Many clients have a variety of questions concerning their unique set of circumstances that might involve decisions in their decision making process. If you have other questions that were not covered in this section, please contact a professional at Old North State Trust, LLC.

What is a trust?

Simply stated, it is a legally enforceable contractual arrangement that transfers property from one person (the Grantor) to another person or corporate body (the Trustee) to be held by the trust and managed by the trustee for the benefit of a class of persons (the Beneficiaries).  The trust is usually established in a written document, that sets out the terms and conditions upon which the trust assets are held and managed and outlines the rights of beneficiaries under the terms of the Trust.

Are there different types of trusts or does one size fit all?

Trusts come in many different types from very simple to complex, but they all have one big advantage: they avoid estate probate by the courts.  They are as varied as the people who establish them.  However, all trusts have five common elements: (1) each has a grantor who transfers legal title to assets into the trust; (2) each has a beneficiary or beneficiaries who receives the benefits or advantages in the trust arrangement; (3) each has a trustee or trustees who manage the affairs of the trust; and, (4) each has a legal component called “intent” that expresses the grantor’s intentions in establishing the trust and the instructions to the trustee as to the management of the assets.  Another way of looking at trusts is whether they are revocable or irrevocable.  Revocable trusts can be changed or terminated at any time by the grantor.  Irrevocable trusts can only be changed or terminated in limited circumstances.  These two major categories have major tax and legal implications that are beyond the scope of this question to answer.  Talk to an Old North State Trust officer who will guide you to a licensed tax or legal professional with significant tax, estate and trust experience such as a CPA or an attorney if you desire more information and guidance on this subject.

I thought trusts were only appropriate for the ultra-wealthy.

No. While the perception is that a Trust is only for the ultra-wealthy, a Trust can have beneficial   application for individuals who have more modest financial circumstances. A properly drawn Trust can expedite the transfer of assets to a decedent’s heirs, defer or avoid federal and state death taxes as well as avoid state probate fees. When utilizing a corporate Trustee such as Old North State Trust, a decedent’s spouse and heirs are relieved of the hardship and burdens of marshaling and safekeeping of assets, accounting for all Trust receipts and disbursements, managing special assets (i.e., income producing real estate, farm lands, undeveloped real property, Sub-Chapter S Corporations, LLC’s, etc.), preparation of fiduciary income tax returns, bill paying and a myriad of other issues. In addition to being relieved of these time consuming but important duties, a corporate Trustee will also provide professional, top notch investment management services.

If my estate is not large enough to be taxable, why would I create a trust?

There are many reasons people with non-taxable estates create a Trust. Often individuals will establish a Trust at their death to shelter the surviving spouse from the rigors of managing assets that took a lifetime to accumulate but for which the surviving spouse lacks the proper ability, experience, acumen or interest to manage. Why saddle a loved one in their “Golden Years” with the worry and hardship of keeping up with a lifetime of property when they should be enjoying those years, relaxing and taking life easier. Other reasons for establishing a Trust would be to protect assets from a would be spendthrift beneficiary or one who has had substance abuse issues, mental or physical health issues or may be susceptible to manipulation by con artists and pseudo philanthropists.

If I have a will, why would I create a trust?

Your Last Will & Testament is the foundation of your financial endgame.  Everyone should have one!  Your Will names your executor, tells how to distribute your assets, provides for custody of minor children and provides a vehicle for special instructions concerning unique assets you may own at death.  However a Will may not be able to take care of all your estate planning desires in the most efficient way.  Where an estate is a relatively short lived legal process, a trust can become a long term financial tool to ensure the desire to take care of your loved ones is achieved.  Among the reasons that people create trusts are:

  1.  Professional Asset Management:  These days, your investable assets need more expertise, time, and supervision than ever before.  An experienced, professional trustee brings specialized training to that task.
  2. Family Financial Protection:  A trust provides a means and structure for delivering your financial resources to multiple beneficiaries or entities over a span of time.  For example, annual income distributions to your spouse for living needs and principal distributions to your children in the future.
  3. Potential Tax Savings:  Some trust plans can lead to substantial tax savings depending on existing tax laws.
  4. Probate Avoidance:  Living trusts may avoid court reporting requirements or probate, and thus, provide the family with an element of financial privacy at death.

If I have life insurance sufficient to cover expenses incurred upon my death, why would I create a trust?

Life insurance can be a wonderful way to provide liquidity to your estate.  The proceeds from insurance may be used to satisfy your final debts and provide cash funds for your beneficiaries after the estate is settled.  But having your insurance death benefits payable to your estate may not be the best estate planning alternative.  An Irrevocable Life Insurance Trust (ILIT) may be a better option.  An ILIT is an irrevocable trust that holds life insurance, the primary purpose of which is to keep the insurance proceeds out of your probate and taxable estate.  An ILIT is a powerful tool to provide your estate with needed liquidity, particularly with an estate encumbered with illiquid assets, such as real estate.  This liquidity would be beneficial in meeting estate costs without having to sell your real estate holdings at an inconvenient or uneconomical time.  Also, an ILIT can be an asset protection vehicle if the trust document includes appropriate spendthrift provisions.

Even with insurance benefits being paid to your estate and if there are excess funds that may be available after debts and taxes, you should consider the merits of achieving your goals and meeting your beneficiaries needs through a trust.  A trust can provide for professional asset management of the assets as well as provide financial security and protection for your family.

If I have a living will or healthcare power of attorney, why would I create a trust?

A living will or declaration of a desire for a natural death is a legal instrument which expresses a person’s desire that extraordinary measures are not to be used to prolong life if his or her medical condition is diagnosed to be terminal and incurable.  The living will is intended to avoid the possibility that family disagreements may delay the administration or withholding of extraordinary medical procedures during the end stage of a person’s life.  A healthcare power of attorney gives someone you trust the legal authority to act on your behalf regarding health care decisions if you become incapacitated or unable to communicate.  Both of these documents are necessary in your overall endgame planning, but neither of these documents is intended to take the place of or deal with your financial estate plan.  You will need a Last Will and Testament and possibly a living, testamentary, and/or life insurance trust to achieve your estate financial goals and protect your family.  A trust can also provide for the individual administration of your assets during your lifetime, when you are unable or unwilling to do so yourself.

My accountant has crafted a tax plan that will minimize taxes upon my death, so I do not need a trust.

There are many uses for trusts other than to save taxes.  Will your heirs need assistance and advice regarding a family owned business or farm?  If you have life insurance, will your heirs be able to manage the proceeds?  Who will assist your surviving spouse if she/he becomes ill or is unable to manage her affairs?  Who will assist you if you become unable to manage your affairs before death?  Do any of your heirs have special needs because of physical or mental conditions?  And sometimes, trusts are used to save taxes, but the non-tax reasons will sometimes outweigh the tax savings.  Plan for the non-tax reasons first and tax savings second.

My spouse (second marriage) and I have agreed upon a plan for dividing assets among our children from our previous marriages as well as among our own children, so a trust is unnecessary.

Planning for your future without the proper documents can be a legal landmine.  In order to ensure that your wishes are adhered to and your assets distributed in the manner you desire, you need the proper tools.  The only way to be completely certain that your intentions are met is via a will or trust.  Providing for distributions solely through a will does not avoid probate administration and costs the way a trust does, so consideration should be given to these factors.

My children get along perfectly well, so I do not need a trust.

Every family situation is unique and has its own set of dynamics.  Even in the best of family circumstances, there is usually a need for outside guidance and expertise.  At the passing of a loved one, a difficult situation can be made even more cumbersome by the administration of an estate and/or trust.  Professional guidance can be crucial in navigating the ever-changing tax and legal landscape, as well as providing for the day to day investment and administration of a lifetime’s legacy.  Even where there is the necessary expertise within the family, there may not be sufficient time to manage the assets or an inclination to do so.  Choosing one family member to act as Executor of Trustee can be a burden and may be perceived by others in a negative way.

At Old North State Trust, we are able to assist families with managing their legacies, helping them wade through the administrative landscape and planning for their future.

I have a pre-nuptial agreement, so a trust is unnecessary.

Pre-nuptial agreements and how they impact estate planning are very technical and may be specific to individual state laws.  This can leave a tremendous gap in estate planning that needs to be addressed.  Oftentimes, pre-nups only address assets accumulated before marriage, not during and only disposition of those assets in the event of divorce. Our recommendation at Old North State Trust, LLC is to seek the counsel of a qualified estate planning attorney in all cases.

I have been told that trusts are very expensive to create and administer.

No, our fees for trust services are very competitive with those of investment advisors, banks, and other trust companies.  As trustee, we provide asset management, trust administration, recordkeeping, along with tax and real estate expertise for an all-inclusive management fee.  Our fee is based on the market value of assets in the trust and computed on a declining rate scale.  To learn the specifics, please ask for a copy of our fee schedule.

The preparation of the trust legal document must be prepared by your attorney.  Our experience has been that the legal costs of document preparation is most always reasonable and certainly worthwhile for our client’s piece of mind knowing their financial matters are in good order.  Often the expense incurred in retaining an estate planning attorney to prepare your trust documents will save you and your beneficiaries significant time and costs by having the trust documents prepared properly.  If you do not have an attorney, we will be happy to supply you a list of estate planning attorney’s for your consideration.

Can’t I appoint a friend or other individual as trustee?

Certainly you can if they will accept the appointment.  The question is: “For your peace of mind should you”?  Corporate trustees such as Old North State Trust, LLC are licensed and regulated by the Banking Commission of the State of North Carolina and have to comply with financial and operating standards set by the Commission.  Some reasons to consider a corporate trustee such as Old North State Trust are: (1) we are trust professionals and thus held to a higher standard of performance than a non-professional; (2) we know a lot about trust matters because we are exclusively a trust and investment management firm; we aren’t distracted with making loans or increasing deposits; (3) we have 160 years of North Carolina trust experience on our staff and manage your wealth affairs on a day to day basis—every day; (4) we provide reliable, objective and seasoned professional advice to our clients and potential clients and are not distracted or swayed by emotional or personal concerns; (5) we have full-time investment and financial analysis staff that are skilled in balancing your short and long term financial goals, your risk tolerance and the state of the economy and often achieve better results because of these factors; and (6) we are truly committed to and practice our motto: “Our Passion for Service is Our Highest Mission.”

What exactly am I paying for when I pay fees to “administer” my trust(s)?

In most states, the general statutes define the fiduciary standard by which trustees are governed.  This standard dictates that Trustees must administer trusts with the highest duty of care and loyalty possible.  They must provide for the proper investment of the assets held in the trust, as well as ensuring that the trust is administered according to the terms of the governing document.  A Trustee must stay informed of current tax, legal and investment issues as well as any other issues relevant to the specific nature of each trust.  A Trustee must balance the needs of all of the beneficiaries and adhere to the wishes of the Grantor of the trust.

I do not want to give up control of my assets, so I am not interested in setting up a trust.

Contrary to what most people think, that is the exact reason why trusts are established.  In all revocable trusts, whether styled a “living trust,” “revocable trust,” or “revocable living trust”, you retain the same control over your assets as you would have without the trust.  You gain the added benefit of more organization and better control of your assets and the ability to plan your financial affairs through the various stages of your life.  These benefits accrue to you and your family since you have prepared a thorough estate plan with professionals.  Irrevocable trusts, trusts by their design that can’t be amended, changed or revoked are the other major classification of types of trusts.  This trust requires careful drafting to make sure that the trust assets are managed by the trustee or trustees in the way the Grantor has specified for the benefit of the beneficiaries.  So control over the assets is still assured but the ability to change the terms and conditions of the trust are extremely limited.  Both types of trust, if correctly established, avoid the time and costs of probate court in settling the estate and keep your financial affairs out of the public view.  Be sure to consult with an attorney experienced in estate matters or contact Old North State Trust for a referral to an expert attorney or CPA to fully understand the legal and taxation differences between the two forms of trusts and how they interplay with estate planning and wealth management.

As an Old North State Trust client, am I limited to the types of investments I can make with my IRA?

Old North State Trust strives to permit a wide variety and types of investments for every investor.

Some of the more common include:
Residential Real Estate
Commercial Real Estate
Mortgages Businesses
Limited Partnerships
Private Stock
Public Stock
Mutual Funds

Why haven’t I heard about this before now?

Historically, the securities industry has been responsible for bringing investments to retirement plans. Banks and brokerage companies have given the impression that stocks, bonds and mutual funds were the only investments permitted in a retirement account. This is not the case. Banks and brokerage companies have a vested interest in having the funds invested in stocks, bonds and mutual funds and not real estate, businesses or other non-traditional investments. Do not let the interests, or lack of knowledge of these institutions limit your ability to maximize the investment potential of your retirement funds. Old North State Trust’s professionals are experienced and able to help truly diversify your self-directed IRA.

What if I want to invest in a property and I need financial assistance from other investors? Are there ways to simplify the purchase and management of the property?

Yes. A group of investors may combine forces and invest in an entity such as a limited liability company (e.g., LLC) then the LLC can purchase the property. With this approach the LLC may take out a loan. Banks are often more comfortable loaning to companies than IRAs and, in some cases, individuals. There are many other advantages, see your Old North State Trust financial advisor to learn more about this approach.

Isn’t a trust a separate taxable entity?

Yes.  Trusts are separate legal entities and as such have to file tax returns.  Whether this affects your tax profile depends upon the type and purpose of the trust you create.

How does this alter my tax profile?

A revocable trust does not provide current income tax savings since income from this type trust is included in the grantor’s individual income tax returns.  This trust does provide assistance with investments and other financial matters.  It also provides privacy upon the grantor’s death and assets in the trust are not subject to probate and public scrutiny.

An irrevocable trust created and funded prior to death removes the assets from the grantor’s estate and is not taxed as part of the grantor’s estate.  The trust is taxed on any income not distributed to the beneficiaries.


Will this draw unnecessary scrutiny from the IRS?

Since there are many sections in the tax code that relate to trusts, the IRS recognizes that there are many legitimate uses for trusts.  The IRS does not increase their scrutiny of individuals based on their use of trusts.

Will my tax preparation and planning bill increase?

Trustees are required to file tax returns for trusts and additional costs will be incurred for the preparation of these returns.

What should I look for in a tax accountant?

You should look for a CPA or other professional who is knowledgeable of tax codes and its related rules and regulations.  You also want a person who is honest and ethical in his/her practice.

Who regulates trusts in my state?

Independent trust companies and bank trust departments are regulated by various government institutions.  Oversight for state chartered trust companies and departments such as Old North State Trust is provided by the Office of the Commissioner of Banks.  Other regulators include the Office of the Comptroller of the Currency and the FDIC.

What is the difference between a trust company and a bank?

The primary difference is that a bank provides traditional services related to checking and savings accounts, certificates of deposit, credit cards, consumer and commercial lending, ATM’s, etc. A trust company specializes in those services directly related to Trust and Estate administration, financial planning and investment management services. All banks are regulated by either the Comptroller of the Currency (nationally chartered) or by the NC Commissioner of Banks (state chartered). Old North State Trust is regulated by the NC Commissioner of Banks.

What qualifications must one possess in order to be a trust officer?

Some trust officers hold their positions as a matter of significant, usually 10 years or better, experience in wealth management.  Not all trust officers are professionally credentialed or licensed.  The most common credentials held by trust officers who hold national certifications or who are licensed are: Certified Financial Planner (CFP®-Certified Financial Planner Board), Certified Trust and Financial Advisors (CTFA- Institute of Certified Bankers), and Certified Public Accountants (CPA) and Attorneys at Law.  These trust officers normally have at least a bachelor’s degree with required significant experience levels in wealth management, a graduate education in trust—including passing graduate level trust schools held by nationally recognized trust educators; or is a state licensed CPA or Attorney at Law.  Most CPA’s and Attorneys at Law giving tax or legal advice to clients involving estate tax and planning matters have significant additional education and experience specializing in those areas of practice.  All of Old North State Trust’s senior trust and trust officers hold current national certification credentials such as the CTFA, CFP or both.

What should I look for in a trust officer or trust company?

Your trust company should have the knowledge and experience to not only administer and invest your trust properly, but should have a solid commitment to actually providing customer service and not simply advertising it.  At Old North State Trust, our trust officers have over 160 years of combined trust experience and we truly believe that “our passion for service is our highest mission”.

What should I look for in a trust and estate attorney?

It is recommended, when looking for an estate planning attorney, that you consider one who regularly practices in the fields of wills, trusts, taxes, and probate in order to provide you with sound legal advice as you put your estate plan into place.  Qualified estate planning attorneys are subject to regulation by state bar organizations, many of which require continuing education in these disciplines.  In all cases, you should inquire about the level of experience and qualifications when selecting a lawyer.  Most important, you should choose an estate planning attorney in whom you have confidence.

What if the difference between a 401K (Employer Plan), a 401K Rollover and a Self-Directed Real Estate IRA?

401K (Employer) Plan – Employer plans are controlled and directed by the employer and/or plan administrator. If you have a 401K with your current employer, check with your plan administrator to determine if real estate purchases are allowed. 401K Rollover – The rollover of 401K funds will occur when you have retired or left your place of employment. In order to use the 401K funds, you must roll them over to a Self-Directed Real Estate IRA.

Self-Directed Real Estate IRA – The Self-Directed Real Estate IRA allows you to place the funds into real estate. If your current custodian does not allow the purchase of real estate, then you simply choose a custodian that does allow the purchase of real estate in your IRA. Old North State Trust can be the plan administrator and/or the Self-Directed Real Estate IRA Custodian. Self directed plans allow you to direct and control the investments

Can I transfer/rollover funds from an existing IRA, 401(k), 403(b), SEP IRA, Roth IRA, Keogh, to a Self-Directed IRA for the purpose of investing in real estate?

Yes. You can choose to transfer/rollover all of, or portions of your existing retirement accounts to an Old North State Trust self-directed IRA for real estate investments. (Most employer sponsored plans such as a 401(k) do not permit a roll over into another type of account while you are still employed. However, in some cases plans do permit a roll over portion of the account balance. See the plan administrator for information on what if any roll over is permitted.) How long does it take to make an investment with a self-directed IRA? It depends on who you are working with. Using a traditional self-directed IRA custodian, it is often difficult to make investments in non-traditional assets, like real estate. Many times, the client does not have any personal interaction with the IRA funds of the traditional self-directed IRA custodian. The client must petition the IRA custodian to make an investment on their behalf. Banks move at a pace much slower than the investment community and it often takes weeks to complete a transaction. On the other hand, Old North State Trust’s clients benefit from having complete control and immediate access to their retirement funds, so they may participate in such transactions quickly and efficiently!

Can I mix personal funds with IRA funds to purchase real property?

Yes, if it is structured correctly. (You must be very careful to whom you are listening.) This can be easily violated through “formation issues”. If you are considering using your personal funds to invest in real estate with your IRA either through Tenant-in-Common or a Partnership Entity, ask an Old North State Trust financial advisor.

I do not have enough money in my IRA to purchase the property. May I purchase real estate via IRA using debt financing?

Yes. Financing with a lender through your IRA is allowed. There are specific rules that must be followed and it does create issues for some lenders. Your Old North State Trust financial advisor can guide you through this process.

How do I find a Realtor, CPA or mortgage lender in my area who knows about self-directed IRAs?

Old North State Trust understands the difficulties in finding competent professionals who understand and embrace the self-directed industry. As a client, we will work with you to find the professional assistance needed to help you reach your goals.

Can my IRA buy real estate that I currently own?

Even though you may hear of those that have done this, it is not permitted. There are many great real estate transactions available so do not put your retirement account at risk by engaging in a “self dealing” transaction such as this. Can I use leverage to buy real estate? Absolutely, leverage is a very powerful tool when purchasing real estate. However, there are unique requirements when using a self-directed IRA and leverage. The “prohibited transaction” rules state that you as a disqualified person cannot extend credit to an IRA or IRA asset. See your Old North State Trust financial advisor for more details.

May I be the property manager for real estate held by my self-directed IRA?

If you have a “traditional” self-directed IRA then the answer is no. Using an Old North State Trust Self-Directed IRA, you can manage the property, collect the rent, screen tenants, perform general maintenance, and more. This can save your IRA hundreds of dollars each month and ultimately provide more investment capital for ongoing investments.

If neither my sister nor brother are not a disqualified party, can I buy a house and let either of them rent it from me?

Theoretically, yes. Neither is a disqualified person. However, if she/he occupied a rental property owned by your IRA and could not make the rent payment; you could run afoul of the exclusive benefit rule. This situation may cause your IRA to have participated in a prohibited transaction. It is important that you treat every investment the same, to benefit your IRA and only the IRA. Where does the rental income go from rental property owned by my IRA? All income generated by a property owned by your IRA must return to your IRA account to insure the tax-deferred status of this investment.

May I have a company I own make repairs to the property that I have in my IRA?

No. The IRA code and regulations on prohibited transactions prohibit such activity by an owner. You may not provide a service and receive a benefit from your plan or account.

Does the Required Minimum Distribution (RMD) apply to Self-Directed IRAs?

Yes. Minimum distributions are required of all retirement accounts each year and begins when the participant reaches age 70 ½.

Who is Old North State Trust, LLC?

Old North State Trust, a North Carolina chartered trust company, provides: Asset Management services; Income, Estate, and Trust Tax consulting; Retirement Planning and Administration; and Trustee and Estate services to both individuals and businesses. ONST professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals.


Old North State Trust, a North Carolina chartered trust company, provides: Asset Management services; Income, Estate, and Trust Tax consulting; Retirement Planning and Administration; and Trustee and Estate services to both individuals and businesses. ONST professionals have many years of experience and for over a decade have assisted clients in identifying and reaching their financial goals.