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What is a Living Trust and How Does it Work?

So you’ve been hearing the terms “living trust” and “trust-based estate plan” thrown around and want to get clear on what exactly these fancy constructs entail. Great question! We know trusts can seem complex and abstract at first when you just want simple guidance on caring for your family.

As your neighborhood estate planning attorneys here in Cary, allow us to walk through the basics of what revocable living trusts involve sans legal jargon.

An Estate Planning Tool for Your Family and Assets

At its core, a revocable living trust is simply a customizable legal arrangement allowing you to consolidate control over assets you transfer into it during your life for simplified distribution later after death. We often describe them to clients as the “instruction manual” guiding what happens to your financial legacy when you can no longer lead the charge.

You determine who assumes oversight of trust assets in your absence, whether a spouse, adult children, other relatives, a trusted advisor, or even professional trustees from a bank or trust company. Acting as manager over assets transferred in while you’re alive, you retain total flexibility to freely access funds, make changes, or revoke terms anytime as grantor.

Think of your revocable living trust’s trustee as a manager who can step in seamlessly to guide your estate if you become incapacitated – or after you pass away, distribute assets directly to remaining family members per your preset instructions.

Why Do People Create Living Trusts in North Carolina?

Rather than entering probate, where courts and lawyers filter assets through public filings and paperwork, your living trust allows you to avoid this legal process completely so your loved ones don’t inherit the added stress accompanying your hard-earned investments.

90% of Americans actually fail to establish any estate plan at all. Don’t become part of this statistic, leaving your legacy to fate and the state to control.

Our clients have several motivations for creating living trusts. These include:

  • Control Throughout Incapacity – If facing declining health hampering management over finances or real estate holdings, a robust living trust arrangement empowers designated successors to step in to pay bills, access accounts for your benefit, and act decisively on assets that courts rarely permit with sluggish conservatorships.
  • Tax Minimization – Inheritance and probate taxes can slowly erode the net worth passed down to your survivors. Simple sidestepping through a thoughtfully customized living trust means more of your assets actually landing safely to support your family’s future.
  • Total Avoidance of Probate – Again, 100% bypassing North Carolina’s public probate system keeps life simpler and less costly for beneficiaries, ensuring they inherit investments intact rather than depreciated by unnecessary administrative expenses.
  • Peace of Mind Today – Perhaps most importantly, establishing your living trust provides comfort, knowing everything transfers seamlessly when that day comes, giving your legacy lives on as intended, and caring for those who matter most, however, and whenever needed.

How Do You Set Up and Fund a Living Trust?

Once deciding partnering with Cary Estate Planning, crafting your personalized living trust makes sense, given your assets and intentions to provide for your family, here is an overview of the next steps:

  • Initial Consultation – We meet privately to discuss goals around asset transfers, distribution amounts, inheritors, estate taxation, executor preferences, and considerations unique to your family, like special needs dependents requiring additional planning.
  • Tailored Trust Drafting – Our team will prepare customized trust documents factoring in all facets uncovered, initially outlining terms granting authority to successors managing trust assets, distribution instructions stating who inherits what, contingent plans accounting future life changes, among other details like estate inclusion and more. Clients review drafts to ensure their legacy vision appears accurately represented.
  • Asset Retitling – We assist in retitling applicable assets like financial accounts, life insurance policies, real property deeds, and more into your trust’s name so they avoid probate, eventually transferring directly to beneficiaries by legal designation. This administrative detail often deters do-it-yourselfers, but we simplify mundanities.
  • Final Funding – As Grantor, you officially transfer assets into your trust to fund it and start benefiting from consolidated control and legal protections during life. We ensure no gaps exist in titling or ownership that could undermine avoiding probate down the road. Consider all boxes legally checked!
  • Ongoing Administration – As your durable power of attorney for healthcare and financial matters plus legal counselor, we assist in modifying living trust terms over the years as family or asset situations evolve to perpetually provide you peace of mind through life’s transitions. We meet annually to assess any needed adjustments.

While involved initially upfront, living trusts start working their magic immediately during both vibrant seasons, still actively overseeing assets as well as after life changes course when successors assume control.

Does a Living Trust Replace Other Estate Planning Documents?

While living trusts serve as the cornerstone to guide your legacy, they work best alongside other estate planning tools for comprehensive protection.

Our estate planning documents, like financial powers of attorney, can assign someone to make money decisions if a catastrophic event leaves you impaired outside what a living trust covers. Other protections include healthcare directives for medical wishes and guardianship designations for minor children.

Healthcare directives, including Living Wills, provide continuity in communicating medical wishes if facing terminal illness or permanent injury and unable to convey yourselves. And guardianship designations ensure trusted individuals assume responsibility over any minor children should the unexpected occur prematurely.

A multi-layered estate plan uses different safeguards against various situations that may impact your family. Let’s explore customized options for your vision. Contact us today for a consultation.

Author Bio

Paul Yokabitus

Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.

Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.

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