Should I Establish a Trust Even If I Have Beneficiary Designations in Place to Avoid Probate?

Detailed Answer

Many people rely on beneficiary designations—on life insurance policies, retirement accounts or payable-on-death bank accounts—to transfer assets outside of probate. While these designations can bypass probate for specific accounts, they do not address all your property. In North Carolina, a revocable living trust under the Uniform Trust Code (Chapter 36C of the NC General Statutes) allows you to place a broad range of assets into a trust. When you pass away, those trust assets transfer directly to your beneficiaries, avoiding probate altogether.

Here are key reasons to consider establishing a trust even when you have beneficiary designations:

• Comprehensive Probate Avoidance: Beneficiary designations apply only to specific accounts. A trust can hold real estate, business interests, investment accounts and personal property that don’t have a designated beneficiary.
• Incapacity Planning: A revocable living trust names a successor trustee to manage trust assets if you become incapacitated. Without a trust, your family may need to seek guardianship through the probate court under Chapter 35A.
• Privacy: Probate records in North Carolina (see Chapter 28A) become public. Trust administration generally remains private, safeguarding details of your estate.
• Control Over Distributions: A trust lets you set conditions for distributions—such as age or milestone events—beyond a simple beneficiary payout.
• Flexibility: You can amend or revoke a revocable trust at any time during your lifetime, adapting it to changing circumstances.

Key Points to Consider

1. Asset Inventory: List all assets, including those with beneficiary designations and those without. Identify gaps where a trust could provide probate avoidance.
2. Trust Funding: After creating a trust, you must transfer titles of real estate, accounts and other assets into the trust. Failure to fund the trust can lead to unintended probate.
3. Cost vs. Benefit: Trust creation involves attorney fees and administrative actions. Compare these costs to potential probate expenses and delays under Chapter 28A.
4. Successor Trustee Selection: Choose someone you trust to manage your assets and follow your distribution instructions.
5. Coordination with Beneficiary Designations: Ensure your trust and beneficiary forms align. An outdated beneficiary form can override your trust instructions.

Conclusion and Next Steps

While beneficiary designations provide a straightforward method to avoid probate on certain assets, a revocable living trust offers a comprehensive solution for your entire estate. Trusts enhance privacy, streamline incapacity planning and give you greater control over how and when your heirs receive their inheritance. Pierce Law Group’s attorneys guide clients through every step— from drafting and funding the trust to coordinating beneficiary designations and handling complex assets.

Contact Pierce Law Group today to discuss whether a trust makes sense for your situation. Email us at intake@piercelaw.com or call (919) 341-7055 to schedule a consultation.