Understanding the Problem
A revocable trust separates formal ownership and management authority from the beneficial interests created by the trust. This can be confusing when the same person creates the trust, serves as trustee, uses the property, and retains the power to change or cancel the arrangement.
Apply the Law
Key Requirements
A trust may be created by transferring property to another person as trustee or by an owner declaring that the owner holds identifiable property as trustee. North Carolina law also requires the trustee to keep trust property separate and, when feasible, ensure that records show the trust’s interest in the property. See N.C. Gen. Stat. §§ 36C-4-401 and 36C-8-810.
You can appoint yourself as trustee when you create a revocable trust. In that role, your name may appear on deeds, bank accounts, investment accounts, and other ownership records in your capacity as trustee rather than as an individual owner. A certification of trust may state the proper manner of taking title to trust property. N.C. Gen. Stat. § 36C-10-1013.
What the Statutes Say
While a trust is revocable, the beneficiaries’ rights are subject to the settlor’s control, and the trustee’s duties are owed exclusively to the settlor. If the settlor is also the trustee, the trustee’s actions are presumed to be taken at the settlor’s direction. N.C. Gen. Stat. § 36C-6-603.
Unless the trust expressly provides otherwise, the settlor may revoke or amend a covered revocable trust under N.C. Gen. Stat. § 36C-6-602. Upon revocation, the trustee must deliver the trust property as the settlor directs. A trustee also has the powers granted by the trust and, subject to its terms, broad powers to manage, administer, and distribute trust property. N.C. Gen. Stat. § 36C-8-815.
Analysis
Process & Timing
During the settlor’s lifetime, the settlor may use trust assets for the settlor’s benefit, change beneficiaries by properly amending the trust, or revoke the trust, subject to the trust instrument and applicable law. Revocation or amendment should substantially comply with the method stated in the trust. If that method is not exclusive or no method is provided, N.C. Gen. Stat. § 36C-6-602 permits certain other methods.
When the settlor dies, the successor trustee named in the trust generally steps in to manage and distribute the property under the trust’s terms. Whether the entire trust becomes irrevocable at that point depends on its terms and whether any other person retains a power to revoke part of it.
Exceptions & Pitfalls
The trust controls only property that has been properly transferred to it or otherwise made trust property. Assets left in the settlor’s individual name without an effective beneficiary designation or other nonprobate transfer may still require probate. Properly funded trust assets can generally pass through trust administration rather than probate, and the trust instrument may preserve more privacy than a publicly filed will, although litigation or other legal requirements can result in disclosure.
Joint trusts require additional care. When more than one settlor funds a revocable trust, each settlor’s amendment or revocation authority may depend on the source and character of the contributed property under N.C. Gen. Stat. § 36C-6-602.
Conclusion
In North Carolina, the trustee holds title to property that has actually been transferred to the revocable trust, while the trust terms define beneficial interests. During revocability, the settlor controls beneficiary rights and may amend or revoke the trust, subject to the instrument and applicable procedures. The key threshold is proper funding: property never transferred to the trust may still require probate. Review deeds and account registrations, then have an estate planning attorney correct any funding or trustee-designation problems.
Talk to an Estate Planning Attorney
Pierce Law Group can review your trust, property titles, and beneficiary designations during a free case evaluation. Email [email protected] or call (919) 341-7055 to discuss whether your estate plan works as intended.
