Privately Held Companies
While everyone benefits from having an RLT, it is not absolutely necessary for everyone. There are, however, a few issues that almost require the use of an RLT. Where a person or family owns a small business or privately held company, it is critical that they have a business succession plan in place. Depending on factors such as the size of the company, the number of owners, the potential for heirs to carry on the business, and whether there is a market for the company to be sold to third parties, that succession plan may center on an RLT, a buy-sell agreement, and/or the use of life insurance policies. Our office has attorneys who focus on business governance to help me with more complex business succession plans. Even if you company has little value after your death, it is important to ensure that it does not become an asset of your estate. Absent a corporate agreement or the company being funded into a trust could mean that the company becomes an asset of your estate. That would mean that the clerk of court could require that the heirs have the company appraised (which can be very expensive). It could also result in all the company’s information being made part of the public record, giving competition an insight into how your company is run. If that wasn’t bad enough, the company will not have anyone at the head until the probate process can get underway and then the clerk of court is going to charge $4 per thousand of the appraised value (up to $6,000). Owning a small business or having a stake in a closely held company makes it imperative that you spend some time to come up with a plan.

Real Estate in Multiple Place
Another issue that can increase the need for an RLT is owning multiple pieces of real estate. While real estate in North Carolina is a non-probate asset (which means is passes automatically at the time of death), if the heirs wish to sell the property, refinance the property, or use the property for collateral for a loan within two years of the death of the owner, a full probate is required. That is a pain and hurdle in and of itself, but the only thing worse than probate is multiple probates. Especially if the real estate is in multiple states. Most attorneys are only licensed in one state so your heirs will end up with more than one attorney handling an estate administration to get property clear. But the heirs will have inherited the property at the time of death, so they are responsible for its upkeep, taxes, insurance, and mortgage payments all while waiting on the months or years long probate process to unfold and grant them access to other resources or be able to sell the property. By placing property into an RLT, the successor trustee needs merely show a death certificate and sign a certificate of trust (included in the estate planning binder). That means the property can be listed for sale the day after death and sold shortly thereafter.

Mixed Families and Remarriage
Having kids from prior marriages is another reason to consider an RLT. Most people want to provide for a surviving spouse if he or she needs help. But they also want to make sure that their kids or beneficiaries get whatever is left over when the spouse passes. Using a Will does not allow us to do that because a Will can be changed anytime before death. Let’s say a married couple goes to an attorney to get an estate plan done. Each has one child from a prior marriage and one together. They both agree to sign mirror Wills that give everything to the surviving spouse and then when the last of them passes, everything is to be split evenly among the three kids. Husband dies first and wife inherits everything. A few years later, she has lost touch with husband’s oldest child and decides to redo her Will leaving everything to her two children, cutting the husband’s oldest child out entirely. That was not what the husband intended.
Using an RLT allows the husband (and wife) to hold all of his individually held assets in a marital trust and requiring that the marital trust can only be used if necessary for health, education, maintenance, and support. If the wife needs to access those funds for her wellbeing, she can do so, but whatever is leftover goes to his two kids.

RLTs usually also include a remarriage provision that locks the surviving spouse out of the marital trust if they get remarried unless and until the new spouse signs a prenuptial agreement waiving any rights to the marital trust. Husband doesn’t want his money going to the pool boy. This also allows us to hold some money in a separate trust that the surviving spouse cannot access if they were to be taken advantage of after you are gone. We have all seen scenarios where a widow is targeted by nefarious actors. Setting aside some money that is managed by a third person can create a peace of mind knowing that at least something is there in the worst-case scenario. The percentages we put into the marital trust and how each bucket of money is handled can all be tweaked and changed to match your goals and situation, but using a trust helps ensure that your wishes are carried out.