Reasons to Consider a Trust in North Carolina Estate Planning

A will is widely considered as the cornerstone of estate planning in North Carolina, and the figures are encouraging in terms of the increase in people preparing one. According to the 2023 Wills and Estate Planning Study, the number of individuals who have created a will rose by 3 percent from 2022 and 6 percent compared to 2020. If you have already taken steps, you are on the right track for realizing the benefits of having a will. You are able to choose the person to manage your estate and maintain control over distributions to beneficiaries, among other advantages.

However, there may be additional benefits through an important estate planning option: A living trust. You might shun the idea, thinking like many others that a trust is only for the rich. When you review some of the reasons for creating one and the objectives you can achieve, you will soon understand how a trust could be a valuable component of your estate plan. A Monroe, NC estate planning lawyer can advise you on options and assist with document preparation, but some information on why to consider a trust is also helpful.

Privacy Issues:

Regardless of whether you have a will, estate administration is a matter of public record. The probate process involves collecting your assets, creating an inventory of them, and accounting for income and expenses. All of these details would be available to the public. When you have a trust, which is a private agreement, the trust entity owns your assets. This information remains confidential because the trust is not subject to the probate process.

Avoiding Probate:

When you create a trust, you will typically execute a pour-over will at the same time. The will “pours over” anything you own at death into the trust, leaving you with no assets upon your passing. There may still be some estate administration tasks, including evaluating the validity of the will. However, you do avoid the bulk of the court process for probate, which saves time and money.

Asset Protection:

With some trusts, you can transfer ownership of real estate, personal property, and bank accounts to protect them from legal proceedings. This may be advantageous if:

  • You are in an occupation where litigation is common, such as doctors, dentists, and real estate professionals.
  • You seek to protect assets from creditors, as long as you do not run into problems with fraudulent transfers.
  • You want to take advantage of favorable property, business, or income tax treatment.

Estate and Inheritance Tax Planning:

North Carolina does not impose estate tax upon the estate OR inheritance tax on individuals who receive distributions from an estate. However, there is a federal estate tax that high net worth individuals might need to address. Tax laws change constantly, but the exemption amount for those dying in 2023 is $12.92 million. A trust can help you shield assets up to this amount, especially when your spouse also creates a trust that works in conjunction with your own. Federal estate tax rates range from 18 percent to 40 percent of the value above the $12.92 million exemption amount.

Supporting Someone with Special Needs:

If you have a loved one with a disabling medical condition, you may want to provide financial support. The problem is that giving money directly to this person could jeopardize their access to public benefits. You might make your loved one “too rich” to qualify for public assistance. A special needs trust avoids this problem by making distributions that do not impact the individual’s eligibility.

Types of Trusts:

You may view any of these reasons as grounds to create a trust, but there are different trust structures to consider for meeting your goals. Examples include:

  • A revocable living trust, which gives you the ability to make changes during your lifetime;
  • An irrevocable trust that prohibits you from making changes, but delivers better asset and tax protection; and,
  • A marital trust between spouses; and,
  • Charitable trusts that allow you to shelter assets and donate to causes that matter to you.

Consult with a Union County, NC Estate Planning Attorney About Trusts

It is helpful to know the benefits of creating a trust and the different types available under North Carolina law, but you can see the importance of retaining skilled legal representation. Plyler, Long & Corigliano, LLP is knowledgeable about the laws, so we can advise you on options that will help you meet your estate planning goals. For more information, please contact us at 704-741-5804 or via our contact form to set up a consultation.