What Are the Most Important Components That Should Be Part of Everyone’s Estate Plan?

Determining what the objectives are, implementing a plan that meets those objectives in a way that conforms to the laws of the tax code and treasury regulations is important when planning any estate. To accomplish this, our approach is to sit down to listen to the client. The first question we ask is, “Tell us about your family and what do you want it to look like in five, ten, or twenty years?” Determining those objectives early on is important, then we can craft the estate plan around those objectives.

Clients come to my office and sometimes have expectations of how that meeting is going to go. They know something about estate planning documents, and they may have heard that they need a will. Sometimes the clients have objectives they think can be adopted in a fairly easy manner, but there are consequences of certain “do it yourself” types of estate planning that can be detrimental.

What Exactly Is a Trust, and Do I Need Different Types of Trusts in My Estate Plan?

A trust is essentially a contract between two people, one who is the grantor of the trust and the other the trustee or beneficiary. These can be the same individual, the grantor of the trust can also be the trustee. That’s contrary to contract law where generally you cannot enter into a contract with yourself, but this is permissible in this use case. You can transfer assets into a trust, just like you could in a corporation or limited liability company because the trust itself is a legal entity. At some point in time, it even may have a separate tax ID number, not during the life of the grantor, but at their time of death.

Keeping that in mind, a trust is a contract that contains terms, or directions to the trustee, from the person who created the trust as to how they want their assets to be managed. For example, I could be my own trustee and I could put anything I wanted to into that trust while I’m alive, as well as take anything out. I can terminate a trust or modify it. Anything that I could do with the assets, if they were in my own name, I can also do the same thing with a limited trust. It’s a transparent entity.

Where trusts become helpful is in the instance of an incapacity. Frequently, I’ll draft my trusts so a married couple will both be co-trustees of the other’s trust, or one spouse may be the successor trustee at the incapacity of the first spouse.

It is a private contract and is not required to be a public record. There’s no necessity of recording it at the courthouse. The only folks who even have the power to demand a copy of the trust are the beneficiaries themselves. Even then, you can limit the scope of what they may be able to receive.

Ultimately, the trustee has a fiduciary obligation to the beneficiaries, the individuals that the grantor of the trust has determined should receive assets in one form or another, at a time either during the lifetime of the grantor or at the grantor’s death. For example, the grantor may want to keep assets in trust for a particular child with special needs. That child may be disabled and need to have government assistance from Medicaid, Medicare, supplemental security income, or disability income. To qualify they cannot hold more than a certain amount of assets in their name. A special needs trust is one way to use a trust to protect family wealth from claims of creditors, of not only a special needs beneficiary but from any beneficiary.

A trust is drafted in a way that is intended to meet the objectives of the grantor of the trust. At some point in time, the trust may terminate. We discuss with each client what circumstance or triggering event they want to occur before the trust terminates. The trust may not terminate. In North Carolina, under certain circumstances, we can keep trust assets in a trust in perpetuity. If you want to have a dynastic trust that lasts for generations, we can do that in North Carolina, but it takes a competent attorney who knows how to draft an instrument of that nature to make it happen.

For more information on Estate Planning Law in North Carolina, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling 704-248-6325 today.