Last Will & Testament, and Trusts Frequently Asked Questions:
Wills
- Anyone 18 years old and older may make a WILL. A WILL is a legal document that allows you to control how and to whom your real property and personal property passes at your death. A WILL also typically names an EXECUTOR who will act on behalf of the estate to ensure that it is administered correctly.
- A WILL executed in another state may be valid in North Carolina, but should be (reviewed by a North Carolina attorney to determine if it meets the various technical · requirements under North Carolina law.
- A TRUST is an agreement between the creator of the TRUST (the Grantor or Settlor) and a TRUSTEE. The creator of the TRUST transfers assets to the TRUSTEE and the TRUSTEE holds and spends the assets as designated in the agreement for the benefit of the BENEFICIARIES named in the document. Depending on the reason for creating the Trust, it can be revocable or irrevocable.
- A very common estate planning technique is to have a "pour-over WILL" which directs the EXECUTOR to transfer (pour-over) all of a person's property to the TRUSTEE of a trust (can be a trust created at death or during the decedent's lifetime).
- A person who has a pour-over WILL, will also create a revocable or inter vivos trust during their lifetime. The revocable trust can be changed by the grantor during his/her lifetime and becomes irrevocable at the grantor's death. The grantor may title assets in the name of the trust during his/her lifetime. The purposes of using a revocable trust are as follows: privacy, savings on probate fees (the assets titled in the name of the trust during the grantor's lifetime will not be subject to PROBATE), and tax planning. A WILL becomes a part of the public record during PROBATE, but a TRUST does not because it does not need to be filed with the Clerk of Superior Court. A testamentary TRUST (a trust created at death) can also be used for tax planning purposes.
Trusts
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.
Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Other benefits of trusts include:
Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.
Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Other benefits of trusts include:
- Control of your wealth. You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.
- Protection of your legacy. A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.
- Privacy and probate savings. Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.
ABUSIVE TRUSTS:
There are promoters of abusive trusts trying to convince the general public that they must have a trust to shelter their property from taxes and avoid probate. Abusive trust arrangements usually promise benefits that do not actually change the taxpayer’s status or create any benefit for the taxpayer. Or, they claim to eliminate federal taxes in ways not allowed under federal tax laws. The old adage that "if it seems too good to be true, it probably is" applies here. You should ask an attorney to review the materials provided by the promoter.
