Creating A Trust In North Carolina

Using Trusts For Estate Planning In North Carolina

Every state has its own requirements, laws and specifications for trusts, and North Carolina is no exception. In North Carolina, you can set up a trust for any lawful purpose. In setting up a trust, you are setting out in a legal document what will happen to your property or wealth, and how your assets can be used by your beneficiaries.

The very first decision you will need to make is why you feel a trust is the best decision for the people you want to benefit from your choice.

The estate planning process has several moving parts, and creating a trust is simply one of them. You can successfully navigate the process with the help of an experienced, knowledgeable estate planning attorney. If you’d like to learn more about the different aspects of estate planning in North Carolina, reach out to our friendly team of experts at McCollum Law today.

Why Create a Trust?

Many of the reasons to create a trust involve your own knowledge of who will benefit from it. Some reasons you may feel a trust is necessary are because the beneficiary or beneficiaries are minors, or aren’t able to make decisions:

  • Minors – If those who will benefit from the trust are underage, you may want to set up a trust that removes the burden of decisions from them. You can place their guardians in charge of any funds or assets until the minor child is of age. It’s also possible that you don’t trust those who have guardianship of those minors to make the same decisions you would make, or simply that you want the assets used for something very specific, such as a college degree for a child, grandchild or relative, and you can specify who is in charge of the trust and what it can be used for.
  • Incompetent – Under North Carolina law, a person is incompetent if they don’t have the ability to decide on or to discuss decisions that revolve around themselves. This can be due to any number of reasons, from mental illness to dementia, but you may want to make sure someone who can’t help themselves receives the benefit of your trust.
  • Other – It’s possible you may want to make sure that your beloved pets are taken care of after you pass on. You can develop a pet trust that will put in someone’s hands the care of those pets, along with the funds to supply that care.

These are just a few of the reasons to develop a trust, and a legal expert can assist you with whether a trust is an appropriate way of handling your funds and assets now or after your death. Much of that will depend on how much value is available to be placed in the trust.

Types of Trusts: Which Is Right For You?

Irrevocable Trusts

If you have very strong feelings about who will benefit from the trust you’re setting up and how it can be used, and want to make sure that it cannot be legally changed by you or anyone else after it is established, you will want to get assistance in setting up an irrevocable trust. 

The hazard, of course, is that once it’s created, you cannot change the trust, and you may have a change of heart at a later date.  When you set up an irrevocable trust, the person you name as trustee will be in charge of what happens with your funds or assets specified in the trust.

Revocable Trusts

A revocable trust is a trust containing assets to be transferred to the beneficiaries upon the grantor’s death. In the meantime, the grantor or originator of the trust retains control, including receiving all interest from the trust.

If you want to have the ability to make changes in the trust once it’s established, you may want to set up a revocable trust. Your lawyer can discuss with you the benefits of establishing a trust that can be changed in future.

Read more: Revocable Trusts In North Carolina

What are Probate and Taxes About?

For instance, you may also wish to avoid probate or avoid federal estate tax. North Carolina has neither an estate tax nor an inheritance tax, and the federal estate tax exemption increased to $11.8 million in 2018. This may well change in future federal administrations. If the overall value you may want to cover in the trust is significantly lower, there are other ways of dealing with the distribution of your assets, including developing a will that specifies who gets what. If your assets and funds are worth more, a legal expert can help you develop the right trust that will help your beneficiaries pay the least amount of tax when you pass on.

Probate is the legal paperwork and process that happens when you die–and legal documents like trusts and wills can avoid much of the long, drawn-out probate process when you use a trust and your will to appoint a personal representative, and to designate specific properties or money to specific people.

Sorting out whether you want a living or testamentary trust will be the first step–in other words, do you want to put your money or assets into the trust now, or do you want them to be placed in the trust after you pass on?  Once you’ve decided that, there are two conditions under which your trust can be established:

What Are the Requirements for Setting Up a Trust?

There are a number of requirements that must be satisfied before you can set up a trust in North Carolina:

  • You cannot select yourself as both the only trustee and the only beneficiary.
  • You must select a competent trustee, and you will need to outline their duties in the document.
  • You must be able to make your own decisions. This is the part you’ve heard about in wills, “Being of sound mind and body.” If you are worried about your own ability to remain competent before your death, for whatever reason, a trust may well be a way to provide you with peace of mind in the interim.
  • You must have a clear intention to create a trust. Your lawyer will make certain that a trust is actually what you have in mind, and will help you decide if a trust is the best way to get the outcome you want from your assets.
  • You must select a specific person who is identified as your beneficiary. There are two exceptions:
    • If you establish a charitable trust, in which case you can leave your funds or assets such as stocks or other items in trust for the organization.
    • If you establish a trust for animals.

Talk To Our North Carolina Trust Attorneys

Taken as a whole, trusts are complex documents, and you want to make sure you’re setting up the trust that will be of most value to your beneficiaries. If you live in or near Cary, NC, you have knowledgeable professional assistance available from McCollum Law. Contact us today to set up a consultation.

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