Estate planning is an integral part of protecting your hard-earned assets, providing for your loved ones, and ensuring your business remains on solid ground after your death.
If you are a small business owner in North Carolina, Wilson Ratledge is here for you. We’ll dive deep into the world of trusts and talk more about how they can benefit your estate planning needs.
What is a Trust?
At its core, a trust is a legal entity where one party, the trustor (or “grantor” or “settlor”), transfers property or assets to a trustee to manage and distribute for beneficiaries as specified in the trust agreement. Trusts can be versatile tools, adapting to your unique financial situation, personal goals, and business-related objectives.
Why Should Business Owners Consider a Trust in North Carolina?
In North Carolina, the use of trusts offers a multitude of benefits tailored to the needs of small business owners. One of the primary reasons to consider a trust is the assurance of business continuity.
As an owner, you naturally want to ensure that your business remains resilient and operational in your absence. By establishing a trust, you can lay out specifics regarding the future management of the business, potential successors, and the conditions under which transitions should take place, thus offering a roadmap for stability and direction.
North Carolina’s trust laws are particularly favorable for asset protection. With instruments like the irrevocable trust, business owners can achieve better protection for the intended beneficiaries against potential creditors and lawsuits.
Another compelling reason to opt for trusts is the potential to sidestep the often tedious and costly probate process. By channeling your business interests and other assets into a trust, assets can be transitioned to beneficiaries more efficiently and without the delays associated with probate.
Lastly, there are potential tax advantages to be gained. Given North Carolina’s evolving tax landscape, as well as federal estate tax considerations, structuring assets through the right trust can yield considerable tax savings for the estate.
Types of Trusts for Business Owners
- Living/Revocable Trust: This is a revocable trust established during your lifetime. It allows you to maintain control over the assets, including your business, while you’re alive. Upon your death, the trust becomes irrevocable, and the assets get distributed as per your instructions without undergoing probate to the extent assets are titled in the trust prior to your death.
- Irrevocable Trust: Once established, you cannot modify this trust without the consent of the beneficiaries or the court. It offers robust asset protection benefits and potential tax advantages, making it suitable for business owners with considerable assets.
- Charitable Trust: If you have philanthropic inclinations, a charitable trust lets you donate a portion of your assets (or business profits) to a charity and may provide tax benefits.
- Family Limited Partnership (FLP) or Family Limited Liability Company (LLC): These are not trusts per se, but they allow you to transfer your business interests to family members, sometimes at discounted valuations, which can have estate tax benefits.
Creating a Trust in North Carolina: Steps & Considerations
- Identify Your Objectives: Do you aim to protect assets, avoid probate, or provide for a special needs family member? Your goals will dictate the type of trust you should establish.
- Choose a Trustee: The trustee is crucial for the trust’s effective management. You can select an individual, such as a family member, or a corporate entity like a bank or trust company.
- Draft the Trust Agreement: A well-drafted trust agreement, specific to North Carolina laws, is paramount. The team at Wilson Ratledge has worked with North Carolina business owners in estate planning for decades – put our experience to work for you.
- Fund the Trust: A trust is merely a shell without assets. Transfer your assets or business interests to the trust to make it operative.
- Regular Review: Laws change, and so do personal and business situations. Regularly review and update your trust to ensure it aligns with current circumstances and North Carolina law.
Contact Our Business Estate Planning Attorneys Today
Trusts are powerful tools for estate planning, especially for North Carolina small business owners. While we aim to give you an overview here, estate planning is intricate and deeply personal.
Contact the team at Wilson Ratledge today to craft an estate plan tailored to your unique needs and business objectives. Your legacy deserves the best protection – start today!