Trusts & Trust Administration

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What is a Trust?

A Trust is a legal entity created to hold real property and personal property. There are three main parties involved with a trust: the grantor (also called “trustor”), trustee, and beneficiary. The “grantor” or “trustor”, transfers assets into the trust. The “trustee” man ages the assets in the trust based on the instructions in the trust instrument.  The “beneficiaries” are then the people, charity, or company that may use the  assets in the trust for their benefit. Assets in the trust are titled in the name of the trust. 

Trusts can be created to meet a wide variety of goals. For example, a Trust can be created:

  • To ensure your assets are distributed to your beneficiaries on the terms you set
  • To avoid probate in one county or many
  • To provide protection from creditors
  • To ensure loved ones with special needs and disabilities will have sufficient income to last their lifetime
  • To ensure property can be transferred to loved ones with special needs and disabilities without the person making the transfer losing their Medicaid eligibility
  • To ensure a person will qualify for Medicaid benefits after the five-year look back period

Types of Trusts

Revocable Living Trust

A Revocable Living Trust is a type of trust that can be amended, revised, and revoked during the lifetime of the grantor. On the death of the grantor, the trust becomes irrevocable and can no longer be amended, revised, or revoked. Revocable Living Trusts are often used in conjunction with a Pour-Over Will (for a description of a Pour-Over Will, click here).

Revocable Living Trusts can be beneficial in the following situations:

  • Parent of minor children wishes
    to have control over how and when the assets are distributed to their children
    instead of relying on the fall back provisions in North Carolina law.

  • Parents of adult children that do
    not want an adult child to receive their assets in a lump sum. The desire of the parent
    can arise from the adult child being in an unstable marriage, high debt level, addiction to alcohol, drugs, or gambling, simply does not handle money wisely
  • A landowner with real estate in many counties and states and wishes to avoid probate in all of the jurisdictions.

  • A person that wishes to have someone else completely manage their assets.

Irrevocable Living Trust

An Irrevocable Living Trust is a type of trust that cannot be revised, amended or revoked during the lifetime of the grantor. An Irrevocable Living Trust can be useful to protect assets from creditor and qualify for Medicaid after the five-year lookback period.

Medicaid Asset Protection Trust

A Medicaid Asset Protection Trust is a type of Irrevocable Trust that can be created to allow the grantor to qualify for Medicaid five years after all their assets are transferred to the trust. With this type of trust, the grantor cannot be the trustee.

Special Needs Trust

A Special Needs Trust, also referred to as a Supplemental Needs Trust, is a type of trust created for a person with a disability to ensure the disabled person does not lose their SSI, Medicaid or other government benefits. There are two main types of Special Needs Trusts: 1). Self-Settled Special Needs Trust and 2). Third-Party Special Needs Trust. 

A Self-Settled Special Needs Trust is funded with the disabled beneficiary’s assets. These types of trusts cannot be created by the disabled beneficiary but must be created by someone else, usually a parent, grandparent, family member, guardian, or the court.

A Third-Party Special Needs Trust is funded with the assets of someone besides the disabled beneficiary. Most often, these trusts are funded with the assets of a parent. These trusts can be funded while the parent is alive, or through a Will or living trust.

As part of our free Estate Plan consultation, we will assess your personal circumstances to determine if a trust would be appropriate for you and your loved ones.

Trust Administration

What is the Role of a Trustee?

trustee is in charge of administering a trust in accordance with the
terms of the trust instrument, Federal Law, and North Carolina law. The role of the trustee will vary depending on the type
of trust, assets in the trust, and the needs of the beneficiaries.

Common Trust Administration Duties

  • Understanding the terms of the trust
  • Managing the trust assets
  • Distributing funds to the beneficiaries on a regular basis
  • Approving/dissapproving requests for funds from the beneficiaries
  • Paying bills for the beneficiaries
  • Filing tax returns (if necessary) 
  • Keeping records and providing regular statements to the beneficiaries

At Dugan & Leger, we can serve as the trustee as well as provide guidance and counsel to existing trustees.

Nick Fernez leads our Trust and Trust Administration practice. Please click here to see his biography.

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