How To Create A Trust in NC
A trust is a legal arrangement where one person, called the trustee, holds and manages property for the benefit of another person, called the beneficiary. The person who creates the trust is known as the grantor or settlor.
As with most legal arrangements, the process for creating a trust varies from state to state. It’s important to know your state’s respective requirements for trust creation, to prevent confusion or dispute after you’re gone.
Below is a straightforward guide on how to create a working, valid trust in the state of North Carolina, made specifically to meet your personal needs.
Step One: Identify Which Type of Trust Meets Your Needs
There are several types of trusts, the most common of which are revocable trusts (or living trusts) and irrevocable trusts.
Revocable trusts can be changed or altered by the grantor during their lifetime, while irrevocable trusts cannot. The former are used for smooth transitions after the grantor’s passing, allowing for ease in asset management. The latter are used for asset protection or tax purposes, so lengthy processes are involved in changing them.
There are also two other types of trusts, albeit less commonly used ones.
Special needs trusts protect beneficiaries with disabilities without affecting their eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). They pay for supplementary, non-essential items, such as education, recreation, and special equipment that could enhance the beneficiary’s quality of life.
Testamentary trusts are created in a will and only become active after the death of the grantor. They are used when trying to protect inheritances for minor children, control distribution ages, and safeguard assets from creditors or divorce.
It’s worth it to sit down with your loved ones and consider which of these trusts works best for you and your personal situation. Once you are sure, you should continue to the next step: identifying assets and beneficiaries for the trust.
Step Two: Identify Assets and Beneficiaries for the Trust
During this step, you must clearly identify the assets you would like to include in your trust, whether that be real estate, bank accounts, stocks, or more. It’s important to identify how these assets are owned: separately, or as marital property.
Then, you must decide who you want to receive each asset. These beneficiaries could include children, extended family members, non-profit organizations, corporations, etc. You may also name the primary beneficiaries (who are first in line for the asset), and secondary/contingent beneficiaries (who may inherit the asset if the primary beneficiary cannot).
Step Three: Select the Trustee
Now, you must appoint the person or entity (bank or financial corporation) that manages your trust. Key duties of the trustee may include investing assets, paying debts and taxes, and acting in the best interests of the beneficiaries. Playing an important role in your financial planning, trustees are subject to a few requirements in the state of North Carolina: they must be eighteen years of age or older, be legally competent enough to manage their own affairs, manage the trust impartially if there are multiple beneficiaries, and accept the position of trustee.
Step Four: Draft the Trust Agreement
To actually create the trust, you will need to work with an experienced estate planning attorney to draft a legally sound trust document. Working with a legal professional will ensure that your intentions are clear in your trust and your wishes are properly followed after your death.
Step Five: Sign the Trust Agreement
To make your trust a legally binding document, you must sign it in front of an NC notary public to ensure validity. If it’s a joint trust, both parties must sign in front of the notary. The signed document will be the official version of the trust, so store it in a safe place.
To conclude, trusts are a powerful tool in estate planning, offering flexibility, protection, and peace of mind to the grantor and their loved ones. They allow you to provide for your loved ones, control how your assets are distributed, and avoid unnecessary legal complications.
If you’re considering a trust as part of your estate plan, reach out to Price Law! Our attorney, Sarah Price, can guide you through the process to make sure your assets are protected and your wishes are carried out.
This article is for informational purposes only and does not constitute legal advice. Trust modification rules are fact specific. Consult experienced North Carolina estate planning counsel regarding your particular situation.