Trusts Part 1

Right now, if you own land, I can almost guarantee it is registered with the state.  This relationship to the state is one of Trustee to beneficiary– the state (Trustee) holds the ability to make legal decisions regarding the property while you (beneficiary) are allowed to live on the land/in the house. If you want to pass the property down to your heirs, it will have to go through probate court; the court will decide, while considering your will and testament, exactly how the rights estate will be distributed.


One can appoint anyone they know to be trustee.  The prerequisites are purely up to the grantor’s/trustor’s/settlor’s discretion. In this context, those titles all mean the same thing.

By making a natural person the trustee, you bring the ownership of the land/house into the private realm.  The property is no longer connected to the County when it comes to power of disposition and jurisdiction.

Trusts, until recently, were a very foreign subject to me.  If you had asked me six months ago what a trust was, and whether it was interesting to me, I would have probably said that a trust was only for rich people who want to someone to watch over their money after they die so that their children do not spend all the capital/sell the property.

That scheme represents a specific type of trust. Trusts can be used in many ways though, and that determines which type should be chosen. The words alone play a huge role in the nature of the trust.  Over and over again, we see in legislation that the wording of the trust creates the law that is to be followed in dealings with the trust.

Chapter 36C of the NC General Statutes is called “The Uniform Trust Code”. You can be sure that most if not all states have adopted this (hence the name uniform).  Within the text, we see that some trusts are non-judicial, meaning they are not up for a court to decide. The trustee, as directed by the beneficiaries, makes any and all legal decisions. His/her/its name shows up on paperwork, and the names of beneficiaries do not need to be known to that corporate structure called the County.

What makes some Trusts private/common law trusts, and some trusts judicial (left to the court)? 

“§ 36C-1-107.  Governing law.

(a)        The meaning and effect of the terms of a trust are determined by any of the following:

(1)        The law of the jurisdiction designated in the terms unless the designation of that jurisdiction’s law is contrary to a strong public policy of the jurisdiction having the most significant relationship to the matter at issue.

(2)        In the absence of a controlling designation in the terms of the trust, the law of the jurisdiction having the most significant relationship to the matter at issue.

(b)        Notwithstanding subsection (a) of this section, the rights of a person other than a trustee or beneficiary are governed by G.S. 36C-10-1010 through G.S. 36C-10-1013. (2005-192, s. 2; 2007-106, s. 4.)”


“§ 36C-1-106.  Common law of trusts; principles of equity.

The common law of trusts and principles of equity supplement this Chapter, except to the extent modified by this Chapter or another statute of this State. (2005-192, s. 2.)

Trusts Part 2 (draft)

Foreign situs trust.    A trust which owes its existence to foreign law. It is treated for tax purposes as a non-resident alien individual.”

Grantor trust.    A trust in which the grantor transfers or conveys property in trust for his own benefit alone or for himself and another.”

“Inter    vivos.    Between    the    living;    from one living person to another. Where property passes by conveyance, the transaction is said to be inter vivos, to distinguish it from a case of succession or devise.    So an ordinary gift from one person to anoth­ er is called a “gift inter vivos,” to distinguish it from a gift made in contemplation of death (mortis causa) or a testamentary gift.”

Inter vivos gift.    Gift made when donor is living and provides that gift take effect while donor is living as contrasted with testamentary gift which is to take effect on death of donor (testator).

Inter vivos transfer.    A transfer of property during the life of the owner.    To be distinguished from testamen­ tary transfers where the property passes at death.

Inter vivos trust.    Trust created during lifetime of set­ tlor and to become effective in his lifetime as con­ trasted with a testamentary trust which takes effect at death of settlor or testator.   

Inter vivos trust. Trust created by an instrument which becomes operative during the settlor’s lifetime as contrasted with a testamentary trust which takes effect on the death of the settlor.”

Express private passive trust. Such exists where land is conveyed to or held by one person in trust for another, without any power being expressly or im­pliedly given trustee to take actual possession of land or exercise acts of ownership over it, except by bene­ficiary’s direction.”

Land trust.    A land trust (as used in Illinois) is a trust in which corpus consists of real estate and in which deed to trustee appears to confer upon him full pow­ ers to deal with real estate and complete legal and equitable title to trust property. So far as public records are concerned, trustee’s powers are complete. Such powers, however, are in fact restricted by a trust agreement mentioned in the deed in trust.    Such trust agreements typically vest in beneficiary full powers of management and control.    However, beneficiary cannot deal with property as if no trust exist­ ed.    Such trusts generally continue for a definite term.”

Living trust.    An inter-vivos trust created and opera­tive during the lifetime of the settlor and commonly for benefit or support of another person.”


Perpetual trust.    A trust which is to continue as long as the need for it continues as for the lifetime of a beneficiary or the term of a particular charity.”
Personal trust.    Trusts created by and for individuals and their families in contrast to business or charitable trusts.”

Secret trusts. Where a testator gives property to a person, on a verbal promise by the legatee or devisee that he will hold it in trust for another person.”

“Trustor. One who creates a trust. Also called settlor.”

Voluntary trust.    An obligation arising out of a per­ sonal confidence reposed in, and voluntarily accepted by, one for the benefit of another, as distinguished from an “involuntary” trust, which is created by operation of law.    According to another use of the term, “voluntary” trusts are such as are made in favor of a volunteer, that is, a person who gives nothing in exchange for the trust, but receives it as a pure gift; and in this use the term is distinguished from “trusts for value,” the latter being such as are in favor of purchasers, mortgagees, etc. A “voluntary trust” is an equitable gift, and in order to be enforce­ able by the beneficiaries must be complete. The difference between a “gift inter vivos” and a “volun­ tary trust” is that, in a gift, the thing itself with title passes to the donee, while, in a voluntary trust, the actual title passes to a cestui que trust while the legal title is retained by the settlor, to be held by him for the purposes of the trust or is by the settlor transfer­ red to another to hold for the purposes of the trust.”

Trusts: Come On, Commit!

If one is beneficiary of a revocable trust, a creditor can have a lien against the property held in trust.

“§ 36C-5-505.  Creditor’s claim against settlor.

(a)        Subject to the other applicable law, whether or not the terms of a trust contain a spendthrift provision or the interest in the trust is a discretionary trust interest as defined in G.S. 36C-504(a)(2) or a protective trust interest as defined in G.S. 36C-5-508, the following rules apply:

(1)        During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.”

Creating an irrevocable trust makes another level of separation between the property and the beneficiary; less control in a sense, because the ability to take back the property is gone (it will go to the named beneficiaries upon death of settlor/trustor/grantor),  but this trust protects the property more completely, and can be made unreachable by any creditor.