Changes to North Carolina Trust Code Affect Estate Planning

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In August 2015, the Act to Amend the Law Governing Estate Planning and Fiduciaries (Senate Bill 336) was enacted to modify North Carolina’s Uniform Trust Code. The Act sets forth new provisions regarding trustee duties and liability, trust decanting, guardianship, and living probate.

What has the Act changed for estate planning in North Carolina?

• Trustee liability. Provisions were added that clarify the roles of trustee, co-trustee, and power holder, and the liability inherent in each role. Trustees generally are not liable for actions taken under the direction of a power holder. The amendments provide that the terms of a trust document cannot remove a power holder’s duty to act in good faith and in the best interests of the beneficiaries. The amendments also clarify that trustees are liable for a co-trustee’s actions, when made as a result of a trustee’s direction.
• Guardianship. Provisions were added to allow for appointment of a standby or successor guardian for incompetent adults. Previously only appointment of standby guardians for minor children was specifically addressed in Chapter 35A of the general statutes.
• Decanting. Irrevocable trusts in North Carolina can be modified under certain conditions. Decanting is one process that allows for modification to irrevocable trusts. The Act added provisions that provide greater flexibility for the use of decanting, particularly for certain Special Needs Trusts and Supplemental Needs Trusts.
• Living probate procedures. North Carolina’s Uniform Trust Code now provides for ‘living probate’ – a way for individuals to petition a court to declare their will valid while they are alive. This could help prevent will contests after the testator dies.