Sep152025
Estate Planning Q&A Series

How do I review or update an older special needs trust to reflect my child’s current needs? – North Carolina

Short Answer

In North Carolina, you can update an older special needs trust (SNT) by first confirming its type (first-party or third-party), governing law, and whether it is revocable. If the SNT is irrevocable, changes typically happen by court-approved modification, or by trustee-driven “decanting” when allowed. The right forum and process depend on whether the trust’s principal place of administration is in North Carolina. Always ensure any update preserves SSI/Medicaid eligibility and clearly addresses end-of-life distributions.

Understanding the Problem

You want to know whether, in North Carolina, you can review and update an older special needs trust to fit your child’s current needs, including what happens at your child’s death and whether the trust can name a secondary personal care assistant. The trust was created under another state’s law and still states that law as its governing law. This article explains your options and the correct offices to involve.

Apply the Law

Under North Carolina law, the path to update an SNT depends on: (1) the trust’s type (first-party SNT funded with the beneficiary’s assets versus third-party SNT funded with others’ assets); (2) who holds amendment powers; and (3) where the trust is administered. Judicial modification of an irrevocable trust must be brought before a superior court judge; the Clerk of Superior Court handles certain administrative trust matters (including transferring a trust’s principal place of administration). Separate from court modification, North Carolina’s decanting statute can allow a trustee to move assets into a new trust with updated terms, subject to strict limits. One key statutory threshold: a trustee may be able to end an uneconomic trust of small value; otherwise, court or decanting routes apply. Any change must preserve the SNT’s purpose and public benefits compliance.

Key Requirements

  • Identify the trust and its law: Confirm whether the SNT is first-party or third-party, whether it is revocable, and which state’s law governs; determine its principal place of administration.
  • Choose a permitted change path: Use court modification for irrevocable trusts, or decanting when permissible; ordinary administrative matters can proceed before the Clerk where authorized.
  • Protect benefits eligibility: Keep discretionary distribution language and spendthrift protections; avoid provisions that count as support or cash gifts to the beneficiary.
  • Address caregiver arrangements safely: If a parent-trustee seeks payment for caregiving, manage conflicts with explicit trust authorization, beneficiary consent, or court approval; ensure compensation is reasonable and documented.
  • Clarify end-of-life distributions: State who receives remaining assets; first-party SNTs commonly require Medicaid recovery before any remainder; third-party SNTs typically distribute to named remainder beneficiaries.
  • Use the right forum: Court modification in Superior Court; principal-place-of-administration transfers and certain trustee matters go to the Clerk of Superior Court.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Your SNT is governed by another state’s law; first confirm whether it is a first-party or third-party SNT and identify its principal place of administration. As a 24/7 caregiver, if you also serve as trustee and wish to be compensated from the trust, you will need clear trust authorization or court-approved procedures to avoid conflict issues. To fix uncertainty about distributions at your child’s death, amend via court order or decanting to state Medicaid recovery (if applicable) and name remainder beneficiaries. The trust can also name a secondary personal care assistant or empower a care manager/power holder to coordinate services, consistent with SNT rules.

Process & Timing

  1. Who files: Typically the trustee or an interested beneficiary. Where: For judicial modification, file a civil action in the Superior Court in the North Carolina county meeting venue rules; for transferring the principal place of administration or other clerk matters, file with the Clerk of Superior Court. What: No standard AOC form; your attorney drafts the petition/complaint and proposed order. When: Filing timelines vary; modification proceedings move on the civil docket, and decanting requires statutory notice periods before changes take effect.
  2. If the trust is currently administered outside North Carolina, consider a petition before the Clerk of Superior Court to transfer the principal place of administration to a North Carolina county, then proceed here for ongoing matters. Expect additional notice steps to beneficiaries.
  3. Finalize by court order (for judicial modification) or trustee documentation (for decanting), then update beneficiary notices, certifications of trust, caregiver arrangements, and any care plan language. The trustee then administers under the updated terms.

Exceptions & Pitfalls

  • Public benefits compliance: Keep distributions discretionary and for supplemental needs; avoid language that mandates support payments to the beneficiary.
  • Decanting limits: You cannot add new current beneficiaries, reduce vested interests, or expand a trustee’s compensation without required consents or approval.
  • Conflict-of-interest traps: If a parent-trustee pays themselves (or close family) for caregiving, get express authorization in the trust, informed beneficiary consent, or court approval; maintain written agreements and time logs.
  • Out-of-state governance: If the trust’s principal place of administration is not in North Carolina, local courts may lack a basis to act until it is transferred.
  • Uneconomic trusts: Very small trusts may be terminated or restructured under a specific statutory threshold; procedures change and may vary by county.

Conclusion

To update an older SNT in North Carolina, first confirm the trust’s type, governing law, and principal place of administration. Then select a compliant path—judicial modification in Superior Court or trustee decanting—to add caregiver provisions, clarify remainder terms (including any Medicaid recovery), and preserve benefits. The most practical next step is to have a North Carolina attorney review the trust and, if needed, file a petition to modify the trust or proceed with decanting after required notices.

Talk to a Estate Planning Attorney

If you’re dealing with an older special needs trust that no longer fits your child’s needs, 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.

Category: Estate Planning Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.