Estates and Trusts

You worked hard to build your company from the ground up and have family members or close friends that you want to enjoy the fruits of your labor now or once you die. You may already know that trusts are the best option for maximizing wealth transfers to others. However, you may be unclear about tax-efficient trust strategies business owners like you can use to ensure your loved ones receive as much of the assets as possible. Continue reading where we’ll discuss tax-saving trust options our attorneys at WilsonRatledge help business owners like you fund.

Types of Trusts To Consider as the Owner of a Company in North Carolina 

A few different trust options worthy of consideration when transferring wealth, such as your business interests, to others include: 

• Gifting to an irrevocable trust: Making gifts to or funding an irrevocable trust may be an effective strategy for you to consider if you, as a business owner, want to transfer wealth to a child or grandchild, yet you have concerns about their ability to be financially responsible if you were to make a direct gift instead. One downside to an irrevocable trust is that you cannot change it once you fund it. However, a carefully thought-out estate plan can help you avoid potential pitfalls and provide a steady flow of income from the trust and tax-saving benefits.  
• Funding a generation-skipping trust (GST): By skipping your child’s generation and creating this trust in which you transfer assets to future generations, like your grandkids, it allows you to avoid having to pay any estate taxes you might otherwise owe.
• Establishing an irrevocable life insurance trust (ILIT): This irrevocable trust owns life insurance and so the policy benefits continue to be held by it once the insured dies, which shields the proceeds from taxation.
• Creating a grantor retained income trust (GRIT): This trust allows you to transfer assets to your heirs and receive an income stream for a limited time thereafter. Once that period ends, appreciation for those transferred assets beyond the annuity payment payouts can be received tax-free by your beneficiaries. 
• Create a charitable remainder trust (CRT): Business owners can transfer interests in the company into a charitable remainder trust. The trust, in turn, makes yearly payments to a designated non-charitable beneficiary. That remainder, which must equate to 10% or more of the funding value, transfers to the selected charity at the conclusion of the trust term. Many business owners fund CRTs because they allow them to contribute to a charitable cause and because the charitable remainder creates an income tax deduction, reduces their obligation to pay capital gains taxes, and allows the non-charitable beneficiaries to receive significant annual payments, details regarding which are discussed in the North Carolina Charitable Remainder Trust Administration Act. 
• Funding a non-grantor trust: These trusts can be appropriate for business owners seeking to reduce the tax burden associated with selling their business in a state with higher income rates compared to a state with lower or no state income tax state.

Why To Schedule a Consultation With Our North Carolina Tax and Trust Attorneys

The above is far from an exhaustive list of wealth transfer trust options that can reduce your tax burden so you can pass on more of what you’ve worked hard to build and earn to others. The trusts, estates and tax planning attorneys at Wilson Ratledge can be a great resource to you in deciding which wealth transfer options will benefit you, your business, and your loved ones. Contact our law office to schedule an initial consultation to discuss tax-efficient options for passing your assets to others now or in the future via trusts.

Estate planning is an integral part of protecting your hard-earned assets, providing for your loved ones, and ensuring your business remains on solid ground after your death. 

If you are a small business owner in North Carolina, Wilson Ratledge is here for you. We’ll dive deep into the world of trusts and talk more about how they can benefit your estate planning needs.

What is a Trust?

At its core, a trust is a legal entity where one party, the trustor (or “grantor” or “settlor”), transfers property or assets to a trustee to manage and distribute for beneficiaries as specified in the trust agreement. Trusts can be versatile tools, adapting to your unique financial situation, personal goals, and business-related objectives.

Why Should Business Owners Consider a Trust in North Carolina?

In North Carolina, the use of trusts offers a multitude of benefits tailored to the needs of small business owners. One of the primary reasons to consider a trust is the assurance of business continuity. 

As an owner, you naturally want to ensure that your business remains resilient and operational in your absence. By establishing a trust, you can lay out specifics regarding the future management of the business, potential successors, and the conditions under which transitions should take place, thus offering a roadmap for stability and direction. 

North Carolina’s trust laws are particularly favorable for asset protection. With instruments like the irrevocable trust, business owners can achieve better protection for the intended beneficiaries against potential creditors and lawsuits. 

Another compelling reason to opt for trusts is the potential to sidestep the often tedious and costly probate process. By channeling your business interests and other assets into a trust, assets can be transitioned to beneficiaries more efficiently and without the delays associated with probate. 

Lastly, there are potential tax advantages to be gained. Given North Carolina’s evolving tax landscape, as well as federal estate tax considerations, structuring assets through the right trust can yield considerable tax savings for the estate.

Types of Trusts for Business Owners

• Living/Revocable Trust: This is a revocable trust established during your lifetime. It allows you to maintain control over the assets, including your business, while you’re alive. Upon your death, the trust becomes irrevocable, and the assets get distributed as per your instructions without undergoing probate to the extent assets are titled in the trust prior to your death.
• Irrevocable Trust: Once established, you cannot modify this trust without the consent of the beneficiaries or the court. It offers robust asset protection benefits and potential tax advantages, making it suitable for business owners with considerable assets.
• Charitable Trust: If you have philanthropic inclinations, a charitable trust lets you donate a portion of your assets (or business profits) to a charity and may provide tax benefits.
• Family Limited Partnership (FLP) or Family Limited Liability Company (LLC): These are not trusts per se, but they allow you to transfer your business interests to family members, sometimes at discounted valuations, which can have estate tax benefits.

Creating a Trust in North Carolina: Steps & Considerations

• Identify Your Objectives: Do you aim to protect assets, avoid probate, or provide for a special needs family member? Your goals will dictate the type of trust you should establish.
• Choose a Trustee: The trustee is crucial for the trust’s effective management. You can select an individual, such as a family member, or a corporate entity like a bank or trust company.
• Draft the Trust Agreement: A well-drafted trust agreement, specific to North Carolina laws, is paramount. The team at Wilson Ratledge has worked with North Carolina business owners in estate planning for decades – put our experience to work for you.
• Fund the Trust: A trust is merely a shell without assets. Transfer your assets or business interests to the trust to make it operative.
• Regular Review: Laws change, and so do personal and business situations. Regularly review and update your trust to ensure it aligns with current circumstances and North Carolina law.

Contact Our Business Estate Planning Attorneys Today

Trusts are powerful tools for estate planning, especially for North Carolina small business owners. While we aim to give you an overview here, estate planning is intricate and deeply personal. 

Contact the team at Wilson Ratledge today to craft an estate plan tailored to your unique needs and business objectives. Your legacy deserves the best protection – start today!

Planning for the future of a loved one with special needs is a critical task that demands careful consideration. Many North Carolina families are unaware of the estate planning tools at their disposal, specifically Special Needs Trusts. These trusts provide an efficient way to ensure a better quality of life for your loved one while preserving their eligibility for government benefits.

What Is a Special Needs Trust?

A Special Needs Trust (SNT) is a legal instrument designed to manage assets for the benefit of a person with disabilities. This type of trust aims to supplement, rather than replace, governmental assistance programs such as Medicaid or Supplemental Security Income (SSI). The trustee manages the assets for the benefit of the disabled individual while ensuring that the assets are not counted for means-tested programs.

When Should a Special Needs Trust Be Used?

A Special Needs Trust becomes crucial in several circumstances:

Inheritance Planning

Leaving an outright inheritance can disqualify your loved one from receiving essential government benefits. A Special Needs Trust allows them to inherit assets without affecting their eligibility.

Litigation Awards

If your loved one receives a significant amount of money due to personal injury or other litigation settlements, the sum should ideally go into an SNT to protect their financial future.

Lifetime Gifts

If you or other family members wish to gift assets during your lifetime, placing them in an SNT ensures these gifts won’t jeopardize the individual’s eligibility for government programs.

How to Structure a Special Needs Trust

While the creation of an SNT can be complex, the basic components are as follows:

Choosing a Trustee

Selecting a capable trustee is critical. They will manage the trust assets and make disbursements. The trustee should be familiar with the beneficiary’s needs and also understand the rules surrounding government benefits.

Funding the Trust

You can fund an SNT with various assets such as cash, real estate, or investments. Depending on your situation, the trust can be either revocable or irrevocable.

Type of Trust

There are different types of SNTs, including first-party trusts funded with the beneficiary’s assets and third-party trusts funded with assets from someone other than the beneficiary.

Legal Formalities

Drawing up the trust document should only be done by a qualified North Carolina special needs trust attorney, as state laws can have unique provisions affecting SNTs.

Key Takeaways

If you’re looking to create a special needs trust to protect your loved one after your passing, here are the key takeaways you need:

• A Special Needs Trust preserves government benefits eligibility while enhancing the quality of life for your loved one.
• An SNT is essential for inheritance planning, litigation awards, and lifetime gifts.
• Proper structuring of an SNT is complex but necessary for its effectiveness.

Schedule a Consultation With Our North Carolina Estate Planning Team Today

Securing the future of a loved one with special needs requires diligent planning and legal expertise. At Wilson Ratledge, we are committed to offering you the best legal guidance tailored to your unique needs. Contact us today to schedule a consultation and discuss how a Special Needs Trust can be a critical part of your estate plan.

Setting up a living trust in the state of North Carolina can be tricky. But, with the right team on your side to help, the estate planning process in North Carolina becomes much more manageable. Our North Carolina estate planning and trusts attorneys at Wilson Ratledge can help you craft that plan.

What Is A Living Trust?

A living trust is defined as the following: a trust in which the person who creates the trust can alter it at any time or, if they are so inclined, to end the trust altogether.

The opposite of a living trust is an “irrevocable trust.” By setting up an irrevocable trust, you do not have the ability to alter or end the trust at any time.

Many people refer to a living trust as a “revocable trust.” So, if you hear that particular phrase mentioned, know that it refers to a living trust.

What Are The Advantages Of Setting Up A Living Trust?

Setting up a living trust offers a wide assortment of advantages. Some of the most notable benefits that can come from setting up a living trust are as follows:

1. Probate avoidance: Assets placed in a revocable trust typically do not need to go through probate, which can save your beneficiaries time, legal fees, and court costs.
2. Privacy: Unlike a will, a revocable trust does not become part of the public record upon your death. This means that the details of your trust and the assets it holds remain private.
3. Control and flexibility: With a revocable trust, you can maintain control over your assets during your lifetime and make changes to the trust, including amending or revoking it, as your circumstances or wishes change.
4. Incapacity planning: A revocable trust can include provisions that allow a designated trustee to manage your assets in the event of your incapacity. This can help avoid the need for a court-appointed guardian or conservator.
5. Asset management: A revocable trust allows you to appoint a professional trustee to manage your assets, which can be beneficial if you lack the time, interest, or expertise to manage them yourself.
6. Potential tax benefits: While a revocable trust generally does not provide significant tax benefits during your lifetime, it can be structured to minimize estate taxes for your beneficiaries, depending on your specific situation.
7. Protection for beneficiaries: A revocable trust can provide protection for your beneficiaries, such as by including spendthrift provisions that prevent creditors from reaching a beneficiary’s interest in the trust.

Given the benefits outlined above, a living trust is easily the best option for you if you are seeking flexibility. 

How Do You Set Up A Living Trust In North Carolina?

The process of setting up a living trust can be complicated. Understanding what goes into creating a living trust, along with working with an experienced legal partner who can make sure the trust aligns with your needs, can make the process much smoother.

Some things you can do in advance to make the process smoother can include the following:

1. Inventory your assets: Make a comprehensive list of all your assets, including real estate, bank accounts, investments, retirement accounts, life insurance policies, vehicles, and valuable personal property. Note the estimated value of each asset and gather documentation, such as account statements, deeds, and titles.
2. Identify your beneficiaries: Decide who you would like to receive your assets after your death. This may include family members, friends, or charitable organizations. Consider alternate beneficiaries in case your primary beneficiaries predecease you or are unable to inherit.
3. Choose a trustee: The trustee is responsible for managing the trust according to your instructions. This person or entity should be trustworthy, responsible, and capable of managing financial matters. Consider who you want to serve as the initial trustee, as well as any successor trustees.
4. Define your objectives: Consider your goals and objectives for creating the trust, such as avoiding probate, protecting assets, providing for minor children, or addressing concerns about your own incapacity. Be prepared to discuss these goals with your lawyer.
5. Outline specific instructions: Think about any specific instructions you may want to include in your trust, such as when and how assets should be distributed to beneficiaries, or how assets should be used for their benefit (e.g., education, healthcare, or living expenses).
6. Review existing estate planning documents: If you already have estate planning documents, such as a will or power of attorney, gather them for review. Your lawyer will need to consider these documents to ensure that your new living trust coordinates properly with your existing plan.

Taking the time to do this due diligence in advance can ensure that the resulting plan takes into account your preferences and protects your family and legacy.

Speak With Our North Carolina Trust Administration Lawyers

Setting up a living trust isn’t always easy. Still, by speaking with a North Carolina trust administration lawyer at  Wilson Ratledge today, the process can and will become much easier and much more pleasant.

North Carolina Law Has Provisions For You To Arrange Care For Your Pets As Part Of Your Estate Planning

People love their pets. To outsiders – particularly those who do not own pets – love may sometimes seem excessive. The fact remains, though, that there is a bond between pets and their owners. One of the essential parts of that bond is the obligation of the owner to provide care for the pets, which can’t provide for themselves. The owner provides love, food, and shelter in exchange for loyalty and companionship from the pets. So what happens to your pets when you die? 

Fortunately, North Carolina law has provisions that make it easy to ensure that you can continue to provide proper care for your pets even after you are gone without relying upon someone’s promise that they will take care of things. Our estate planning attorneys at Wilson Ratledge explain more below.

North Carolina Lets You Take Legal Action In Your Will To Care For Your Pets When You No Longer Are There To Do So

In 1995, the North Carolina legislature passed a statute enabling pet owners to establish a testamentary trust to care for their pets after the owner has passed away. A testamentary trust is one established in your will that provides a governing structure intended for a particular purpose and funds it with a part of your estate to pay for whatever purpose the trust is designed to serve, which in this case would be the care of your pets. Under the statute, the trust is to benefit those pets of yours that are alive at the time of the establishment of the trust. However, you can work with your estate planner to update the trust to include any pets you obtained after the initial creation of the trust. The trust terminates once the last surviving animal covered under the trust passes away.

A trust for your pet is every bit as legally enforceable as any other trust, meaning the trustee you designate has a fiduciary obligation to adequately provide for the care of the pets identified in the trust. The trustee uses the money placed into the trust to pay for that care. That care can be as described explicitly in the trust as you like. You can identify particular veterinarians to provide medical care for the pets, how often the pets should be taken to the vet, a specific brand of pet food, or even the frequency of visits to the dog park. Your pet, your trust.

You can identify someone to serve as a trustee who is required to either provide care for the pets identified in the trust or arrange for that care. In either case, the trust pays for the maintenance of the covered pets for as long as they live, after which any funds remaining in the trust are distributed as directed in the trust document. During the course of the trust, no principal placed in the trust, nor investment income earned by the trust, can be used by the trustee or for any other purpose other than the care of the designated pets that are the beneficiaries of the trust.

If you don’t designate a person to manage the trust, the clerk of the superior court with jurisdiction over the trust can do so upon the application of “a person.” Given that vagary, it is probably best to designate someone you know who will properly care for your pets. You need to ensure that the person you designate is willing to serve and will be able to do so when the time comes, or else the clerk of the superior court will appoint a different trustee.

Work Closely With Your Estate Planner On Your Pet Trust

Your pet trust can include as much specificity as you like. You need to make clear to your estate planner exactly what you want to accomplish with the trust. If you wish for a particular pet food to be given to your pets, or daily dog park visits, you better tell your estate planner. Telling the person you designate as trustee is not legally enforceable. On the other hand, it might not be wise to make serving as a trustee too burdensome. You need to talk to the person you plan to designate as a trustee to ensure that person is willing to do what the trust requires. 

You also need to communicate clearly to your estate planner what pets are to be covered by the trust. In case you might outlive the pets originally covered by the trust and get more pets, be sure to have your estate planner draft the trust to include any pets you acquire later. Otherwise, those pets will not be covered.

If You Want To Establish A Pet Care Trust, Talk To The Estate Planning Attorneys of Wilson Ratledge

While many people might think it a little silly to provide for the care of your pets via a trust in your will, in reality, it is both quite responsible and can be a source of peace of mind knowing that your pets will be cared for according to your wishes when you pass away. The estate planning attorneys of Wilson Ratledge can help you with that endeavor and any other estate-planning matters. Contact us today. Our knowledge and experience regarding estate planning will help you easily navigate the process.

Want to protect your firearms and pass them down to future generations? A gun trust in North Carolina may be the solution. In our latest article, the North Carolina estate planning attorneys at Wilson Ratledge will explain what a gun trust is and how to set one up.

What is a Gun Trust?

A gun trust, also known as a firearms trust, is a legal entity that you create to hold and manage firearms. The trust is controlled by a trustee, who is responsible for managing the firearms and ensuring that they are used in compliance with state and federal laws. Beneficiaries of the trust, known as trust beneficiaries, are individuals who are allowed to access and use the firearms.

Benefits of a Gun Trust in North Carolina

There are several benefits to creating a gun trust in North Carolina. Some of the most notable include:

Allowing Multiple Individuals To Access and Use the Firearms

A gun trust allows multiple individuals, known as trust beneficiaries, to access and use the firearms. This can be especially useful for families who want to ensure that multiple members can use their guns for hunting or self-defense.

Protection from Creditors 

Assets held in a trust are generally protected from creditors. This means that if the trustee or one of the trust beneficiaries were to become the subject of a lawsuit, the firearms held in the trust would not be at risk of being seized.

Streamlining the Process for Obtaining Certain Types of Firearms

In North Carolina, certain types of firearms, such as those subject to the National Firearms Act (NFA), require a special process for acquisition and ownership. A gun trust can streamline this process and make obtaining these types of firearms easier.

Avoiding Probate

When a person passes away, their assets go through probate. Probate can be a lengthy and expensive process, and it can also make the assets public record. A gun trust can help to avoid probate and keep the assets private.

Avoiding the Need for a Will

A North Carolina gun trust can be used to transfer firearms to beneficiaries upon the death of the trustee, avoiding the need for a will.

How to Set Up a Gun Trust in North Carolina

Setting up a gun trust in North Carolina is a relatively simple process. It involves the following steps:

Choose a Trustee 

The trustee is the individual who will be responsible for managing the firearms and ensuring that they are used in compliance with state and federal laws. It is essential to choose a trustee that you trust and who has a good understanding of firearms and the laws surrounding them.

Choose Trust Beneficiaries 

Trust beneficiaries are the individuals who will be allowed to access and use the firearms. It is crucial to consider the age and experience level of the beneficiaries to avoid any potential legal issues that may arise from firearm misuse.

Have an Attorney Draft the Trust Agreement

The trust agreement is the document that sets out the terms and conditions of the trust. It should include information such as the trustee’s responsibilities, the trust beneficiaries, and the firearms to be held in the trust. The trust agreement should also include instructions for what should happen to the firearms in the event of the trustee’s death or incapacity.

Fund the Trust 

The trust must be funded with the firearms that will be held in the trust. This can be done by transferring ownership of the firearms to the trust or by purchasing firearms using trust funds.

Register the Trust 

In North Carolina, a gun trust must be registered with the state before acquiring any firearms subject to the National Firearms Act (NFA). The registration process will include submitting a copy of the trust agreement and a list of the firearms to be held in the trust.

Review and Update 

It is important to review and update the trust agreement regularly to ensure that it continues to meet the needs of the trustee and beneficiaries and complies with any changes in the law.

Contact Our Law Firm for Assistance

Gun trusts can be useful for managing firearms in North Carolina, but they are subject to an extremely intricate and complex web of state and federal laws. If you’re interested in setting up a gun trust, it’s important to work with one of our North Carolina trust attorneys at Wilson Ratledge. Our attorneys specialize in North Carolina firearms law, and we can help you set one up that meets your needs.