A trust is a legal arrangement in which the owner of property (the “grantor” or “settlor”) transfers property to be held in trust by an individual known as the “trustee” for the benefit of some third party known as the “beneficiary.”
GRANTOR | Pledges Property
TRUSTEE | Holds Property
BENEFICIARY | Receives Property
The terms of the trust agreement will set out the grantor’s instructions for the trustee as to how the assets are to be managed while in the trust, and these instructions can specify how the property is to be used and managed during the grantor’s lifetime, as well as how the property is to be distributed upon the grantor’s death.
For a trust to be valid, it must be funded by some form of property. Sometimes there will be a list of the personal property that the grantor has placed in the trust, or the trust will state that a small dollar amount was given to the trustee. Once the trust is created, the grantor should continue to add property to the trust, depending on the purpose for which the trust was created.
A living trust is one created during the grantor’s lifetime. Often the grantor will also be the trustee and the beneficiary of a living trust. However, the sole trustee cannot also be the sole beneficiary of the trust. As such, the trust will always name successor trustees and contingent beneficiaries for when the grantor passes.
Avoiding NC Probate | Typically, any distribution of your assets after your death pursuant to the terms of a trust agreement may also be accomplished in a will. However, by using a trust to make such distributions rather than a will, you avoid the headache and expense of a complex probate process.
Avoiding Probate in Other States | If you transfer the real property located in another state into your living trust before you die, then ancillary administration is avoided because the trust owns the real property at the time of your death, not you.
Planning for Incapacity | If you become mentally or physically unable to make decisions, a successor trustee that you appointed in the trust agreement takes over control of the assets in the trust and is under fiduciary duties of loyalty and care to make use of your assets for your benefit.