What Types of Trusts Exist North Carolina?
As mentioned at the beginning of this article, trusts are created for many different reasons. Some of the more common reasons that people may create a trust are to avoid probate, to provide for a minor, incompetent, or irresponsible beneficiary, to minimize taxes, and to protect assets. These varying reasons for creating trusts, among many others not listed here, has resulted in the creation of countless different types of trusts, including, but not limited to, the following:
- Annual Exclusions Gift Trusts
- Asset Protection Trusts, such as Domestic Asset Protection Trusts (DAPT)
- Charitable Lead Trusts
- Charitable Remainder Trusts, including Charitable Remainder Annuity Trusts (CRAT), Charitable Remainder Unitrusts (CRUT), and Testamentary Charitable Remainder Annuity Trusts (TCRAT)
- Credit Shelter Trust
- Grantor Trusts, such as a Grantor Retained Annuity Trust (GRAT), Grantor Retained Unitrust (GRUT), and Intentionally Defective Grantor Irrevocable Trust (IDGIT)
- Gun/NFA Trusts
- Education Trusts
- Joint Exempt Step-Up Trusts (JESTs)
- IRA Trusts
- Irrevocable Life Insurance Trusts (ILIT)
- Medicaid Planning Trusts, including Medicaid Asset Preservation Trusts and Medicaid Qualifying Trusts
- Qualified Domestic Trusts (QDOT)
- Qualified Terminal Interest Property Trust (QTIP)
- Pet Trusts
- Special Needs Trusts
- Trusts for Children
While there are many different types of trusts, generally, each of those trusts listed above falls into two broader categories – (1) living trust or testamentary trust and (2) revocable trust or irrevocable trust.
Living Trusts vs. Testamentary Trusts
A trust is either a living trust or a testamentary trust. A living trust is a trust that is initially funded during the life time of the settlor. On the other hand, a testamentary trust is funded upon the death of the settlor, often within a last will and testament.
Revocable Trusts or Irrevocable Trusts
A trust is either revocable or irrevocable. With a revocable trust, the settlor retains ownership and control of the property in the trust and can change the terms, including the trustees and beneficiaries. However, with an irrevocable trust, the settlor gives ownership and control of the property in the trust to the trustee, and no longer owns or controls the property, thus making it so the settlor cannot enact changes.
What are the Requirements for Creating a Valid Trust in North Carolina?
In order to create a valid trust in North Carolina, the North Carolina Uniform Trust Code requires that certain elements are met. These include:
- A settlor with capacity to convey;
- A clear intention to create a trust;
- A definite and ascertainable beneficiary, unless a charitable trust or a trust for animals;
- A competent trustee with duties to perform; and
- The same person is not the sole trustee and sole beneficiary.
