Short Answer

In North Carolina, a living (revocable) trust helps assets you title into the trust avoid probate but does not shield those assets from your or your estate’s creditors. An irrevocable trust can provide creditor and long-term care planning benefits if you give up control and fund it well before any need arises. A supplemental needs trust (also called a special needs trust) is designed for a disabled beneficiary to preserve means-tested benefits; it is not for protecting the grantor’s own assets.

Understanding the Problem

You want to know whether to use a living trust, an irrevocable trust, or a supplemental needs trust under North Carolina law. The decision affects who controls the assets, whether the assets avoid probate, and if they stay available to pay future expenses. Here, Mom lives in North Carolina and owns a small house. Understanding how each trust works will help you match the tool to your goal.

Apply the Law

North Carolina groups trusts broadly into revocable and irrevocable. Revocable trusts can be changed or revoked and are common probate-avoidance tools. Irrevocable trusts are harder to change and can, if properly designed and funded, offer creditor and public benefits planning advantages. A supplemental needs trust is a special, usually discretionary trust for a disabled beneficiary so that trust payments do not disrupt needs-based benefits. Trusts are private documents; they are not filed with the Clerk of Superior Court, though certain court proceedings about trusts use the clerk or superior court depending on the issue.

Key Requirements

• Living (Revocable) Trust: You keep control and can amend or revoke; you must retitle assets into the trust to avoid probate; assets remain available to your creditors during life and after death.
• Irrevocable Trust: You give up control you want protected; you cannot be free to access principal if you seek creditor/Medicaid protection; transfers face look-back rules for public benefits.
• Supplemental Needs Trust (SNT): For a disabled beneficiary; trustee has discretion to supplement—not replace—public benefits; a first-party SNT generally requires a Medicaid payback, while a third-party SNT does not.
• Funding Matters: Only assets retitled to or payable to the trust follow trust terms; POD/TOD or joint accounts bypass the trust unless you change them.
• Forum & Notices: No routine filing for private trusts; if a revocable trust is used instead of probate, you can ask the Clerk of Superior Court to appoint a limited personal representative to publish creditor notice.

What the Statutes Say

• North Carolina Gen. Stat. § 36C-6-602 (Revoking or amending a revocable trust) – Presumes revocability and explains how to amend or revoke.
• North Carolina Gen. Stat. § 36C-5-505 (Creditors’ claims against settlor) – Revocable trust assets are subject to the settlor’s creditors; limits for irrevocable trusts depend on retained access.
• North Carolina Gen. Stat. § 36C-5-502 (Spendthrift provisions) – Validates spendthrift clauses restricting a beneficiary’s ability to transfer interests and creditor reach.
• North Carolina Gen. Stat. § 36C-5-504 (Discretionary trusts) – Clarifies protection for discretionary distributions, a key feature of SNTs.

Analysis

Apply the Rule to the Facts: A living trust could keep Mom’s house out of probate if the deed is retitled to the trust, but those trust assets would still be available to satisfy Mom’s creditors and, after death, claims against her estate. An irrevocable trust could be used to protect the house if Mom gives up control and funds it well before any benefits are needed; that tradeoff is significant. A supplemental needs trust would be useful only if a beneficiary (for example, a child or grandchild) is disabled and needs assets managed without losing benefits; it is not a tool to shield Mom’s own assets.

Process & Timing

1. Who files: No filing is required to create these trusts. Where: Typically drafted and signed privately; deeds or account forms are recorded/updated with the Register of Deeds or financial institutions. What: Trust agreement; for a house, a deed into the trust (revocable or irrevocable) or other deed strategy; consider a pour-over will to catch stray assets. When: Before incapacity; for irrevocable trust planning, well before any expected need for public benefits.
2. If you use a revocable trust instead of probate, consider asking the Clerk of Superior Court to appoint a limited personal representative to publish creditor notice so claims are cut off on a timetable similar to estates. Timeframes and local practice vary.
3. For a first-party SNT for a disabled adult, ensure eligibility rules are met (including who can establish it) and coordinate with benefits agencies; third-party SNTs are usually embedded in a will or revocable trust and become effective at funding.

Exceptions & Pitfalls

• Funding gaps: A revocable trust does nothing for assets left outside it. POD/TOD and joint accounts bypass the trust and can upset your plan unless coordinated.
• Creditor exposure: Revocable trust assets remain subject to your creditors and, after death, to claims against your estate. Publishing creditor notice requires an estate or limited personal representative.
• Irrevocable tradeoffs: Retaining control or access can defeat protection goals; transfers may affect benefits for a period.
• SNT specifics: First-party SNTs commonly require Medicaid payback at the beneficiary’s death; third-party SNTs do not. Direct cash gifts to a disabled beneficiary can jeopardize benefits—use trustee-paid supplemental expenses instead.
• Trustee duties: Trustees must manage prudently and keep qualified beneficiaries reasonably informed; poor administration can lead to disputes.

Conclusion

Use a revocable living trust to avoid probate for assets you title into it, understanding those assets remain reachable by your and your estate’s creditors. Use an irrevocable trust only if you are prepared to give up control and plan ahead for potential creditor and long‑term care advantages. A supplemental needs trust is for a disabled beneficiary to preserve benefits; it is not for shielding the grantor’s assets. If you choose a revocable trust, execute and record the deed for the house and coordinate beneficiary designations promptly.

Talk to a Estate Planning Attorney

If you’re weighing living vs. irrevocable vs. supplemental needs trusts to protect a North Carolina home and coordinate probate-avoidance, our firm can help you understand 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.