Estate planning can be a complex endeavor, but it is an essential step in ensuring that your assets and loved ones are taken care of after you're gone. One of the key tools in estate planning is the "trust," a legal entity that holds property or assets for the benefit of specific persons or entities.
Trusts can be used for a variety of purposes, such as minimizing estate taxes, protecting assets, and facilitating the smooth transition of wealth.
For example, if your local library or another institution is close to your heart and you want to make sure to leave them some of your assets after passing, a trust can help. Worried about what will happen to your pets? A trust can help. Are you a high net worth individual and have concerns about how taxes will impact your estate and family? A trust can help there, too.
Trusts can be complex instruments, and it’s important to have an experienced estate planning attorney at your side. David Anderson has helped families in Wilmington and throughout eastern North Carolina structure their estates to help fulfill their wishes for over a decade. Contact our team today to schedule a consultation to review your estate planning.
Below are some of the most common types of trusts available to clients in North Carolina.
Revocable Living Trusts
What It Is: This is perhaps the most common type of trust. The person who creates the trust, also known as the "grantor," can amend or revoke the trust at any time while they're alive.
Why It’s Useful: Revocable living trusts avoid probate, ensuring a quicker distribution of assets to beneficiaries. They also provide a measure of privacy, as the terms of the trust are not made public.
Irrevocable Trusts
What It Is: Unlike a revocable living trust, an irrevocable trust cannot be amended or terminated without the consent of the beneficiaries once it has been established.
Why It’s Useful: This type of trust is particularly beneficial for minimizing estate taxes and protecting assets from creditors. Because the assets are no longer owned by the grantor, they are not subject to estate taxes upon the grantor’s death.
Charitable Trusts
What It Is: This type of trust is designed to benefit a charitable organization as one of the beneficiaries.
Why It’s Useful: Charitable trusts offer tax benefits for the grantor and the option to support a cause they are passionate about. There are two main types: Charitable Remainder Trusts (CRT) and Charitable Lead Trusts (CLT).
Special Needs Trusts
What It Is: This trust is created to provide for a disabled beneficiary without jeopardizing their eligibility for government assistance programs like Medicaid or Social Security.
Why It’s Useful: Special needs trusts are essential for families with disabled loved ones, ensuring they receive proper care without losing access to essential government benefits.
Testamentary Trusts
What It Is: Unlike other trusts which are established during the grantor’s lifetime, a testamentary trust is created through a will and only takes effect upon the grantor’s death.
Why It’s Useful: This trust is useful for those who want to establish conditions on their bequests, like distributing assets to children only when they reach a certain age.
Family or Marital Trusts
What It Is: This type of trust is usually set up to transfer assets to a surviving spouse tax-free, and then to other beneficiaries (like children) upon the death of the surviving spouse.
Why It’s Useful: Family or marital trusts offer tax benefits and can ensure that assets ultimately reach intended beneficiaries, particularly in cases involving blended families.
Spendthrift Trusts
What It Is: This trust restricts a beneficiary’s access to trust principal, usually to protect the assets from the beneficiary’s creditors or to limit the beneficiary’s spending.
Why It’s Useful: Spendthrift trusts are useful for protecting the assets from creditors and ensuring that beneficiaries who are not financially responsible cannot squander their inheritance.
Pet Trusts
What It Is: A pet trust is established to provide for the care and maintenance of one or more pets after the grantor’s death.
Why It’s Useful: For those who consider their pets as part of the family, pet trusts ensure that their pets will be taken care of, specifying everything from daily care to medical treatments.
Schedule Your Estate Planning Consultation Today
Understanding trusts can be a complex undertaking, but the right legal advice can make all the difference. If you're looking for guidance on creating a trust in North Carolina, we’re here to help. Schedule your consultation with David and the team here today to start on the path to creating an estate plan that makes sure you protect all you’ve worked so hard for throughout your life.