North Dakota Revocable Trusts: Estate Planning & Asset Protection

For North Dakota residents, revocable trusts can serve as useful estate planning tools to help manage your assets both during your lifetime and after death. Revocable trusts, also known as living trusts, allow you the flexibility to retain control over your assets as the trustee while outlining your wishes for asset distribution upon death or in the event of incapacity.

In this article, we will provide an overview of revocable trusts under North Dakota law—exploring what they are, their benefits for estate planning purposes, what assets can be included, how to create one, and reasons why North Dakotans may want to consider incorporating revocable trusts as part of robust estate plans.

What is a Revocable Trust?

A revocable trust, sometimes called a living trust, is a legal entity created during the grantor's lifetime to hold ownership of assets for the benefit of trust beneficiaries. As the name implies, revocable trusts can be changed or terminated at any time by the trust creator, known as the grantor or settlor, who typically names themselves as the initial trustee.

This allows maximum flexibility since the grantor maintains full control over the trust and trust assets during their life. Upon the grantor's death or incapacity, the revocable trust springs into effect to transfer assets directly to beneficiaries without probate, as outlined in the trust documents. Unlike irrevocable trusts, revocable trusts allow ongoing control rather than permanently relinquishing it.

Benefits of a Revocable Trust

• Avoid probate for assets placed in trust, reducing costs and delays.
• Maintain privacy in distributing assets after death, unlike wills which become public records.
• Designate beneficiaries and outline distribution instructions upfront per your wishes.
• Plan for possible incapacity by naming a successor trustee to manage assets.
• Retain control and ability to modify terms while alive as the grantor.
• Assets titled in trust pass directly to beneficiaries and avoid public court supervision.
• It can provide protection of assets for beneficiaries who may mismanage an inheritance.
• Complement other estate planning documents as part of an integrated strategy.
• Relatively easy and flexible to establish compared to irrevocable trusts.

Types of Assets to Include

1. Financial accounts: Savings/checking accounts, certificates of deposit, brokerage accounts, stocks.
2. Real estate: Primary home, investment properties, vacant land.
3. Business assets: Interests in privately owned companies and limited partnerships.
4. Motorized vehicles: Cars, trucks, boats, recreational vehicles.
5. Retirement accounts: IRAs, 401(k)s with properly designated beneficiaries.
6. Life insurance: Policies and death benefits by naming a trust as beneficiary.
7. Physical possessions: Jewelry, artwork, collectibles.
8. Royalties/mineral rights.
9. Proceeds that transfer by contract: Annuities, structured settlements.

How to Create a Revocable Trust in North Dakota

1. Consult an estate planning attorney licensed in North Dakota to draft the trust documents that match your goals.
2. Name a trustee to manage the assets - often you name yourself first.
3. Designate trust beneficiaries to inherit assets.
4. Outline instructions for asset distribution after death or incapacity.
5. Designate a successor trustee such as a family member or corporate trustee.
6. Provide trustee powers to manage investments and make distributions.
7. Sign a trust agreement to formalize the creation of the trust.
8. Obtain EIN from the IRS for tax filing purposes.
9. Prepare new deeds for real estate, transferring titles into trust name.
10. Open financial accounts in the name of trust, and change titles of assets.

Integrate Revocable Trusts in North Dakota Estate Planning

In North Dakota, revocable trusts are often used integrated with other estate planning documents as part of a comprehensive strategy. Proper coordination of your revocable trust with your Last Will and Testament is crucial to ensure assets are transferred seamlessly upon death or incapacitation.

Your will can name the trust as a beneficiary to avoid probate and provide instructions if any assets were not re-titled into the trust name. Powers of attorney also complement a trust plan by authorizing a chosen agent to handle finances if you become incapacitated.

A fully integrated estate plan crafted under legal guidance allows North Dakotans to maximize the usefulness of wills, trusts, and powers of attorney in furthering their asset distribution and protection objectives.

The Fundamentals of Trust

A trust is a three-party fiduciary arrangement created by a grantor or trustmaker and governed by a trustee, who manages assets for a stated purpose for the benefit of the named beneficiaries. The grantor who creates the trust transfers legal ownership of property or assets to the trustee.

As a fiduciary, the trustee has a duty to administer the trust and manage the trust assets properly and in good faith on behalf of the beneficiaries, per the instructions laid out in the trust documents.

The beneficiaries ultimately benefit from the assets in the trust according to distribution and use provisions. Careful designation of the trustee role as well as trust instructions and provisions are key to ensuring the grantor's intentions are carried out.

Reasons for Considering Revocable Trusts in North Dakota

Revocable trusts can benefit North Dakota residents in planning for asset management and distribution before and after death.

Reasons to consider incorporating a revocable trust include:

• Desiring privacy in distributing your estate versus public probate, planning for possible incapacity with a successor trustee.
• Mitigating family disputes by detailing exact distribution wishes upfront.
• Managing complex assets outside North Dakota with trust versus ancillary probate.
• Avoiding potential delays and expenses from the North Dakota probate process.
• Integrating well with other estate documents like wills and powers of attorney as part of a robust plan.

For those with assets in multiple states or those desiring control alongside flexibility, North Dakota revocable trusts can prove useful vehicles for estate planning and wealth transfer.

North Dakota Trust Major Features

• North Dakota permits purpose trusts, perpetual or dynasty trusts, asset protection trusts, and practically any kind of lawful trust.
• North Dakota does not tax trust income, unlike some states that tax all trust income or that of certain resident trusts.
• Trusts can continue for unlimited generations in North Dakota.
• The grantor naming themselves as sole trustee is permissible.
• North Dakota law authorizes trustees to perform all actions needed to administer a trust properly.
• Decanting allows assets from one trust to be transferred into a new trust with different terms.
• Trust roles like investment advisor or trust protector can be assigned to outside experts.
• More flexibility for trustees on what information must be shared with beneficiaries.
• Breach of trust actions face a 2-year limit.
• North Dakota venue rules prevent the transfer of trust litigation cases out of state.

North Dakota provides trust grantors, trustees, and beneficiaries with a very flexible and autonomy-focused legal environment for creating and administering trusts.

The Versatility of Revocable Trusts in Estate Planning

Revocable living trusts are valued in estate planning today for versatility that extends far beyond simply holding assets, as more basic trusts did in the past.

Modern advancements in trust law and best practice implementation methods allow revocable trusts to be used seamlessly for activities like managing significant retirement accounts, facilitating lifetime asset protection planning strategies, structuring incentive distributions to heirs based on criteria important to a grantor, dividing assets tax-efficiently between sub-trusts upon the first death of a married couple, and efficiently structuring estate plans larger than the federal estate tax exemption amount.

In the hands of specialized legal counsel, a customized revocable trust plan wields many possibilities for North Dakota residents pursuing personalized wealth transfer and asset protection objectives.

The Power of Trusts Over Asset Distribution

One of the primary appeals of revocable trusts in estate planning is the power and control they give grantors over directing the ultimate distribution of assets to heirs and beneficiaries. Properly crafted trust distribution provisions allow grantors to place enforceable conditions and incentives around distributions, both for beneficiaries and for trustee actions.

For example, a grantor may desire to distribute trust assets in stages to an heir - providing a third at age 25, half the balance at 30, and the remainder at 35. The grantor may make full distribution conditional on the beneficiary earning a college degree. These types of incentive structures can be customized.

Trusts also allow the grantor to appoint an institutional trustee to stand between heirs and their inheritance with accountability measures in place. Mandatory trustee accounting provisions coupled with limited beneficiary withdrawal rights provide oversight.

In essence, revocable trusts allow grantors to deliberately shape future events surrounding asset transfers by defining the “rules of the game” upfront. This facet gives trusts more tailored control than outright asset transfers or probate proceedings could achieve.

Preserving Assets and Directing Distribution

A driving motivation for many individuals creating revocable trusts is putting provisions in place to preserve wealth and directly guide its distribution after death. Trusts allow grantors to outline what assets should be retained versus liquidated or sold by trustees, preventing quick depletion of principal.

Detailed instructions in the trust document can segment distributions, providing guidance to trustees on what percentages or fixed dollar amounts beneficiaries should receive at set ages or life stages per the grantor’s wishes.

Careful trust drafting allows grantors to deliberately plan for asset preservation paired with directed, customized distribution schemes to transfer wealth in a controlled manner.

Conclusion

For North Dakota residents, revocable living trusts can serve as versatile estate planning tools when crafted carefully with the guidance of legal professionals. They allow grantors to retain control of assets while planning for seamless distribution upon death and possible incapacity.

Revocable trusts enable you to spell out detailed instructions for asset usage by heirs and beneficiaries when integrated thoughtfully with other planning documents like wills. With customized trusts, grantors can creatively incentivize beneficiaries, provide oversight of inheritance, and preserve wealth for future generations. Revocable trusts ultimately offer flexibility and control - two valuable commodities for comprehensive estate planning.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.