Charlotte Estate Planning Blog

Trusts can be an important part of financial and estate planning for many people in North Carolina, and the decision about what type of trust to create can be influenced by changing interest rates. Interest rates are on the rise after 10 years of low rates, which means that some types of trusts could be useful now in different ways than in the recent past. For people choosing other types of trusts, they may want to act quickly to make a decision, given that rising interest rates could lead to a less advantageous tax situation for the future.

Two popular types of trusts are grantor retained annuity trusts, or GRATs, and charitable lead annuity trusts, known as CLATs. Both of these types of trusts function in similar ways. Each trust pays out an annuity for a fixed period of years; after that time, the value of the trust passes to the beneficiaries named by the trust creator. The beneficiaries are taxed according to a formula based on the interest rate at the time of the creation of the trust, despite the impact of actual rates over time. Therefore, creating these types of trusts during a lower interest-rate period can be beneficial.

Some people in North Carolina may have a will, but in some situations, a will may not be enough. There may be other elements to the estate plan as well such as powers of attorney and trusts. However, what the estate plan may not include is information that lets heirs know why certain decisions about the estate plan were made. Clarifying this may mean heirs are less likely to argue over or challenge the plan.

To create a plan that will help loved ones understand a person's intentions, the first step is to make a list of assets and debts along with the value and beneficiary. Even assets of little financial value should be included since heirs may fight over sentimental items. Next, a person should write a letter that explains why assets were distributed in a certain way. This may help forestall arguments between family members who may try to insist that an estate plan did not reflect a person's actual wishes.

A person in North Carolina who is the fiduciary for a trust has an obligation to manage that trust responsibly. If the person lacks financial experience, a professional can be contacted to assist in managing the assets.

There is a difference in principal and income in a trust. The two may be distributed to the same person or to different people; there is no standard way of handling this. However, a trust that is created for a surviving spouse often pays income to the spouse but not principal. The principal may be available to the spouse in case of an emergency. If the principal has not been used by the time the spouse dies, it might go to charity, to the children or to other beneficiaries.

People in North Carolina often want to enjoy a greater level of control and management of their assets and their future, even when facing declining health. This means that estate planning can be particularly critical not only to setting one's affairs in order but to securing peace of mind for oneself and one's family. Making an estate plan can be important for people with businesses and other sizable assets; however, it can also be a critical step for people with smaller estates who want to protect their loved ones.

The estate planning process is designed to put key documents in place, like wills, trusts and powers of attorney, to handle a person's assets during life and after death. While many people recognize that making such a plan can be important, 55 percent of Americans do not have a will, the most basic estate document. When people pass away without a will, their belongings are subject to probate and are distributed according to standard state law, regardless of what their preferences may have been during life.