Understanding the Problem
The decision is whether a married couple should place assets into one shared trust and manage it together or have each spouse create an individual trust. The key issues are who can change the plan, who controls the property during life, and what happens at the first spouse’s death. A joint structure may be convenient, but it can create unwanted shared control when one spouse would prefer to keep particular property or beneficiary choices separate.
Apply the Law
North Carolina allows spouses to create a joint trust in which both spouses are settlors. Spouses can also create separate trusts, with each spouse serving as the settlor of an individual trust. The trust terms and applicable statutory rules determine who can amend or revoke a revocable trust and how it is administered at incapacity or death.
Key Requirements
- Clear trust structure and control: The document should state whether decisions require both spouses, whether either spouse can act alone, and who can amend or revoke the trust.
- Correct funding and titling: Selected assets must be retitled into the trust or made payable to it in a way that matches the plan, especially for real estate and jointly owned accounts.
- Plan for the first death: The trust should state what becomes irrevocable at the first spouse’s death, what remains under the survivor’s control, and who manages the trust going forward.
What the Statutes Say
- N.C. Gen. Stat. § 41-65 (Entireties property conveyed to trusts) – Real property owned by spouses as tenants by the entirety may be conveyed to a joint trust or in equal shares to two separate trusts. Although the property is no longer held as tenants by the entirety, specified protections can continue while the spouses remain married, the property remains in the trust or trusts, and both spouses are current beneficiaries as required by the statute.
- N.C. Gen. Stat. § 39-6.7 (Construction of conveyances to or by trusts) – A deed, beneficiary designation, or other instrument transferring property “to a trust” is treated as a transfer to the trust’s trustee or trustees.
- N.C. Gen. Stat. § 36C-6-602 (Revocation or amendment of revocable trust) – For a revocable trust created or funded by multiple settlors and consisting of property other than community property, each settlor generally may revoke or amend the trust as to the portion attributable to that settlor’s contribution.
- N.C. Gen. Stat. § 30-3.4 (Procedure for determining the elective share) – A surviving spouse generally must file a verified elective-share petition with the appropriate clerk of superior court within six months after the issuance of letters testamentary or letters of administration.
Analysis
No specific facts were provided, so two neutral examples illustrate the choice. If both spouses want one combined plan, share the same beneficiaries, and plan to act together as co-trustees, a joint trust can work well. If either spouse wants tighter control over separate property, wants to protect children from a prior relationship, or does not want the other spouse to change the disposition of certain assets, separate trusts are often the cleaner structure.
Process & Timing
- Create and sign the documents: Both spouses create a joint trust, while each spouse creates an individual separate trust. Trusts are ordinarily created outside court.
- Fund the trust: Retitle selected assets through the appropriate office or financial institution. For real estate, this typically includes recording a deed with the county register of deeds.
- Address entireties property carefully: For a home owned as tenants by the entirety, decide whether to deed it to a joint trust or in equal shares to two separate trusts, and use deed language that matches the plan.
- Follow the plan at the first death: Carry out the trust’s administration instructions, including any required division into shares or subtrusts, and review titles and beneficiary designations that name the deceased spouse.
Exceptions & Pitfalls
- Tenancy by the entirety issues: Deeding entireties real estate into a trust changes how title is held. Statutory protections depend on satisfying requirements that include remaining married, keeping the property in the qualifying trust or trusts, and maintaining both spouses as current beneficiaries.
- Unequal contributions: A joint trust can blur the distinction between separate and jointly owned property if the trust and funding records are not drafted and maintained carefully.
- Blended families: Separate trusts often reduce conflict when spouses have different beneficiaries. A joint trust can still work, but it should clearly define what becomes irrevocable at the first death.
- Unfunded trusts: Creating a trust without retitling major assets, especially real estate and financial accounts, may leave those assets subject to probate and prevent the plan from working as intended.
- Elective-share risk: A plan that leaves too little to a surviving spouse may create an elective-share dispute, and the surviving spouse generally has only six months after the issuance of letters testamentary or letters of administration to file the required petition.
Conclusion
North Carolina law permits married couples to use either a joint trust or separate trusts. A joint trust may simplify management, while separate trusts can preserve individual control and keep assets and beneficiaries distinct. The key threshold is how the couple owns and wants to control each asset, especially a home held as tenants by the entirety. The next step is to inventory asset titles and contributions, choose the appropriate structure, and properly draft and fund the trust or trusts.
Talk to an Estate Planning Attorney
If you are deciding between a joint trust and separate trusts in North Carolina, call us at (919) 341-7055 to request a free case evaluation and discuss how your assets, beneficiaries, and goals affect the choice.
