When it comes to estate planning in North Carolina, few topics generate more confusion than trusts and your primary residence. Hence, I’ve written this follow up to my last entry. While trusts can be powerful tools, there are many misconceptions about what they can—and can’t—do when it comes to your home.
Below, we’ll dispel some of the most common myths about trusts and real estate for North Carolinians, so you can plan with clarity and confidence.
Myth #1: You Must Put Your Home in a Trust to Avoid Probate in North Carolina
Reality:
Unlike many states where probate is notoriously expensive or lengthy, North Carolina’s probate process is relatively efficient, especially for smaller or well-organized estates. While placing your home in a revocable trust can avoid probate, it’s not always necessary. In fact, many homeowners can achieve similar results using joint ownership with right of survivorship, life estate deeds, or careful beneficiary designations.
That said, if you own real estate in multiple states or want more control over asset distribution, a trust may still be appropriate.
Myth #2: Putting My Home in a Revocable Living Trust Will Protect It from Nursing Home Costs
Reality:
This is a common—and dangerous—misunderstanding. A revocable living trust does not protect your home from Medicaid spend-down rules. Since you retain control over the assets in the trust, they are considered “available” resources for Medicaid eligibility purposes.
If long-term care planning is a concern, options like an irrevocable trust or planning around North Carolina’s Medicaid Estate Recovery Program may be more appropriate—but these require careful legal guidance.
Myth #3: A Revocable Trust Will Shield My Home from Lawsuits or Creditors
Reality:
A revocable trust offers no asset protection. Because you maintain full control and ownership of the trust during your lifetime, your home is still accessible to creditors, lawsuits, or claims against your estate. If asset protection is your goal, other strategies — such as irrevocable trusts or liability insurance — may be more appropriate.
Myth #4: Trusts Reduce Estate or Capital Gains Taxes
Reality:
This is another major misunderstanding. A revocable trust does not reduce your estate taxes or eliminate capital gains taxes. Your home remains part of your taxable estate, and for tax purposes, you are still the legal owner. However, the good news is that your beneficiaries may receive a step-up in basis at your death, just as they would if the property passed via a will — helping reduce capital gains if they later sell the property.
For high-net-worth individuals, more advanced tax planning is needed to reduce estate exposure.
Myth #5: I’ll Lose Control of My Home if I Put It in a Trust
Reality:
If you set up a revocable living trust and name yourself as trustee (which is very common), you retain full control over the property. You can live in the home, refinance, sell it, or even remove it from the trust if you change your mind. The trust only becomes irrevocable (and managed by someone else) after your death or incapacity—depending on how it’s written.
Myth #6: Trusts Eliminate All Costs After Death
Reality:
While a trust can help avoid probate, it doesn’t eliminate all estate-related expenses. You may still have costs related to trust administration, legal fees, property appraisals, or tax filings. However, in many cases, these costs are lower and more predictable than probate-related fees.
Myth #7: Trusts Are Only for the Wealthy
Reality:
You don’t have to be a millionaire to benefit from a trust. In fact, many North Carolina families use revocable living trusts for practical reasons, like avoiding probate for out-of-state property, simplifying administration during incapacity, or protecting vulnerable beneficiaries. Trusts offer flexibility and control, regardless of estate size.
Myth #8: Transferring My Home to a Trust Will Trigger Property Tax Increases or the Mortgage Will Be Called Due
Reality:
In North Carolina, transferring your home into a revocable trust does not affect your property tax valuation or exemptions, such as the homestead exclusion. And in most cases, mortgage lenders will not call the loan due if the transfer is to a revocable trust where the borrower remains the occupant and trustee. This is supported by federal law under the Garn-St. Germain Depository Institutions Act of 1982.
Still, it’s smart to review your mortgage documents and notify your lender when making any title changes.
Final Thoughts: What Should You Do?
Trusts can be valuable tools in North Carolina estate planning, but they’re not a magic solution for every homeowner. The right approach depends on your goals, family dynamics, and the type of assets you hold. Don’t let myths—and well-meaning but inaccurate advice—steer you in the wrong direction.
At Forbes Law Firm, we help North Carolina families separate fact from fiction when it comes to trusts and real estate. Whether you’re trying to avoid probate, plan for incapacity, or protect assets for future generations, our estate planning team can guide you through the best options for your situation.
Ready to get started? Schedule a consultation with us today.
