I took a course in trusts & estates in law school. It wasn’t my favorite. But I did ok on the exam and I took from it a simple and memorable lesson: if you get rich, you should set up a trust. That’s because trusts are more flexible than wills, the costs of administration for trusts are lower, and because they are taxed at a lower rate when you die.

I didn’t take a course in tax, but I knew informally that there were tax benefits too. The main benefit is that trusts are treated as separate people by the IRS. If you have a trust, then your trust files a return, and you file a separate return, excluding the trust assets. In this manner, rich people divide their assets into lower tax brackets, and pay fewer taxes than they would otherwise pay. It also gives tax lawyers a lot of low stress, interesting work to do. Tax lawyers are known to be the happiest lawyers around.

The only problem is that middle class people, and people who are only sort of rich, can’t afford to pay the fees that would be necessary for a lawyer to divide their assets into trusts and then get into lower tax brackets, so they wind up having to actually pay the amount one would think they’d pay. And that’s not right, because we as a nation are so over-taxed.