North Myrtle Beach Attorney for Trust Formation

If you would like to form a trust, or if you have any questions about estate planning services in Myrtle Beach, call Bespoke Estate Law. We have many years of experience in the formation of trusts, wills, and other estate planning vehicles. We would be happy to schedule a free consultation with you where we can learn of your unique situation, and set forth a course of action for you to protect your assets. We look forward to hearing from you.

How Do Trusts Work?

The formation of a trust is an excellent way to manage your estate efficiently and cost-effectively. A trust assures that your property will be distributed appropriately and efficiently to your loved ones according to your wishes.

The execution of a trust is also a form of legal protection. Trust formation avoids probate proceedings, which can be lengthy and costly. The beneficiaries of your properties can receive your assets free and clear of probate proceedings, which generally take a minimum of one year to complete even for a relatively simple estate. More importantly, beneficiaries of an irrevocable trust enjoy significant tax benefits, while potentially reducing estate taxes.

In Myrtle Beach and South Carolina generally, the formation of trusts is governed under the South Carolina Trust Code (SCTC) and the South Carolina Probate Code (SCPC). Essentially, trust is a legal arrangement in which the owner of the property (grantor or settlor) gives property to another (trustee), who must manage the property for the benefit of another (beneficiary).

Different Types of Trusts in South Carolina

Under SC law, there are four (4) major types of trusts, each with their own advantages and disadvantages. To determine which type of trust best suits your needs, you need to consult with an experienced estate planning attorney who is aware of all of the latest developments of the law. The value and variety of your property, the intended purpose of the trust, and various other life circumstances will influence what is the best route for you to take for yourself and your beneficiaries.

Revocable Trust [S.C. Code Section 62-7-103(13)]

A revocable trust is one where you retain full management and control over trust assets during your lifetime. Trust assets are still taxed to your social security number, and you may amend your trust during your lifetime. In a legal sense, you retain title and ownership of your property while alive. As a result, your assets remain part of your estate and are subject to estate tax. All assets in a revocable trust avoid probate.

Irrevocable Trust [S.C. Code Section 62-7-411]

In contrast to a revocable trust, an irrevocable trust cannot easily be altered after its execution. An irrevocable trust can be utilized to reduce estate tax, shelter assets from creditors or lawsuits, and plan for potential nursing home care. Upon forming an irrevocable trust, the settlor is no longer considered the owner of his properties; instead, a third party trustee must hold the assets in a fiduciary capacity for the settlor's benefit. Assets placed in an irrevocable trust avoid probate, and are not subject to estate tax.

Testamentary Trust [S.C. Code Section 62-7-401(a)(1)(i)]

A testamentary trust becomes effective upon the death of the trustor or settlor. It is formed by the execution of a testamentary will which contains provisions subjecting a part of the estate to a trust in favor of named beneficiaries. Testamentary trusts may be utilized when a distribution will be made to minor children or persons with disabilities. Unlike forming a revocable trust during your lifetime, assets in a testamentary trust must be probated.

Special Needs Trust [S.C. Code Section 62-7-503(c)]

A special needs trust (SNT) is designed to safeguard the interests of a disabled beneficiary. SNTs contain provisions that prevent a special needs person from receiving a large distribution at one time and rendering them ineligible for governmental assistance programs. SNTs may also be utilized to provide for individuals who are not particularly responsible with money. Assets placed in a SNT avoid probate, and remain in trust to be distributed for the beneficiaries' benefit.

Trust Formation in South Carolina

Under Section 62-7-402 of the SCTC, a valid trust is formed if the following are present:

1. The settlor has the capacity to create trust.

2. The settlor indicates an intention to create the trust.

3. The trust has a definite beneficiary or is; (a) a charitable trust, (b) a trust for the care of an animal, or (c) a trust for a non charitable purpose.

4. The trustee has duties to perform.

5. The same person is not the sole trustee and sole current and future beneficiary.

Notably, under Section 62-2-501 of SCPC, the capacity to form a trust requires the trustor to be of sound mind and not a minor. A person of sound mind means that the person is capable of rational thought or decision-making, free of any mental illnesses or any form of drugs impairing the mind. This ensures that the trust was executed by the trustor's own volition, free from any form of coercion or fraudulent machinations.

On the other hand, a minor, as defined under Section 62-1-201(27) of the SCPC, refers to any person under 18 years of age. A person is not considered a minor if they are under 18 years of age, but have already married or been emancipated by a court decree.

What Does a Trustee Do?

In a trust agreement, the trustee is deemed as the legal owner of the properties on behalf and for the benefit of the beneficiaries. To safeguard the interests of the trust's owner and the beneficiaries, the law imposes upon the trustee fiduciary duties and responsibilities that must be strictly complied with.

Duty of Loyalty (S.C. Code Section 62-7-802)

The duty of loyalty mandates that the trustee manage the trust exclusively for the benefit of the beneficiaries. Accordingly, the trustee must avoid transactions involving trust properties that could create a conflict of interest or result in self-dealing.

Duty of Impartiality (S.C. Code Section 62-7-803)

The trustee must act impartially in investing, managing, and distributing the trust property, while considering the individual interests of the beneficiaries.

Duty to Inform and Report (Section 62-7-813)

Upon the Settlor's death, the successor trustee is required to inform the beneficiaries of the trust's existence and other pertinent information concerning distributions. A trustee may also be required to send annual reports of the trust property to the beneficiaries. For these purposes, he must keep adequate records of the trust's administration.

There are a multitude of factors to consider when forming a trust. The formation can be a complex process depending on the breadth of your assets, goals, family dynamics, health, age, and other legal implications. The assistance of an experienced estate planning attorney can help you identify and create a trust that is tailored to suit your needs and circumstances.

Call a Trust Attorney in North Myrtle Beach Today

At Bespoke Estate Law, our experienced trust formation attorneys can handle all your estate planning needs. We are a leading law firm that specializes in providing comprehensive estate planning, business law, contract law, and probate & trust administration services to clients in the North Myrtle Beach area. Contact us today to get in touch with a dedicated trust formation attorney. We also provide estate planning services in Wilmington and all of the surrounding areas.