An Overview of Trusts in North Carolina Estate Plans
Planning for the future can feel frustrating, uncomfortable, and intimidating, so let us help take the guesswork out of it. If you’re wondering what a trust does or if a trust would work for you, this legal guide will help explain it. If you need help with estate planning or just have a question, do not hesitate to contact us for an initial consultation (don’t worry—it’s free).
What does a trust do?
Similar to a will, a trust allows you to transfer and give your real estate, personal property, assets, and money to the loved ones you choose. Unlike a will, a trust can take effect anytime, including while you are still alive. During the process of forming a trust, you will select a third party known as a “trustee” who will be responsible for maintaining whatever property or money to put in the trust and distributing it to the loved ones you’ve chosen in the specific ways you’ve specified. There is no one-size-fits all when it comes to starting a trust and deciding which the best strategy for guaranteeing that your expectations and preferences are honored can be difficult. But we can help.
what kind of trusts are there?
There are different types of trusts to choose from and each offers its own protections, benefits, and drawbacks. They fall into three general categories:
Living Trusts
Living trusts are generally the most common. In a living trust, the person starting the trust (also known as the “grantor”) will sign a legal form that outlines the specific property, assets, and money the grantor wants to put into the trust. The form will also specify who will receive money and/or benefits from the trust, how much they will receive, when they will receive it, and even what conditions they must fulfill to receive it. The trust can be changed, revoked, or cancelled by the grantor as any point in time.
Irrevocable Trusts (“cannot be revoked”)
As its name suggests, an irrevocable trust generally lasts forever and cannot be changed until it no longer has any assets or money to pay out to beneficiaries. After the grantor puts the property and money into the trust, it cannot be changed, revoked, or cancelled by the grantor. The grantor will have to select someone else to act as “trustee” who will be in charge of the property and funds going forward. The primary benefit of irrevocable trusts is to avoid costly estate taxes if you have a high net worth or to get property out of your name when applying for government benefits.
Testamentary Trusts
A testamentary trust is created in a will and goes into effect only when the grantor dies.
Five (5) ways Trusts Can Be Better than Wills
Using a trust avoids the probate process, which can be costly and time intensive.
Using a trust can reduce estate taxes for high wealth individuals.
Using a trust protects your beneficiaries from creditors because your beneficiaries don’t own the property or assets in the trust.
Using a trust can help you and your beneficiaries reduce their net worth in order to better qualify for and maintain government benefits.
Using a trust lets you choose who will handle the assets and funds you leave to minor children (under the age of 18) instead of the Court deciding.
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