I assume you are referring to an inter-vivos trust (aka "living") Trust rather than a testamentary Trust.
That said, inter-vivos trusts don't have the benefits a lot of people think they do and aren't for everyone.
For example, for tax purposes, the property in a trust remains the property of the grantor. Contrary to popular opinion, living trusts do not save estate taxes, and they do not save income taxes. No matter how many times this is said, some people either do not hear it or do not believe it. For income tax purposes, you – the grantor of the trust – still have to pay tax on income obtained from the property; for estate tax purposes, even though you have transferred assets to a revocable (living) trust, those assets remain – and are included – in your taxable estate.
There are also increased costs as a result of the creation of such a living trust. Lawyers will charge you a fee for creating the trust, and these fees can run thousands of dollars. Furthermore, you will have to incur administrative and recording costs. The paperwork that the trust has to handle may be as great a burden as having to go through the probate proceedings.
There is one additional negative which people often forget.
Just because you have transferred property to a living, revocable trust does not mean that those assets are protected as against creditors. If someone gets a judgment against you – for example in an automobile accident where the judgment is higher than your insurance coverage – the judgment creditor can attach all of your assets so as to satisfy the judgment, even those assets which have been transferred to a living trust.
More importantly, even if you set up a living trust, you must still have a Will. Most people own more than their house, and especially if there are children involved, or other assets, it is imperative to have a Will (referred to as a pour-over Will) to make clear your intentions as to how your property will be disposed of on your death. With a Will, even if there is a cumbersome probate proceeding, at least your intentions have been made known; without a Will, the intestacy laws determine who receives your assets.
I looked at all aspect of this and passed on the inter-vivos trust and instead set up a testamentary trust.
There are savings as each of us dies, and I am all for anything that reduces the fed/state's bite. That said, you are of course correct about income tax, real estate tax and potential creditor issues.
The issue that made up our minds was the potentially crippling long-term care issue. We have coverage but our recent experience with an elder family member has shown us that real 'long-term' care can bancrupt just about anybody. Putting the properties in trust does shelter them from the medicaid regulations...after a five year period of course.
We are looking to move two of the properties to a Qualified Principal Residence Trust, but we aren't ready for that just yet.
Thanks for you thoughtful informative post.