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Creating a Trust — The Top Five Things You Need to Know

A well thought out and complete estate plan will do far more than simply create a road map for the distribution of your estate assets when you die. Exactly what additional components you include in your plan will depend on what you strive to accomplish with your estate plan. Regardless of what your estate planning goals are, you will undoubtedly need to utilize additional tools and strategies to reach those goals. One commonly used estate planning tool is a trust. At one time, trusts were almost exclusively the domain of wealthy families who used them to avoid estate taxes and retain control over the family fortune when passing it down through the generations. Today, however, trusts are found in even the most basic estate plans because they have evolved to the point where almost any estate plan can benefit from the addition of one. If creating a trust is in your future it is important to work closely with your North Carolina estate planning attorney to ensure that your trust functions as planned and is successful in reaching its intended goal. In the meantime, however, the following top five things you should know about trusts should help get you started.

  • The difference between a testamentary and a living trust. All trusts are broadly divided into two categories – testamentary and living (formally referred to as “inter vivos”) trusts. A testamentary trust is one that does not become active until the death of the Trustor, the person who created the trust. A living trust, on the other hand, will become active as soon as all the formalities of creation are satisfied and funding is established for the trust.
  • What “revocable” and “irrevocable” really means. A revocable trust is one that can be modified, amended, or revoked by the Trustor at any time and without the need for a reason. This means you can add or remove assets, add or remove beneficiaries, or terminate the trust entirely whenever you wish. An irrevocable trust is one that the Trustor cannot modify, amend, or revoke once the trust is activated. Under certain circumstances a court can modify, amend, or terminate an irrevocable trust; however, as the Trustor of an irrevocable trust you should consider everything to be set in stone when you create it. Because it does not become active until your death, a testamentary trust is always revocable until your death at which point it becomes irrevocable. A living trust can be either revocable or irrevocable.
  • How to choose the right Trustee. One of the most common mistakes people make when creating a trust is not taking the time to choose the right Trustee. The Trustee is responsible for managing and investing trust assets as well as administering the trust terms. The duties and responsibilities of a Trustee require him/her to have good financial acumen, knowledge of the law, and excellent conflict resolution skills. DO not simply choose your spouse or a family member because you “trust” them. Choose the right person for the job if you want your trust to be a success.
  • Why using a DIY trust agreement is a bad idea. In today’s internet world it is very easy to find “Do-It-Yourself” legal forms, including trust agreements. It may be tempting to save money by using one; however, DIY legal forms are often out of date, not state specific, and completely lacking in meaningful guidance or instructions. More often than not, the form fails completely, meaning you will not only lose money but the goals you were hoping to achieve are left unfulfilled.
  • How to choose the right type of trust. A well written trust can help with things such as asset protection, probate avoidance, incapacity planning, and numerous other estate planning goals. Knowing the right type of trust to create, however, requires the advice and assistance of an experience estate planning attorney. Creating the wrong type of trust for your purpose is often worse than not creating one at all. Therefore, working with an experienced attorney only makes sense.

Contact Us

If you have additional questions about creating a trust in the State of North Carolina contact the experienced estate planning attorneys at The Law Offices of Cheryl David by calling 336-547-9999 to schedule an appointment.

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