Short Answer

Yes. In North Carolina, you can build a discretionary “supplemental needs” provision into an irrevocable, third‑party trust so a beneficiary who may need public benefits is supported without making trust assets countable for means‑tested programs. To do this correctly, the trust should use discretionary distribution language, include strong spendthrift protections, and avoid giving the beneficiary control over distributions.

Understanding the Problem

You want to set up a North Carolina irrevocable trust to protect a parent’s assets and ensure their care. You also want the trust to accommodate a family member on medication who may need special needs planning. The question is: can you include special needs provisions in this trust so the family member can receive support without risking public benefits?

Apply the Law

North Carolina trusts are private and typically do not require filing with the court. To preserve means-tested benefits (like SSI/Medicaid), the trust should provide that any distributions to the beneficiary are purely discretionary and meant to supplement—not replace—public benefits. A third‑party supplemental needs provision fits well inside an irrevocable trust that is funded with someone else’s assets (e.g., the parent’s), and it does not require a payback to the State at the beneficiary’s death. If a pre‑existing trust later needs to be adjusted, North Carolina’s decanting statute can allow moving assets into a dedicated special needs subtrust for a beneficiary with a disability. Disputes or judicial changes typically go to Superior Court, while many internal administration issues may be handled by the Clerk of Superior Court.

Key Requirements

• Third‑party funding: Use the parent’s assets (not the beneficiary’s) so the special needs subtrust is a “third‑party” SNT and avoids reimbursement/payback.
• Purely discretionary distributions: Give the trustee broad discretion with no mandatory payouts and no beneficiary right to demand distributions.
• Supplemental purpose: State that distributions are to enhance quality of life by supplementing, not supplanting, public benefits.
• Spendthrift protection: Include a spendthrift clause so creditors cannot reach the beneficiary’s interest before receipt.
• Independent trustee controls: Do not give the beneficiary (or someone legally obligated to support them) authority to compel distributions.
• Privacy with third parties: Authorize use of a Certification of Trust to work with banks and others without disclosing the full document.

What the Statutes Say

• North Carolina Gen. Stat. § 36C‑5‑502 (Spendthrift trusts) – Spendthrift terms block transfers and creditor reach until distribution.
• North Carolina Gen. Stat. § 36C‑5‑504 (Discretionary interests) – Discretionary interests are protected; courts generally won’t force a distribution.
• North Carolina Gen. Stat. § 36C‑10‑1013 (Certification of trust) – Lets you prove trust authority to third parties without sharing the full trust.
• North Carolina Gen. Stat. § 36C‑8B‑13 (Decanting for beneficiary with a disability) – Allows moving assets into a special needs trust for an eligible beneficiary.

Analysis

Apply the Rule to the Facts: Because the trust will be funded with the parent’s assets, you can add a third‑party supplemental needs provision for the family member on medication. Draft the trust to give an independent trustee full discretion, include a clear “supplemental, not supplanting” purpose, and add a spendthrift clause. If the family member later qualifies as disabled and the existing terms need refinement, North Carolina’s decanting law can move assets into a targeted special needs subtrust without court involvement, subject to statutory notice and fiduciary duties.

Process & Timing

1. Who files: No court filing is required to create the trust. Where: Private execution; record any deed transfers with the county Register of Deeds if real estate is funded. What: Irrevocable trust agreement with supplemental needs provisions; trustee acceptance; funding documents; use a statutory Certification of Trust with banks. When: Typical drafting and signing can often be completed in 2–3 weeks, with funding transfers taking another 2–6 weeks depending on institutions.
2. Coordinate funding: retitle bank/brokerage accounts to the trustee; execute and record deeds for real property; update beneficiary designations if appropriate; provide Certifications of Trust to financial institutions. Expect varied institution timelines.
3. Post‑signing: keep records, provide beneficiary reports as required, and avoid distributions that could jeopardize benefits. If needs evolve, consider decanting to a dedicated SNT consistent with fiduciary duties and statutory notice.

Exceptions & Pitfalls

• Avoid mandatory or “support/maintenance” distribution standards; they can undermine eligibility for means‑tested benefits.
• Do not name the beneficiary as trustee or give them control over distributions; control can make assets countable.
• Include a spendthrift clause; without it, creditors may reach distributions after they are due or paid.
• Be careful with distributions that cover basic food/shelter; certain payments can affect benefit calculations.
• Irrevocable means limited post‑signing changes; build flexibility now (e.g., trust protector powers or decanting authority) rather than relying on court modification later.
• Fund the trust correctly; assets not retitled to the trustee will not be governed by the trust and may pass through probate.
• Use a Certification of Trust to work with banks while keeping terms private and reducing requests for the full document.

Talk to an Estate Planning Attorney

If you’re setting up an irrevocable trust and want to add special needs provisions while minimizing future challenges, our firm has experienced attorneys who can help you understand your options and timelines. Call us today.

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.