People in North Carolina who are creating an estate plan might think that a trust is just for wealthy families. That is not accurate, as they can be used in a number of ways. For example, a special needs trust allows a disabled loved one who is receiving government benefits to be supported while continuing to get those benefits. A spendthrift trust will manage assets for an irresponsible beneficiary while a charitable trust donates money to charity.
One of the simplest types of trusts to create is a Totten trust. An example of a Totten trust is a bank account with a beneficiary, and establishing it may be as easy as completing paperwork that names that beneficiary. A bypass trust can be used to help reduce estate tax liability for married couples.
There is another type of trust called an asset protection trust that can help protect assets from creditors, but it is only available in a few states, and North Carolina is not one of them. It may be possible to establish an asset protection trust using another state's laws, but there is no guarantee that the trust would stand up to a court challenge by a creditor.
An attorney may be able to help clients understand the different types of trusts that may be useful based on their circumstances and goals. For example, a person who wants to make sure a beneficiary receives a home at a lower tax rate might want to consider a qualified personal residence trust. An attorney may also be able to review the advantages of revocable and irrevocable trusts as well as various ways of setting up a trust. The trustee might be a friend or relative, a professional or even an institution such as a bank.