piece of real estate, or a vehicle into the trust, those assets will still need to go through probate. This is a very common problem.

This is why most estate planning attorneys recommend a “pour-over will” alongside a trust. A pour-over will is a type of will that directs any assets outside your trust at the time of your death to “pour over” into the trust. Under O.C.G.A. § 53-12-100 through § 53-12-120, Georgia law recognizes testamentary additions to trusts, which supports the use of pour-over wills in Georgia estate plans.

Beyond that, a trust cannot name a guardian for your minor children. Only a will can do that. If you have children under 18, you need a will that names someone to care for them if you pass away. A trust simply does not address this. A complete estate plan includes both a trust and a will, along with other documents like a healthcare directive and a durable power of attorney. Contact Slowik Estate Planning in Atlanta to make sure all the pieces of your plan work together.

A Revocable Trust Does Not Automatically Qualify You for Medicaid

Many people hope that placing assets in a trust will help them qualify for Medicaid if they need long-term care in a nursing home. Whether a trust helps with Medicaid eligibility depends entirely on the type of trust you have and when you created it.

A revocable living trust offers no Medicaid protection at all. If your assets are in a revocable trust, Medicaid considers those assets to still be owned by you because you still have control over them. As a result, those assets are counted toward Medicaid’s asset limit.

An irrevocable trust can potentially help, but the timing rules are strict. To be exempt from Medicaid’s asset limit, the trust must be irrevocable, meaning once it is created, the terms cannot be cancelled or changed, and once the assets are transferred into the trust, they no longer belong to the trustmaker. Beyond that, Medicaid applies a 60-month, or five-year, look-back period. You must establish a Medicaid Asset Protection Trust and move your assets into it at least five years prior to applying for Medicaid long-term care. This is known as the “five-year look-back period.”

Even with an irrevocable trust, the drafting must be precise. If your trust is irrevocable, an “any circumstances” test will be applied. If there are any circumstances, no matter how hypothetical or unlikely, under which income or principal could be paid to the applicant, then income and principal are deemed available to the full extent it could be paid. This is a high standard, and a poorly drafted trust can fail it completely. Medicaid planning is a specialized area of elder law, and the stakes are high. Talk to Slowik Estate Planning in Atlanta, Georgia, well before you think you might need long-term care.

A Trust Does Not Handle Assets With Beneficiary Designations or Digital Assets on Its Own

A trust does not automatically control assets that pass by beneficiary designation or by operation of law. Life insurance policies, IRAs, 401(k) plans, and payable-on-death bank accounts all pass directly to whoever you named as beneficiary, regardless of what your trust says. If your trust is the intended recipient of those assets, you have to take specific steps to make that happen, either by naming the trust as the beneficiary or through careful coordination with your overall plan.

This matters more than most people realize. You might have a beautifully written trust that leaves everything to your children equally. But if your IRA still names your ex-spouse as the beneficiary, that asset goes to your ex-spouse. The trust has no power to override a beneficiary designation. Reviewing and updating your beneficiary designations regularly is a critical part of keeping your estate plan current.

Digital assets are another area where a trust alone falls short. Georgia adopted the Revised Uniform Fiduciary Access to Digital Assets Act under O.C.G.A. Title 53, Chapter 13. This law gives fiduciaries, including trustees, the ability to access digital assets under certain conditions, but only if the proper steps are taken in advance. Your trust needs to include specific language authorizing the trustee to manage digital assets, and you need to maintain records of your accounts and passwords in a secure, accessible way.

If you have significant foreign assets or accounts held in other countries, your trust may also not cover those without additional planning. International Estate Planning requires attention to the laws of multiple countries, tax treaties, and reporting requirements. A standard domestic trust is not designed to handle these issues on its own.

Proper trust administration is what brings a trust to life and makes sure assets are properly managed and distributed according to your wishes. Working with an experienced Atlanta estate planning lawyer at Slowik Estate Planning means you get a plan that addresses every layer of your financial life, not just the assets that happen to be inside the trust document itself. Call us today to schedule a consultation at our Atlanta, Georgia office.

FAQs About What a Trust Does Not Do in Atlanta, Georgia

Does a revocable living trust protect my assets if I get sued in Georgia?

No. A revocable living trust does not protect your assets from creditors or lawsuits. Because you retain control over the trust and can cancel it at any time, Georgia law treats the assets as still belonging to you personally. A creditor can reach those assets just as if they were held in your own name. Only a properly structured irrevocable trust can offer meaningful creditor protection, and even then, the transfer must not be made with the intent to defraud creditors.

Will putting my home in a trust save me from paying estate taxes?

A revocable living trust does not remove your home from your taxable estate. The home is still counted as part of your estate for federal estate tax purposes at your death. An irrevocable trust may remove the home from your estate, but this comes with trade-offs, including potentially losing the step-up in basis under IRS Revenue Ruling 2023-2. Estate tax planning requires a careful look at your full financial picture, and Slowik Estate Planning can help you find the right structure for your goals.

Can I skip writing a will if I already have a trust in Georgia?

No. A trust only controls the assets that have been properly transferred into it. Any asset that remains in your name at death will likely go through Georgia’s probate process under O.C.G.A. Title 53, Chapter 5. A pour-over will directs those assets into your trust after death, but probate may still be required. A will is also the only document that can name a guardian for your minor children. You need both a trust and a will as part of a complete estate plan.

Does a trust automatically qualify me for Medicaid in Georgia?

Not automatically, and not all trusts qualify. A revocable living trust provides no Medicaid protection because Georgia Medicaid counts those assets as still belonging to you. An irrevocable trust may help, but you must transfer the assets into it at least five years before applying for Medicaid long-term care benefits. The trust must also be drafted correctly to pass Medicaid’s “any circumstances” test. Timing and drafting are everything in Medicaid planning, and waiting too long can eliminate your options.

Does a trust control my life insurance and retirement accounts in Georgia?

Only if you specifically name the trust as the beneficiary of those accounts. Life insurance policies, IRAs, 401(k) plans, and payable-on-death accounts all pass directly to the named beneficiary, regardless of what your trust document says. Your trust cannot override a beneficiary designation. This is one of the most common gaps in estate plans. Reviewing your beneficiary designations and coordinating them with your trust is a key step that Slowik Estate Planning addresses as part of every comprehensive estate plan.

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