Trusts are a vital estate planning option. A trust is when one person, called the trustee, holds property for another person, called the beneficiary, in a legal arrangement. The trustee can be an individual, a bank, or a corporation. The beneficiaries can be one person or several people. The value of this estate planning option lies in the trustee’s control over the property and the ability to manage it for the good of the beneficiaries.
This can be a helpful tool for people who want to ensure that their assets are managed and distributed to their exact wishes after a significant life event, such as death, disability, or a life event experienced by the beneficiaries. The best approach to creating a trust is to consult an experienced estate planning attorney who can help you determine the type of trust that best suits your needs and objectives.
We understand that many of our clients come to us during times of great transition or upheaval in their lives. Whether you are facing a divorce, the death of a loved one, or other major life changes that have triggered your desire to create a trust, we are here to help you navigate the process and solidify your interests.
We also understand that estate planning can be a complex and confusing process. Our experienced Charlotte estate planning attorneys can help you understand your options and create a plan tailored to your needs and objectives. We can help you create a will, trust, or another legal document that will help you protect your assets and ensure that your wishes are carried out.
Understanding the Different Types of Trusts in NC
The first step in estate planning is to understand the most commonly available types of trusts: testamentary trusts, revocable trusts, and irrevocable trusts.
- A testamentary trust is created by a will. This type of trust only comes into existence after the person who created the will (the testator) dies. A testamentary trust is used to manage assets to be distributed to beneficiaries after the testator’s death. For example, a testator may create a testamentary trust to provide for their grandchildren’s education.
- A revocable trust is a legal estate planning option that can be amended or revoked by the grantor at any time. This type of trust is often used to manage assets during a person’s lifetime. A revocable trust becomes irrevocable upon the death of the grantor. This means that the terms of the trust cannot be changed after the grantor’s death and that the last modification to the trust controls how the assets in the trust are to be distributed.
- An irrevocable trust is a type of trust that the grantor cannot amend or revoke. This type of trust is often used to protect assets from creditors. For example, if a person has a large debt, they may create an irrevocable trust to hold assets they want to pass on to their children. This prevents creditors from seizing sentimental assets in the trust like a home that has been in the family for generations to satisfy the debt.
Creating a Trust
The process of creating a trust begins with the grantor. The grantor is the person who makes the trust and transfers assets into it. The grantor must have the legal capacity to create a trust. This means that they must be over the age of 18 and of sound mind.
Once the grantor has decided to create a trust, they must choose a trustee. The trustee is the person who will manage the assets in the trust. The trustee has a fiduciary duty to the beneficiaries of the trust. This means that they must act in the best interests of the beneficiaries and administer the trust according to its terms.
The grantor must also decide what assets to transfer into the trust. The assets must be transferred to the trustee for the trust to be valid. The trustee will then hold and manage the assets for the beneficiaries.
The grantor must also decide who the beneficiaries of the trust will be. The beneficiaries are the people who will receive the assets from the trust. The grantor can name themselves as a beneficiary of the trust. They can also name their spouse, children, grandchildren, or other relatives as beneficiaries. The grantor can also name charities or other organizations as beneficiaries.
The grantor must also decide how the assets in the trust will be distributed to the beneficiaries. The distribution can be made according to a set schedule, such as monthly or yearly payments. The distribution can also be made upon the occurrence of a specific event, such as the beneficiary reaching a certain age.
The grantor must also decide on the terms of the trust. The terms of the trust can be amended by the grantor at any time, as long as they have the legal capacity to do so. The terms of the trust will control how the assets in the trust are to be managed and distributed.
Once the grantor has created the trust, signatures are required. The trust agreement is a legal document that creates the trust and sets forth its terms. The grantor and the trustee must sign the trust agreement to make it official.
After the trust agreement is signed, the trust is created. The grantor’s assets that were transferred into the trust are now held and managed by the trustee for the beneficiaries. The grantor can revoke the trust at any time, as long as they have the legal capacity to do so. The trustee can also be removed and replaced by the grantor at any time.
If you’re ready to create a trust, we can help you choose the right type of trust for your needs and draft the trust agreement. We can also help you transfer assets into the trust and choose a trustee.