How can I use a generation-skipping trust to secure long-term care for my child? – North Carolina

Short Answer

In North Carolina, a generation-skipping trust can fund your child’s long-term care by placing assets in a trustee’s discretionary or supplemental needs subtrust for your child, while preserving the remainder for later generations. If an existing family trust lacks special-needs language, you can ask the trustee to decant (move) assets into a compliant trust or seek a court modification. Beneficiaries have rights to trust information to confirm whether such options are available.

Understanding the Problem

In North Carolina, how do I use a generation-skipping trust to provide for my child’s care without disrupting public benefits and while keeping the remainder for future generations? One key fact: you’re estranged from a parent who set up a living trust with generation-skipping provisions and you remember a grandparent’s account for descendants but don’t know if it’s in a trust.

Apply the Law

North Carolina trust law lets a trustee support a current beneficiary (your child) while preserving the remaining assets for future generations. Two common approaches are: (1) a fully discretionary “HEMS” standard (health, education, maintenance, and support), and (2) a third‑party supplemental needs trust that funds care not covered by means‑tested benefits. If an existing trust lacks these features, the trustee may be able to decant to a second trust with appropriate terms, or a court can modify the trust when circumstances not anticipated by the settlor make changes necessary. Beneficiaries can request trust documents and reports to evaluate options. Trust administration petitions typically begin with the Clerk of Superior Court; judicial modifications are filed in Superior Court. Respondents generally have 10 days to answer a trust petition before the clerk.

Key Requirements

• Confirm and obtain documents: As a qualified beneficiary, you can request a copy of the trust and a current report so you know what the trust allows and whether you’re covered.
• Use special‑needs‑friendly terms: To preserve benefits, ask for a third‑party supplemental needs subtrust or discretionary HEMS standard for your child.
• Trustee options to adjust: The trustee may decant assets to a second trust with updated terms if statutory limits are met; the trustee still must honor the original trust’s purposes.
• Court modification if needed: If decanting or agreement won’t work, petition Superior Court to modify the trust due to unanticipated circumstances so it fits your child’s care needs.
• Correct forum and timing: File information/accounting or internal administration issues with the Clerk of Superior Court; file trust modifications in Superior Court. Respondents usually have 10 days to answer a trust petition before the clerk.

What the Statutes Say

• North Carolina Gen. Stat. § 36C-8-813 (Duty to inform and report) – Beneficiaries can obtain trust information, including reports and, on request, a copy of the trust.
• North Carolina Gen. Stat. § 36C-2-203 (Jurisdiction for trust proceedings) – Clerk handles many internal trust matters; judges handle modifications and certain other actions.
• North Carolina Gen. Stat. § 36C-4-412 (Unanticipated circumstances) – Court may modify a trust to further its purposes when circumstances change.
• North Carolina Gen. Stat. § 36C-8B-11 (Decanting limits) – Sets key limits when appointing assets to a second trust (e.g., no new current beneficiaries; preserve vested interests).

Analysis

Apply the Rule to the Facts: Because you may be a qualified beneficiary of your parent’s living trust, you can request a copy of the trust and a current report. If the trust benefits “descendants,” it may permit distributions for your child. If it lacks special‑needs language, the trustee can consider decanting into a supplemental needs subtrust or, if that is not available, you can seek a court modification to align the trust with your child’s long‑term care needs while preserving benefits and the remainder for later generations.

Process & Timing

1. Who files: A qualified beneficiary or trustee. Where: Clerk of Superior Court (trust proceeding) in the county of the trust’s principal place of administration or where a beneficiary resides. What: Petition to compel information/accounting or other internal administration relief; use the estate/trust summons form (AOC‑E‑150) for respondents. When: After service, respondents generally have 10 days to answer.
2. If terms must change: File a petition in Superior Court to modify the trust due to unanticipated circumstances to add supplemental needs or clarify discretion standards. Include the trustee and all necessary parties; minors/unborn beneficiaries may be represented under North Carolina’s representation rules. Timeframes vary by county.
3. Trustee decanting option: Ask the trustee to evaluate decanting into a special‑needs‑friendly second trust. The statute prescribes notice and limits (for example, no new current beneficiaries and preservation of vested interests). The trustee documents the action and then administers under the second trust.

Exceptions & Pitfalls

• Benefit preservation: Direct cash to the beneficiary can disrupt means‑tested benefits; structure distributions to pay providers or for supplemental items.
• Standing and venue: You generally need to be a qualified beneficiary, and you must file in the correct county to avoid delays.
• Decanting limits: You cannot add new current beneficiaries, reduce vested interests, or accelerate benefits contrary to the first trust’s terms.
• Process choice: Use the Clerk for internal administration (e.g., compel information or accountings); use Superior Court for trust modifications.
• Notice/representation: Include all necessary parties; minors and unborn descendants may require representation so any order binds them.

Talk to a Estate Planning Attorney

If you’re dealing with a generation‑skipping trust and need to secure long‑term care for your child, our firm has experienced attorneys who can help you understand your options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.