Feb32026
Estate Planning Q&A Series

Should I set up a revocable trust or an irrevocable trust if my main goal is protecting my money and property? – North Carolina

Short Answer

In North Carolina, a revocable trust is usually not the right tool if the main goal is asset protection, because the person who creates it typically keeps control and can undo it—so creditors and certain claims can often still reach the assets. An irrevocable trust can offer stronger protection, but only if it is structured so the creator truly gives up key rights and control. For older adults expecting a large inheritance or settlement, the best choice often depends on what “protection” means (lawsuits, creditors, long-term care/Medicaid planning, or estate recovery) and the timing of transfers.

Understanding the Problem

In North Carolina estate planning, the decision is usually: can a trust be set up to protect money and property while still allowing the older adult to use the assets as needed? A revocable trust focuses on management and avoiding probate, while an irrevocable trust focuses more on shifting ownership and limiting access. The key trigger is whether the trust is meant to protect assets from future claims (like creditors or long-term care costs) while the person is alive, not just pass assets at death.

Apply the Law

Under North Carolina law, “asset protection” generally requires that the assets are not treated as the person’s own property for creditor-collection purposes and, in long-term care situations, may also require that transfers are not treated as disqualifying gifts under Medicaid rules. A revocable trust usually keeps the assets effectively under the creator’s control, which limits protection. An irrevocable trust can create separation, but only if the trust terms and funding actually match the protection goal and do not leave the creator with too much retained control or benefit.

Key Requirements

  • Real transfer of control: Strong protection usually requires giving up the power to freely take the assets back or use them like a personal account.
  • Proper trustee and distribution rules: Who controls distributions (and how) matters. If the creator can force distributions to themself, protection is often weak.
  • Timing and purpose of transfers: For long-term care planning, transfers for less than fair market value can trigger penalties, and the timing rules can be unforgiving.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The older adult expects to receive a significant amount of money after moving to North Carolina. If the main goal is protecting that money from future long-term care costs or estate recovery, a revocable trust usually does not create enough separation because the assets are still treated as controlled by the person who set it up. If the goal is stronger protection, an irrevocable trust may be considered, but it typically requires giving up meaningful control and planning ahead to avoid transfer-penalty problems under North Carolina Medicaid rules.

Process & Timing

  1. Who sets it up: The person who owns (or will receive) the assets. Where: Trusts are generally created by a written trust agreement (not filed with a court at creation), but funding steps may involve the Register of Deeds for real estate deeds and financial institutions for account retitling. What: A trust agreement plus asset-transfer documents (deeds, beneficiary changes, account retitling). When: Ideally before the money is received or soon after, because protection planning is harder once assets are commingled or claims arise.
  2. Funding the trust: Protection depends on actually transferring assets into the trust and following the trust’s rules. For real estate, that often means recording a deed; for accounts, it means retitling and updating pay-on-death/beneficiary designations to match the plan.
  3. Review against the goal: The trust terms should be checked against the specific risk (creditors/lawsuits vs. long-term care/Medicaid vs. estate recovery). If long-term care planning is part of the goal, transfers must be evaluated under North Carolina’s Medicaid transfer rules.

Exceptions & Pitfalls

  • Assuming a revocable trust protects assets: A revocable living trust is often great for management and probate avoidance, but it is commonly a poor fit when the primary goal is shielding assets from claims.
  • Keeping too much control in an “irrevocable” trust: If the trust is drafted so the creator can still treat the money like their own (direct distributions, revoke, or freely access principal), the protection goal can fail.
  • Medicaid transfer penalties: For long-term care planning, transferring assets to an irrevocable trust without careful review can create a period of ineligibility. North Carolina follows a penalty framework tied to federal law. See N.C. Gen. Stat. § 108A-58.1.
  • Estate recovery surprises: For certain recipients, North Carolina’s estate recovery definition can reach assets passing through a living trust or similar arrangement. See N.C. Gen. Stat. § 108A-70.5.
  • Not coordinating beneficiary designations: Large incoming funds often arrive through beneficiary designations or payable-on-death arrangements; mismatches can undermine the plan.

Conclusion

In North Carolina, a revocable trust usually does not meet a primary goal of protecting money and property because the creator typically keeps control and can change or cancel the trust. An irrevocable trust can provide stronger protection, but only if it is structured and funded so the creator truly gives up key rights—and transfers must be reviewed for Medicaid transfer-penalty risk. The next step is to draft the correct trust and complete the asset-transfer paperwork (including deeds and account retitling) before or as soon as the expected funds are received.

Talk to a Estate Planning Attorney

If an older adult is moving to North Carolina and expects to receive significant funds, the trust choice should match the real protection goal (creditors, lawsuits, long-term care planning, or estate recovery) and the timing of the transfer. Our firm has experienced attorneys who can help evaluate options and deadlines and put the right documents in place. 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: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.