The Right Way to Set Up a Trust in North Carolina

Everyone tells you to get your affairs in order—no one tells you how.

When it comes to estate planning, a lot of people don’t know where to start, while others hastily throw plans together that don’t fully consider their family situation or financial goals.

As estate planning lawyers, we see it all of the time, so when we work with clients, we take a step back to truly understand the full picture. Do you have minor children to provide for? Are you concerned about reducing taxes or protecting assets from creditors? Are there business or inheritance situations to navigate?

Whatever is keeping you up at night, we’ll identify tailored solutions as part of your customized plan.

For many North Carolina families, establishing a revocable living trust ends up being the ideal solution for accomplishing their goals. But it has to be the right type of trust, properly created and funded from the start. Otherwise, you could miss out on the very benefits you sought in the first place.

What is a Trust?

A trust is a legal arrangement where one party (the trustee) holds and manages property or assets for the benefit of another party (the beneficiary). The person who creates and funds the trust is called the grantor.

There are different types of trusts, but one of the most common for estate planning purposes is a revocable living trust. With this type of trust, you (the grantor) retain full control over the assets during your lifetime. You can make changes, remove assets, or even revoke the entire trust if needed. When you pass away, the assets are then distributed to your named beneficiaries according to the trust’s terms.

Why Set Up a Revocable Living Trust in NC?

A revocable living trust can be a powerful addition to your North Carolina estate plan for several reasons:

1. Avoid Probate: Probate is the court-supervised process of transferring a deceased person’s assets to their heirs or beneficiaries. It can be time-consuming, public, and expensive. With a properly funded revocable trust, your assets bypass probate entirely which means your beneficiaries receive their inheritances much faster.
2. Maintain Control: As the trustee, you manage the trust assets just as you do now. You can buy, sell, invest, or spend the money as desired. You also maintain the right to modify the trust terms or revoke it altogether during your lifetime.
3. Prepare for Incapacity: A revocable trust includes provisions that if you become incapacitated, your hand-picked successor trustee can step in and handle the trust assets for your benefit. This avoids potential court intervention if you cannot make decisions.
4. Privacy: Unlike a will which becomes public record during probate, the details of your trust agreement as well as your assets and beneficiaries remain private.

Of course, a will is still needed to address any assets not properly re-titled to your trust. But for many North Carolinians, incorporating a revocable living trust into their estate plan just makes sense.

How to Create a Trust in North Carolina

If you decide a revocable living trust is right for you, what does the process of setting one up entail? Here are the key steps:

Step 1: Determine Trust Assets

The first step is deciding what assets or property you want included in your trust – real estate, banking/investment accounts, business interests, vehicles, etc. Basically, anything with a title of ownership.

Remember, you retain full control over these assets during your lifetime as the trustee. You can also purchase new assets in the name of your trust after it’s created.

Step 2: Name a Trustee and Beneficiaries

As the grantor, you will likely name yourself as the initial trustee so you can manage the trust assets yourself. It’s critical though to also name a successor trustee – someone you trust to take over if you are incapacitated or pass away.

You’ll also designate your beneficiaries. These are the individuals (or entities like charities) who will receive the trust assets according to your specified terms after your death.

Step 3: Draft and Sign the Trust Documents

This is where our estate planning experience becomes invaluable. We’ll work closely with you to draft a comprehensive trust agreement that reflects your exact wishes and meets all legal requirements.

Once complete, you’ll sign the document along with your chosen trustee(s) and have it properly notarized.

Step 4: Transfer Ownership (Title) to the Trust

For the trust to be fully recognized and effective, you must transfer ownership of your applicable assets to the name of the trust itself. We’ll guide you through this process known as “funding” the trust.

For example, you’d change the name on your home’s deed to officially list the trust as the owner. The same applies for financial accounts, vehicles, businesses, etc. Any new assets acquired after the trust is created should be titled in the trust’s name from the start.

We know this trust creation and funding process seems daunting, but we’re here to handle every little detail and make it a smooth transition.

Can I Set up a Trust Myself?

Technically, yes. You aren’t legally required to hire an attorney to set up a trust in North Carolina. There are online services that provide basic trust templates and forms you could use.

But, is trying to set up a trust yourself advisable? Absolutely not.

Trust creation is a complicated legal process with many potential pitfalls if not done right from the start. Even a slight mistake or oversight in the document or trust funding could completely invalidate the trust or prevent it from operating how you intended.

The risk simply isn’t worth the perceived cost savings of taking a do-it-yourself approach.

When a Will Might Be Better

In some circumstances, a revocable living trust may not provide substantial benefits over having just a basic will. For instance:

• Smaller Estates: North Carolina offers streamlined probate processes for smaller estates under $30,000 in value (for a surviving spouse) or $20,000 (in other cases). If your total assets fall under these thresholds, the cost-savings from a trust may be negligible.
• No Intestacy Concerns: If you have no close living relatives, avoiding intestacy (dying without a will) isn’t a major issue. A will would be sufficient to designate the beneficiaries of your choosing.

However, even for modest estates, a trust does offer advantages that a will cannot – namely the ability to appoint someone to legally manage your affairs if you become incapacitated. This incapacity planning is a key reason many choose a revocable trust along with a “pour-over” will.

Trustee Duties and Responsibilities

Serving as a trustee for someone else’s trust carries significant responsibilities. The trustee has a legal obligation to:

1. Follow the Trust Terms: The trustee must strictly adhere to the instructions laid out in the trust document regarding the management and distribution of assets. No deviating!
2. Act in the Beneficiaries’ Best Interests: Trustees have a fiduciary duty to make decisions not for their own interests, but for the benefit of the trust’s beneficiaries.
3. Proper Administration: This means keeping detailed records, providing accounting statements to beneficiaries, filing tax returns for the trust, and generally administering the trust in a responsible manner.

For these reasons, many choose to name a professional trustee – such as a bank’s trust department, trust company, or even our firm can serve in this capacity. It ensures administration duties are handled by those with experience.

Other Trust Planning Considerations

While revocable trusts are a core part of many estate plans, they’re not the only planning tool we may recommend depending on your particular circumstances and goals:

• Asset Protection Trusts: If creditor protection and insulating assets from lawsuits is a major concern, an irrevocable asset protection trust may make sense as part of your overall plan.
• Special Needs Trusts: For families with a child or dependent with special needs, a special needs trust can provide funds for their lifetime supplemental care without disrupting needs-based government assistance.
• HIPAA Trusts: A specific type of trust that grants a designated trustee access to your otherwise private medical information in the event of your incapacity. Helpful for making healthcare decisions aligned with your wishes.

Whichever tools suit your situation, our comprehensive planning process will ensure your estate plan cohesively works together to accomplish your goals.

Working with a North Carolina Estate Planning Attorney

By now, we hope it’s clear just how nuanced trust creation and overall estate planning can be when done properly. While some online services exist for basic trust templates, they simply cannot provide the customization and personal attention required.

This is why working with an experienced, well-credentialed estate planning law firm like Cary Estate Planning is so important. Our attorneys have helped hundreds of North Carolina families walk through this entire process and implement plans tailored to their needs.

In fact, Cary Estate Planning offers trust and estate plan reviews. If you already have documents in place, we’ll examine them with a fresh set of eyes and make sure your current plan still achieves everything you want, with no gaps or oversights.

And if you need to establish new trusts or update your estate plan for any reason, you can feel confident knowing you have a locally respected, dedicated estate planning advocate by your side.

We routinely work with clients across North Carolina – from families with minor children at home to high net-worth individuals to business owners concerned about succession. No estate is too large or too small for us to handle with the care and professionalism you’d expect from a leading firm.

If you’re ready to take that first step, or even if you still have questions, we’re here. Contact us today to schedule a discovery call.