Setting up a trust can help protect your assets, give you more control over your money, and make things easier for your family after you’re gone. In North Carolina, there are a few types of trusts and several steps to follow if you want to do it right. This guide breaks everything down in simple terms, so you know what to expect.
What Is a Trust?
A trust is a legal arrangement where you (the grantor) place money or property under the care of someone else (the trustee) for the benefit of someone else (the beneficiary). Trusts can help avoid probate, protect your privacy, and make sure your wishes are followed, even if you can’t speak for yourself later.
Types of Trusts in North Carolina
Not all trusts work the same way. Here are the most common types used in North Carolina:
Revocable Trust
Also called a living trust, this type can be changed or canceled while you’re still alive. You usually act as your own trustee until you can’t anymore.
Irrevocable Trust
Once this trust is created, it usually can’t be changed. It can offer stronger asset protection and help with taxes in some cases.
Special Needs Trust
This trust helps people with disabilities get financial support without losing government benefits.
Testamentary Trust
This trust is part of a will and goes into effect only after you pass away.
Why People Set Up Trusts
People often choose to set up a trust for several reasons:
- Avoid probate: Trusts don’t have to go through the court process like wills do.
- Privacy: Trusts aren’t public, so your personal info stays private.
- Asset protection: Some trusts can shield assets from creditors.
- Control: You can set rules about how and when your assets are given to others.
- Tax planning: In some cases, trusts can help reduce estate taxes.
- Planning for incapacity: A trust can make sure your affairs are managed if you can’t do it yourself.
Step-by-Step Guide to Setting Up a Trust in North Carolina
Step 1: Define Your Goals
Think about what you want the trust to do. Do you want to avoid probate? Protect assets? Support a child with special needs? Your goals will shape the type of trust you need.
Step 2: Choose the Right Trust
Pick the kind of trust that fits your goals. A revocable trust is popular for people who want flexibility. An irrevocable trust may be better for asset protection or tax planning.
Step 3: Name the Trustee
This is the person or institution that will manage the trust. Many people name themselves as the trustee and pick a backup (called a successor trustee) to take over if needed.
Step 4: List the Beneficiaries
These are the people who will get the assets in the trust. You can also decide how and when they will receive them, like all at once or in smaller amounts over time.
Step 5: Make an Asset List
Write down all the assets you want in the trust. This could include your home, bank accounts, vehicles, investments, or business interests.
Step 6: Draft the Trust Document
You’ll need a legal document that spells out everything: who’s in charge, who gets what, and when. It’s best to have an attorney help draft this to avoid errors.
Step 7: Sign the Trust
The trust needs to be signed and notarized to make it official. You may also need witnesses, depending on your situation.
Step 8: Fund the Trust
This is a key step many people forget. Funding means transferring ownership of your assets to the trust. For example, changing the title of your house or listing the trust as the owner of your bank account. If you skip this step, the trust might not work how you want.
Common Mistakes to Avoid
Even small mistakes can cause big problems. Here are some to watch out for:
- Forgetting to fund the trust: An empty trust doesn’t help anyone.
- Choosing the wrong trustee: Pick someone responsible, trustworthy, and organized.
- Not updating the trust: Life changes. Make sure your trust keeps up with major events like births, deaths, or divorces.
- Using online templates without help: DIY tools may seem easy but can lead to major errors if you miss something important.
Trustee Duties
Being a trustee is more than a title. They must follow the instructions in the trust, manage the assets wisely, keep good records, and stay in touch with the beneficiaries. It’s a serious role with legal responsibilities.
When a Will Might Be Enough
Not everyone needs a trust. If your estate is small—less than $30,000 for a surviving spouse or $20,000 for others—you might be able to use North Carolina’s simplified probate process. If you don’t have minor children or complicated assets, a simple will might work for you.
Other Trust Options to Consider
Depending on your situation, you might benefit from different types of trusts:
- Asset Protection Trusts: Can keep assets safe from creditors or lawsuits.
- Special Needs Trusts: Helps loved ones with disabilities without hurting their benefits.
- HIPAA Trusts: Allows access to medical info and records for healthcare decisions.
Start Protecting What Matters
If you’re thinking about setting up a trust, now is a good time to take that first step. A trust can help you protect your home, savings, and other important assets while making sure your wishes are carried out the way you want. It can also save your loved ones from the delays and stress that often come with probate. Whether you’re planning for the future, caring for a family member with special needs, or just want more control over what happens to your property, creating a trust can make a big difference. Give our Wilmington estate planning lawyers a call at (910) 777-5734 to schedule a time to talk. We’ll walk you through your options and help you build a plan that works for you and your family.