Trusts Archives - De Bruin Law Firm

Decanting an Irrevocable Trust in South Carolina: When and How Is It Possible?

October 22, 2025/in Trusts

The term “irrevocable” suggests permanence, a legal structure set in stone, unable to be altered or revoked. For many individuals in South Carolina who have established or benefit from an irrevocable trust, this belief can lead to a sense of helplessness when circumstances change. Life is unpredictable, and a trust created years or even decades ago may no longer serve the family’s best interests due to shifts in tax law, beneficiary needs, or unforeseen family dynamics. Fortunately, “irrevocable” does not always mean “un-changeable.” A powerful and sophisticated legal tool known as decanting can often provide the flexibility needed to adapt an old trust to modern realities.

What Does “Irrevocable” Really Mean for a Trust?

An irrevocable trust is a legal arrangement where the creator, known as the settlor or grantor, permanently transfers assets into a trust managed by a trustee for the benefit of named beneficiaries. Once created and funded, the settlor typically cannot amend or dissolve the trust. This permanence is often intentional, designed to achieve specific goals like:

Estate Tax Reduction: By removing assets from the settlor’s personal estate, an irrevocable trust can reduce or eliminate future estate tax liability.
Asset Protection: Assets held within the trust are generally shielded from the creditors of both the settlor and the beneficiaries.
Medicaid and Government Benefits Planning: It can help individuals qualify for long-term care benefits by reducing their countable assets.

While these are powerful advantages, the trade-off is a lack of flexibility. The rules governing the trust are fixed. A revocable living trust, by contrast, can be changed or canceled by the settlor at any time. The challenge arises when an irrevocable trust’s unchangeable nature conflicts with a necessary change.

What is Trust Decanting?

The term “decanting” is borrowed from the world of wine. When a winemaker decants an old bottle of wine, they carefully pour the liquid into a new vessel, leaving the unwanted sediment behind. Trust decanting operates on a similar principle. It is the legal process of a trustee using their discretionary power to “pour” the assets from an existing irrevocable trust into a new irrevocable trust that has updated and more favorable terms.

The old, problematic provisions are left behind in the original trust, while the assets move into a new trust instrument better suited for the current situation. This is not a way to undo the trust but rather a method to restate its terms within a new framework, all while respecting the settlor’s original intent.

Why Might a Trustee Consider Decanting a Trust in South Carolina?

Trustees and beneficiaries may seek to decant a trust for a multitude of reasons. The need for modification is rarely due to a single issue but often a combination of factors that have emerged over time. Some of the most common motivations include:

Correcting Drafting Errors or Ambiguities: Older trust documents may contain ambiguous language or simple scrivener’s errors that create administrative confusion or lead to disputes. Decanting can clarify these terms without the need for costly court proceedings.
Updating Administrative Provisions: A trust may have outdated administrative rules. For example, it might name a successor trustee who has since passed away or become incapacitated, or it may lack provisions for appointing or removing trustees. Decanting allows for the modernization of these essential mechanics.
Adapting to Changes in the Law: Federal and state laws related to taxes, estates, and trusts are constantly evolving. A trust drafted under an old tax code may be inefficient or even detrimental under current law. Decanting can update the trust to take advantage of new tax-saving strategies.
Addressing a Beneficiary’s Changed Circumstances: A beneficiary’s life can change in unexpected ways. They might develop a disability, requiring the creation of a special needs trust to protect their eligibility for government benefits. Alternatively, a beneficiary may be struggling with creditors, divorce, or substance abuse issues, making it prudent to place assets in a new trust with stronger protections.
Improving Tax Efficiency: The new trust can be structured to minimize various taxes, including state income tax (by moving the trust’s location or “situs” to a no-income-tax state), federal estate tax, and the Generation-Skipping Transfer (GST) tax.
Combining or Separating Trusts: It can be inefficient to manage multiple small trusts for the same family. Decanting can consolidate them into a single, more cost-effective trust. Conversely, a single large trust for multiple family branches might be split into separate trusts to avoid conflicts and tailor distributions to each branch’s unique needs.

What is the Legal Authority for Decanting in South Carolina?

Unlike many states that have enacted specific statutes explicitly authorizing trust decanting, South Carolina does not have a dedicated decanting law. However, this does not mean decanting is impossible. The authority for a trustee to decant a trust in South Carolina can be found in several places:

The Trust Document Itself: A well-drafted trust may contain a provision that explicitly gives the trustee the power to decant. This is the most straightforward source of authority.
The South Carolina Uniform Trust Code (UTC): While the UTC in South Carolina does not have a specific decanting section, other provisions can be interpreted to permit it. A trustee’s broad discretionary power to distribute trust principal to or for the benefit of a beneficiary can often be interpreted as the power to distribute those assets to a new trust for that same beneficiary.
Common Law: Decades of case law have established broad powers for trustees acting in the best interests of the beneficiaries. A trustee’s fiduciary duty may not only permit but sometimes compel them to take action, like decanting, to better protect and manage the trust assets.

Because the authority is not derived from a single, clear statute, navigating this process requires a careful legal analysis of the original trust document and the relevant provisions of the South Carolina Trust Code.

Who Has the Power to Decant a Trust?

The primary actor in a decanting is the trustee. However, not every trustee has this power. The key requirement is that the trustee must have discretionary authority to make distributions of the trust’s principal (the assets) to the beneficiaries.

The scope of the trustee’s decanting power often depends on the breadth of their discretion. For example:

Absolute Discretion: If a trustee has “absolute,” “sole,” or “unfettered” discretion to distribute principal, they generally have the broadest power to decant assets into a new trust with significantly modified terms.
Limited Discretion: If the trustee’s discretion is limited by a standard—for example, they can only make distributions for a beneficiary’s “health, education, maintenance, and support” (HEMS)—their power to decant is more restricted. The new trust must generally retain the same limitations.

A trustee cannot decant a trust if their role is limited to making only mandatory income distributions. The power is tied directly to the ability to distribute the underlying principal of the trust.

What is the Process for Decanting a Trust?

Executing a decanting is a formal legal process that must be handled with precision to ensure its validity. While the specifics can vary, the general steps include:

Review the Original Trust Document: The first step is a thorough analysis of the existing trust to identify the trustee’s distribution powers, any restrictions on that power, and the rights of the beneficiaries.
Analyze Trustee’s Authority: A legal determination must be made that the trustee has the authority to decant under the terms of the trust and South Carolina law. This involves confirming that the action is consistent with the trustee’s fiduciary duties.
Draft the New Trust: An entirely new irrevocable trust is drafted. This document will contain the updated provisions and will be structured to receive the assets from the original trust.
Provide Notice to Beneficiaries: In South Carolina, a trustee is typically required to provide notice of the proposed decanting to all qualified beneficiaries. This notice period gives beneficiaries an opportunity to review the changes and raise any objections.
Execute the Decanting: Once the notice period has passed without objection, the trustee executes a legal instrument that exercises their power of appointment. This document formally transfers the assets from the old trust to the new trust.

What Are the Limitations on a Trustee’s Decanting Power?

Decanting is a powerful tool for modifying irrevocable trusts, but it is not without significant limitations. A trustee cannot exercise this power to make changes that fundamentally violate their fiduciary duties or the core purpose for which the trust was established. Understanding these key limitations is crucial for any trustee considering decanting.

Fiduciary Duties: Paramount among these limitations are the trustee’s fiduciary duties. Any decanting action must be undertaken in good faith and, most importantly, in the best interests of all beneficiaries. A trustee is strictly prohibited from decanting a trust to benefit themselves, such as by increasing their own compensation, or to favor one beneficiary over others without a valid and compelling reason that aligns with the settlor’s original intent. The trustee’s loyalty must remain with the beneficiaries as a whole.
Beneficiary Rights: The rights of the beneficiaries are also a critical constraint. The new trust created through decanting cannot eliminate or diminish a beneficiary’s vested right. For instance, if the original trust explicitly grants a beneficiary a current, mandatory right to receive all trust income, the decanted trust cannot alter this provision to make income distributions discretionary. Such a change would fundamentally impair a vested interest.
Adding New Beneficiaries: A trustee does not have the authority to introduce entirely new beneficiaries who were not initially included in the original trust instrument. The pool of beneficiaries for the new, decanted trust must either be identical to the original beneficiaries or constitute a subset of those original beneficiaries. This limitation ensures that the trust’s scope remains consistent with the settlor’s initial charitable or familial intentions.
Respecting the Settlor’s Intent: One of the most significant overarching limitations is the requirement to respect the original settlor’s probable intent. Decanting should be employed to further or clarify the settlor’s original goals, not to completely rewrite the purpose of the trust in a way that contradicts those goals. While decanting can address unforeseen circumstances or adapt to changing laws, it cannot be used as a means to fundamentally alter the settlor’s foundational wishes regarding the trust’s objectives and beneficiaries.
Rule Against Perpetuities: Finally, the new trust established through decanting cannot extend the duration of the trust beyond the period allowed by law. This is typically governed by the rule against perpetuities, which prevents trusts from existing indefinitely and tying up assets for an unreasonable length of time. Adherence to this rule ensures that trust assets will eventually vest in identifiable beneficiaries within a legally defined period.

How Does Decanting Compare to Other Methods of Trust Modification?

Decanting is one of several ways to alter an irrevocable trust, and it is often the most effective when unanimity is not possible. Other common methods include:

Judicial Modification: This involves petitioning a court to approve changes to the trust. It can be effective but is also public, time-consuming, and expensive.
Non-Judicial Settlement Agreements (NJSAs): Under the South Carolina Trust Code, trustees and beneficiaries can enter into a binding agreement to modify a trust. However, this requires the consent of all parties, which can be difficult or impossible to obtain if there are minor beneficiaries, uncooperative family members, or unborn future beneficiaries.
Trust Protector Actions: Some modern trusts name a “trust protector,” a third party with the specific power to amend the trust. If the trust has a protector with this authority, their action may be a simpler path than decanting.

Decanting is particularly valuable when a trustee needs to act, but obtaining the consent of every beneficiary for an NJSA is not feasible.

Navigating Complex Trust Matters with Confidence

The ability to decant an irrevocable trust provides a vital solution for families whose financial and personal situations have outgrown the confines of an older estate plan. It allows for the thoughtful and strategic adaptation of a trust to protect beneficiaries, improve tax outcomes, and ensure the trust functions as intended for generations to come. However, given the lack of a specific decanting statute in South Carolina, the process demands careful legal guidance from attorneys familiar with state trust law.

The DeBruin Law Firm is committed to providing knowledgeable counsel to trustees and beneficiaries across Greenville and the surrounding communities. We can help you evaluate whether decanting is a viable option for your trust and guide you through every step of the process, ensuring compliance with all legal and fiduciary requirements.

If you are managing or benefiting from a trust that no longer meets your family’s needs, please contact us at (864) 982-5930 or send a message online to schedule a consultation.

Choosing Between a Corporate Trustee and Family Member in Greenville, SC

October 22, 2025/in Trusts

Creating a trust is one of the most thoughtful and impactful steps you can take in planning for your family’s future. It is an act of foresight, designed to protect your assets and provide for your loved ones long after you are gone. However, the document itself is only half of the equation. The person or entity you choose to carry out your wishes—the trustee—is just as important. For many families in Greenville, this decision boils down to a deeply personal choice: appointing a trusted family member or engaging the services of a professional corporate trustee.

This is not a simple decision, and there is no single correct answer. The right choice depends entirely on your family’s dynamics, the complexity of your assets, and the long-term goals of your trust.

What Exactly is the Role of a Trustee?

Before comparing candidates, it is vital to know what the job entails. A trustee is more than just a gatekeeper of funds. They are a fiduciary, which is a legal term for someone who must act in the best interests of another party—in this case, the trust’s beneficiaries. This is the highest standard of care recognized by law, and it comes with a significant list of responsibilities.

The primary duties of a trustee include:

Loyalty and Impartiality: The trustee must administer the trust solely in the interest of the beneficiaries. If there are multiple beneficiaries, the trustee must act impartially, without favoring one over another.
Prudent Asset Management: The trustee is responsible for managing, investing, and protecting the trust’s assets. This requires sound financial judgment and a strategy that balances growth with risk.
Adherence to the Trust Document: The trustee’s primary instruction manual is the trust document you create. They must follow your instructions for how and when to distribute assets to beneficiaries.
Detailed Record-Keeping: A trustee must maintain meticulous records of all transactions, including investments, distributions, and expenses. They are required to provide regular accountings to the beneficiaries.
Tax Compliance: The trustee is responsible for filing the trust’s annual income tax returns and ensuring all tax obligations are met.
Communication: A trustee must keep beneficiaries reasonably informed about the trust’s administration and promptly respond to requests for information.

This is a demanding, time-consuming, and legally significant role. A mistake, even an unintentional one, can lead to personal liability for the trustee.

The Case for Appointing a Family Member or Friend as Trustee

The impulse to name a spouse, adult child, sibling, or close friend as trustee is a natural one. This is the person who knows your family, understands your values, and has a personal connection to the beneficiaries. The arguments in favor of this approach are compelling and rooted in familiarity and trust.

Advantages of a family trustee often include:

Personal Knowledge: A family member likely knows the beneficiaries personally. They may have a better grasp of a beneficiary’s character, needs, and life circumstances, which can be invaluable when making discretionary distributions.
Cost Savings: While a family member is entitled to reasonable compensation for their services under South Carolina law, many choose to waive their fee. This can reduce the administrative costs of the trust, leaving more assets for the beneficiaries.
Deep-Seated Trust: You are placing your legacy in the hands of someone you have known and trusted for years. This existing relationship can provide significant peace of mind.
Potential for Flexibility: A family member may be more willing to work with a beneficiary on a unique request, whereas a corporate entity might be more bound by rigid policies.

For a straightforward trust with modest assets and cooperative beneficiaries, a responsible and financially savvy family member can be an excellent choice.

What Are the Potential Pitfalls of Choosing a Family Trustee?

While appointing a loved one feels right on an emotional level, it can introduce a host of practical and legal complications. The role of a trustee can place an immense burden on an individual and, in some cases, do irreparable harm to family relationships.

The potential disadvantages are significant:

Lack of Knowledge: Does your brother, the skilled carpenter, or your daughter, the dedicated teacher, have the financial acumen to manage a diverse investment portfolio? Do they know how to prepare fiduciary tax returns or navigate the complexities of the South Carolina Trust Code? A lack of knowledge can lead to poor investment decisions or legal missteps, ultimately harming the trust.
Emotional Conflicts of Interest: This is perhaps the greatest risk. Imagine one of your children, acting as trustee, must deny a distribution request from their sibling. This can create resentment and accusations of favoritism that can tear a family apart. A trustee must be able to say “no,” and that is exponentially harder when dealing with a family member in need.
The Burden of the Job: Administering a trust is a lot of work. It requires time, organization, and attention to detail. Your chosen family member may have their own career, family, and responsibilities. They may simply not have the bandwidth to do the job properly, leading to missed deadlines and sloppy record-keeping.
Personal Liability: A family trustee is held to the same high fiduciary standard as a professional. If they make a mistake that costs the trust money, the beneficiaries can sue them, and they could be held personally liable for the damages.
Continuity Issues: What happens if the family member you choose becomes ill, moves away, or passes away? While you should always name successor trustees, an individual trustee introduces a potential point of failure that a corporate entity does not have.

The Alternative: What is a Corporate Trustee?

A corporate or professional trustee is an institution, such as a bank’s trust department or a dedicated trust company, that serves as a professional fiduciary. These institutions are in the business of managing trusts. They employ teams of professionals, including investment managers, tax accountants, and legal compliance officers, all dedicated to trust administration.

Engaging a corporate trustee means shifting the responsibility from a loved one to a regulated, professional entity whose sole purpose is to carry out the duties of a trustee competently and objectively.

What Are the Advantages of Using a Corporate Trustee?

For trusts with significant or complex assets, or families with a history of conflict, a corporate trustee offers a level of professionalism and objectivity that an individual simply cannot match.

The primary benefits of a corporate trustee include:

Knowledge and Experience: These institutions have deep knowledge in asset management, tax law, and trust administration. They handle these matters every day and have established processes to ensure everything is done correctly and in compliance with the law.
Unbiased Objectivity: A corporate trustee has no emotional connection to the beneficiaries. Their decisions are based solely on the terms of the trust document and their fiduciary duty. They can make difficult decisions, like denying an imprudent distribution request, without creating family drama. This impartiality is invaluable in preserving family harmony.
Regulatory Oversight: Corporate trustees are highly regulated by both state and federal agencies. This oversight provides an added layer of protection for the trust assets and ensures that the institution adheres to strict operational standards.
Permanence and Continuity: A corporate trustee does not get sick, take a vacation, or pass away. The institution provides uninterrupted management for the life of the trust, ensuring a seamless transition between individual trust officers if one leaves the company.
Resources and Infrastructure: Professional trustees have sophisticated systems for accounting, record-keeping, investment management, and tax reporting. This ensures accuracy and efficiency in the administration of the trust.

Are There Downsides to a Corporate Trustee?

Of course, the professional option is not without its own set of considerations. For some families, the perceived drawbacks are enough to steer them toward an individual trustee.

Common concerns about corporate trustees are:

Fees: Professional management comes at a cost. Corporate trustees charge an annual fee, which is typically a percentage of the assets they manage. These fees are a direct expense to the trust and should be weighed against the value of the services provided.
Bureaucracy and Rigidity: Because they are large, regulated institutions, corporate trustees can sometimes feel impersonal or inflexible. A beneficiary may need to go through several layers of approval for a request that a family member might grant instantly.
Staff Changes: While the institution is permanent, the individual trust officer assigned to your family’s account can change over time due to promotions or employee turnover. This can disrupt the personal relationship that may have developed.
Investment Philosophy: A corporate trustee will have its own investment models and strategies. These may be more conservative than you or your beneficiaries might prefer.
Asset Minimums: Many banks and trust companies will only agree to manage trusts that meet a certain asset threshold, which can be a barrier for smaller estates.

A Hybrid Approach: Naming a Co-Trustee

For many Greenville families, the optimal solution is not an either/or choice. It is possible to appoint a family member and a corporate trustee to serve together as co-trustees. This hybrid approach can offer the best of both worlds.

In a co-trustee arrangement:

The family member provides the personal touch. They understand the family history and the unique needs of the beneficiaries.
The corporate trustee handles the heavy lifting of the day-to-day administration, including investments, accounting, and tax filings.

This structure allows the family to maintain a personal connection to the trust’s administration while benefiting from the knowledge, resources, and objectivity of a professional. The trust document can even specify how responsibilities are to be divided between the co-trustees.

How Do South Carolina Laws Impact Trustee Selection?

Regardless of who you choose, your trustee will be bound by the South Carolina Trust Code. This body of law outlines the specific duties and powers of a trustee in our state. It establishes the “prudent investor rule,” which requires a trustee to manage trust assets as a prudent person would, considering the purposes, terms, and other circumstances of the trust.

Choosing a trustee who is unfamiliar with these legal obligations is risky. Should a dispute arise, it would likely be heard in the Greenville County Probate Court. A well-drafted trust administered by a competent trustee is the best defense against costly and painful family litigation. An experienced local attorney can help ensure your chosen trustee is prepared to comply with all relevant state laws.

Key Questions to Ask When Making Your Decision

As you weigh your options, consider these questions in the context of your own family and financial situation:

How complex are the trust assets? Does the trust hold a family business, commercial real estate, or other hard-to-manage assets?
What are the specific needs of the beneficiaries? Does a beneficiary have special needs, a history of financial irresponsibility, or a difficult relationship with other family members?
What is the potential for conflict within the family? Would appointing one child as trustee create jealousy or resentment among their siblings?
Does your preferred family member truly have the time, skills, and emotional temperament to handle the job?
Are you and your beneficiaries comfortable with the fee structure and institutional nature of a corporate trustee?
Could a co-trustee arrangement provide the right balance of personal insight and professional management?

Making the Final Choice for Your Greenville Estate Plan

The decision of who will steward your legacy is one of the most important you will make. Choosing a family member offers a personal connection and potential cost savings, but it comes with the risk of inexperience and family conflict. A corporate trustee provides professional, objective management but at a financial cost and with a more formal approach.

At the DeBruin Law Firm, we are dedicated to helping individuals and families in Greenville and throughout South Carolina navigate these important estate planning decisions with confidence. We can help you analyze your situation and structure a trust that not only reflects your wishes but is also set up for successful administration. If you are ready to explore your options or have questions about how to best protect your family’s legacy, please reach out to us.

To discuss your estate planning needs, contact us today at (864) 982-5930 or send a message online to schedule a consultation.

Setting Up a South Carolina Gun Trust: Requirements for Greenville Residents Owning NFA Items

September 23, 2025/in Trusts

For gun owners in South Carolina, the process of acquiring and owning firearms, particularly those regulated by the National Firearms Act (NFA), involves specific legal steps. A gun trust, also known as an NFA trust or firearms trust, is a legal tool designed to simplify this process while ensuring compliance with federal and state laws. At its core, an NFA trust is a revocable living trust created specifically for holding NFA items. These items are a class of firearms and accessories heavily regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).

Common NFA items include:

Silencers/Suppressors: Devices that reduce the sound of a gunshot.
Short-Barreled Rifles (SBRs): Rifles with a barrel length of less than 16 inches, or an overall length of less than 26 inches.
Short-Barreled Shotguns (SBSs): Shotguns with a barrel length of less than 18 inches, or an overall length of less than 26 inches.
Machine Guns: Fully automatic firearms.
Any Other Weapons (AOWs): A broad category that includes disguised firearms or pens guns.
Destructive Devices (DDs): Explosive ordnance or firearms with a bore diameter over a half-inch.

While an individual can purchase NFA items directly, an NFA gun trust offers several significant advantages. The trust acts as the legal owner of the firearms, which provides greater flexibility and control over the assets. This is especially important for NFA items, which have strict regulations concerning possession and transfer.

How Does a Gun Trust Simplify the Process?

When an individual applies for an NFA item, they are the sole owner. If they want to allow someone else to use the firearm, they must be present. A gun trust, on the other hand, allows for multiple “trustees” to be named in the document.

The benefits of a gun trust include:

Shared Possession and Use: All named trustees can legally possess and use the NFA items owned by the trust, without the need for the original owner to be present. This is a primary reason why many Greenville residents opt for a trust.
Estate Planning: A gun trust acts as an estate planning tool. It dictates exactly who will inherit the NFA items upon the original owner’s death, bypassing the lengthy and public probate process. This prevents the possibility of a loved one unintentionally committing a felony by possessing an NFA item they are not legally allowed to own.
Avoiding Individual Paperwork: While each trustee must still pass a background check, the trust itself is the legal entity that submits the application. This can sometimes streamline the application process for items, though it doesn’t eliminate the need for ATF approval.
Privacy: Unlike individual applications, which often require a sign-off from the local chief law enforcement officer (CLEO) and public fingerprint cards, a trust application is a more private process.

What Are the Key Requirements for a South Carolina Gun Trust?

A valid NFA gun trust must be properly executed in accordance with South Carolina state law. The document needs to be legally sound to stand up to both state and federal scrutiny. A poorly drafted trust can lead to serious legal issues, including potential felony charges.

The essential components of a South Carolina gun trust are:

Grantor: The person who creates the trust and funds it with property (the NFA items). This is typically the original owner.
Trustee(s): The individuals authorized to possess, use, and manage the trust’s assets. All trustees must be legally eligible to own firearms.
Beneficiary(ies): The individuals who will ultimately receive the trust’s assets upon the death or incapacitation of the grantor.
Successor Trustee(s): Individuals who will take over management of the trust if the original trustees are unable to serve.

For the trust to be legally binding in South Carolina, the document must be:

In writing.
Signed by the grantor.
Notarized to prove authenticity.

While it is possible to use a pre-made online template, this can be risky. A generic trust may not comply with all South Carolina-specific trust and firearms laws, leaving potential gaps that could invalidate the trust. A professionally drafted trust is tailored to your specific needs and ensures compliance with all relevant state and federal regulations.

How Do You Add NFA Items to Your Trust?

Once your gun trust is established, the process of acquiring an NFA item changes slightly. The trust, not you as an individual, becomes the applicant for the item.

The steps for adding an NFA item to a trust typically involve:

Select the Item: Choose the NFA item you wish to purchase from a licensed dealer in Greenville or elsewhere.

Complete the ATF Form 4: This is the application to transfer a registered NFA firearm. The form will be completed by the dealer and the trust.

Provide Required Documentation: The trust must submit the following:

A completed Form 4 application.
A copy of the fully executed and notarized trust document.
Fingerprint cards for each trustee.
Passport-style photos for each trustee.
The required tax stamp fee ($200 for most items, payable to the ATF).

Submit to the ATF: The dealer will submit the package to the ATF for review.

Wait for Approval: The ATF will conduct a thorough background check on all trustees and review the trust documents. This process can take several months.

Transfer the Item: Once the application is approved and the tax stamp is issued, the dealer can legally transfer the NFA item to the trust.

It is vital that all trustees listed in the trust are legally eligible to own firearms. The ATF will deny the application if any trustee is a “prohibited person,” such as someone with a felony conviction or a history of domestic violence.

What Are the Rules for Trustees in South Carolina?

In South Carolina, a trustee of a gun trust has a significant legal responsibility. The position is not ceremonial. A trustee can legally possess and use the NFA items of the trust. This means they are subject to the same legal scrutiny as the grantor.

Key considerations for trustees include:

Legal Eligibility: Every trustee must be a person who is not prohibited from owning a firearm under state and federal law. This includes passing a background check.
Responsibility: Trustees are legally responsible for the actions of the trust. If a trustee were to use an NFA item illegally, it could jeopardize the entire trust and all its assets.
Communication: A trustee must be able to communicate effectively with the grantor and other trustees. It is important for everyone involved to have a clear understanding of the trust’s rules and purpose.
Fiduciary Duty: While a gun trust is less about financial management, trustees still have a fiduciary duty to the trust and its beneficiaries. They must act in the best interest of the trust.

It’s common for a grantor to name themselves as the initial trustee and add trusted family members or friends. However, it’s essential to have a clear discussion with these individuals about the responsibility before naming them in the trust document.

Gun Trusts and Estate Planning: Securing Your Legacy

One of the most valuable aspects of a gun trust is its role in estate planning. The trust ensures a seamless and legal transfer of NFA firearms upon your death.

Without a trust, an NFA item becomes part of your estate. Your executor, who may or may not be legally allowed to own firearms, must then apply to the ATF to transfer the items to the intended heir. This process is time-consuming and filled with legal complexities. If the heir is not a legally eligible person, the firearm may have to be sold to a dealer or even surrendered to authorities.

With a gun trust:

A seamless transfer: The trust dictates who the beneficiary is, and a successor trustee can manage the transfer of the assets to them.
Probate avoidance: Because the NFA items are owned by the trust, not the individual, they do not go through the public, often lengthy, probate process. This maintains privacy and speeds up the transfer.
Legal protection: The trust ensures that the items are only transferred to legally eligible individuals, protecting both the deceased’s wishes and the heir from legal trouble.

How Does South Carolina State Law Affect Gun Trusts?

South Carolina law has its own set of firearms regulations that a gun trust must adhere to. While federal law governs NFA items, state law often determines the specific requirements for a trust to be valid.

Key South Carolina legal considerations include:

Trust Law: South Carolina has specific laws governing the creation, administration, and dissolution of trusts. A gun trust must be drafted to comply with these state-specific requirements.
Firearms Regulations: While South Carolina is a gun-friendly state, it does have laws regarding possession and use of firearms. For example, local ordinances in cities like Greenville may have additional rules.
Legal Drafting: An attorney familiar with both federal firearms law and South Carolina trust law can draft a document that is airtight and legally defensible. A generic trust from another state may not be valid in South Carolina.

Common Misconceptions About Gun Trusts

There are several myths and misunderstandings about gun trusts that can lead to costly mistakes.

“A trust makes NFA items easier to get.” This is not entirely true. The process is streamlined, but the ATF still conducts a full background check on all trustees.
“Online templates are just as good as a custom trust.” This is a dangerous assumption. A templated trust may not be up-to-date with recent legal changes and may contain language that could invalidate it in South Carolina.
“A trust gives me a ‘get out of jail free’ card.” Absolutely not. A trust is a legal tool for ownership and transfer. It does not excuse a person from following all federal and state laws regarding the use of firearms. Any trustee who uses an NFA item illegally will face the full weight of the law.
“I don’t need trust if I’m the only one who will ever use the NFA item.” A trust is still a powerful estate planning tool. If you die without one, the transfer of the NFA item to your heir will be a complicated legal affair.

Taking the Next Step in Securing Your Firearms

Acquiring NFA items in Greenville, South Carolina, is a serious legal process. A properly established gun trust can make this journey smoother, more flexible, and more secure for you and your family. It’s a proactive step that safeguards your right to own these items and ensures your wishes are honored for years to come.

At the DeBruin Law Firm, we are dedicated to helping individuals and families navigate complex legal matters with confidence. We can assist you in creating a comprehensive and compliant NFA gun trust that is tailored to your unique circumstances and goals.

If you are ready to explore your options for an NFA gun trust or have questions about how to protect your firearms legacy, please reach out to us. We serve residents throughout Greenville and the surrounding areas. Contact us today at (864) 982-5930 or send a message online to schedule a consultation.

Charitable Remainder Trusts vs. Charitable Lead Trusts: Options for Philanthropy in Greenville

September 23, 2025/in Trusts

For many individuals and families in Greenville, philanthropy is a deeply held value. The desire to support local charities, educational institutions like Furman University, or community organizations is often a key part of their legacy. While direct donations are a common way to give, more strategic and sophisticated tools exist to maximize the impact of your gift while also achieving specific financial and tax goals. Two of the most powerful are the Charitable Remainder Trust and the Charitable Lead Trust. Though their names sound similar, their functions are nearly opposite, and choosing the right one depends entirely on your unique circumstances and objectives.

What is a Charitable Remainder Trust (CRT)?

A Charitable Remainder Trust, or CRT, is a planned giving vehicle that allows you to donate assets to a charity while retaining an income stream from those assets for a specific period of time. It’s a strategy designed for individuals who want to make a significant charitable donation but still need income from their assets during their lifetime or for a set term.

How a Charitable Remainder Trust Works:

You create and fund the trust. You transfer assets, such as appreciated stocks, real estate, or other property, into the CRT.
The trust pays you (or a designated beneficiary). The trust pays you an income stream for a predetermined term, which can be your lifetime, the lifetime of another person, or a specific number of years (up to 20).
The charity receives the remainder. When the trust term ends, the remaining assets in the trust are distributed to the designated charity or charities.

This structure allows you to convert a highly appreciated, low-yield asset into an income-producing one without immediately triggering a capital gains tax. The donation to the trust also provides an immediate income tax deduction.

What are the Two Main Types of Charitable Remainder Trusts?

There are two primary types of CRTs, and the choice between them impacts the nature of the income you receive and the flexibility of the trust.

Charitable Remainder Annuity Trust (CRAT)

With a CRAT, you receive a fixed annual payment. This payment is determined when the trust is first established and must be at least 5% but no more than 50% of the initial fair market value of the assets placed into the trust.

Key Features of a CRAT:

Fixed Payments: The payment amount never changes, regardless of how the trust’s investments perform.
No New Contributions: Once the trust is established, no new contributions can be made.
Predictability: It offers a predictable income stream, which can be beneficial for financial planning.

The fixed nature of the payments means that in periods of high market growth, the remainder for the charity may increase significantly. However, in periods of poor performance, the trust could be depleted.

Charitable Remainder Unitrust (CRUT)

A CRUT provides a variable income stream. The payment is a fixed percentage (at least 5% but no more than 50%) of the trust’s value, which is revalued annually.

Key Features of a CRUT:

Variable Payments: The income you receive fluctuates each year based on the trust’s performance.
Flexible Contributions: You can make new contributions to the trust at any time.
Growth Potential: Your income payments and the charitable remainder can both grow if the trust’s investments perform well.

The variable payment schedule of a CRUT can offer a hedge against inflation, as payments may increase with market growth. There are also specific variations of a CRUT, such as the NIMCRUT (Net Income with Makeup Charitable Remainder Unitrust), which can be useful for planning around retirement.

What is a Charitable Lead Trust (CLT)?

A Charitable Lead Trust, or CLT, is essentially the reverse of a CRT. With a CLT, the charity receives the income stream first, and the remaining assets are eventually returned to you or passed on to your non-charitable beneficiaries, like your children or grandchildren.

How a Charitable Lead Trust Works:

You create and fund the trust. You transfer assets into the CLT.
The trust pays the charity. The trust provides an income stream to a charity for a specific term of years.
The remainder goes to your beneficiaries. When the trust term ends, the remaining assets, including any appreciation, are distributed to your non-charitable beneficiaries.

A CLT is a powerful tool for individuals with significant wealth who want to provide for a charity and transfer assets to their heirs with reduced gift or estate tax liability. This strategy is particularly effective in a low-interest-rate environment, where the appreciation of the trust’s assets can exceed the rate assumed by the IRS.

What are the Two Main Types of Charitable Lead Trusts?

Similar to CRTs, there are two types of CLTs, each with different payment and tax implications.

Charitable Lead Annuity Trust (CLAT)

In a CLAT, the charity receives a fixed annual payment. This payment is determined at the outset, and the amount does not change.

Key Features of a CLAT:

Fixed Payments: The charity’s income is a set dollar amount each year.
Predictable Charitable Gift: The charity knows exactly how much it will receive each year.
Growth to Beneficiaries: If the trust assets appreciate beyond the fixed annuity payments, all that extra growth goes tax-free to your non-charitable beneficiaries at the end of the term.

Charitable Lead Unitrust (CLUT)

A CLUT provides a variable annual payment to the charity. The payment is a fixed percentage of the trust’s value, which is revalued each year.

Key Features of a CLUT:

Variable Payments: The charity’s payments rise and fall with the trust’s performance.
No Tax Arbitrage: Unlike a CLAT, there is no opportunity for tax arbitrage because any appreciation in the trust assets is shared with the charity.
Best for Volatile Assets: This structure may be useful if you’re donating assets with a fluctuating value, as it can stabilize the charitable gift.

Key Differences Between Charitable Remainder Trusts and Charitable Lead Trusts

The names of these two trusts are a source of frequent confusion, but it helps to think of them as two sides of the same coin. The core difference lies in who benefits and when.

Who gets the income stream? A CRT pays you (the donor) and/or your beneficiaries first, while a CLT pays the charity first.
Who gets the remainder? With a CRT, the charity receives the remainder. With a CLT, your non-charitable beneficiaries receive the remainder.
Tax deduction timing: A CRT provides an immediate income tax deduction to the donor. A CLT’s tax benefits can be more complex. If it’s a “grantor” CLT, you receive an immediate income tax deduction for the present value of the stream of payments to the charity. If it’s a “non-grantor” CLT, the trust itself gets a deduction for the payments, and there are estate or gift tax benefits for the remainder that passes to your heirs.

The choice between the two boils down to your primary goal. Do you need an income stream for yourself during your lifetime while supporting a charity? The Charitable Remainder Trust is likely the right tool. Do you want to pass wealth to your family while also making a substantial charitable gift, potentially with significant tax savings? The Charitable Lead Trust may be the better option.

What Assets Can Be Used to Fund a Charitable Trust?

Both CRTs and CLTs are typically funded with assets that have appreciated significantly in value. Using appreciated assets, rather than cash, can be a particularly valuable strategy because it allows you to avoid the immediate capital gains tax that would otherwise be owed if you sold the asset yourself. The trust can then sell the asset tax-free and reinvest the proceeds.

Examples of assets commonly used to fund these trusts include:

Highly appreciated securities (stocks, bonds, mutual funds).
Real estate (investment properties, vacation homes).
Closely held business stock.
Other non-cash assets.

For residents in the Greenville area, this could mean using a commercial property downtown, a parcel of land in Travelers Rest, or a successful local business.

How Do These Trusts Impact Your Tax Situation?

The tax benefits of CRTs and CLTs are a primary reason for their popularity in sophisticated estate planning.

Tax Benefits of a Charitable Remainder Trust

Immediate Income Tax Deduction: When you fund a CRT, you receive an immediate income tax deduction based on the present value of the anticipated charitable remainder.
Avoided Capital Gains Tax: The trust can sell the appreciated assets you’ve donated without paying capital gains tax. This allows the full value of the assets to be reinvested for greater growth.
Estate Tax Benefits: The assets you’ve placed in the trust are removed from your estate, which can help reduce your estate tax liability.

Tax Benefits of a Charitable Lead Trust

Reduced Gift/Estate Tax: This is the main benefit of a non-grantor CLT. The value of the gift to your non-charitable beneficiaries is reduced for gift and estate tax purposes by the value of the payments to the charity. This allows you to transfer a larger asset to your heirs while using less of your lifetime gift and estate tax exemption.
Immediate Income Tax Deduction: With a grantor CLT, you, the donor, receive an immediate income tax deduction for the value of the income stream going to the charity, which can be useful if you’re in a high-income year.

Why is Legal Guidance Important in Setting Up These Trusts?

Establishing a Charitable Remainder Trust or a Charitable Lead Trust is a complex legal process that requires meticulous attention to detail. These are not simple documents; they must comply with strict IRS regulations to ensure the tax benefits are realized and the trust operates as intended.

An experienced estate planning attorney provides guidance by:

Evaluating Your Goals: We work with you to analyze your financial situation and philanthropic goals to determine whether a CRT or a CLT is the right tool for you.
Drafting the Trust Document: We draft the trust document to ensure it complies with all federal and state laws, including those specific to South Carolina.
Navigating Tax Implications: We collaborate with your financial advisor and accountant to model the potential tax outcomes and ensure the structure is optimized for your specific situation.
Coordinating with Other Professionals: We coordinate with your other professional advisors to ensure the trust fits seamlessly into your overall estate plan.
Ensuring Proper Funding: We advise on the most suitable assets to fund the trust, which is a key factor in maximizing the benefits.

A misplaced provision or a missed deadline can invalidate the trust and lead to unforeseen tax consequences, completely defeating its purpose. Legal guidance helps to prevent these costly errors.

Which Trust is Right for Me? A Scenario-Based Comparison

The best way to differentiate these trusts is to think about the primary motivation behind the gift.

Scenario A: The Income-Focused Philanthropist

Sarah, a retired doctor in Greenville, holds a portfolio of highly appreciated stock. She wants to support the Greenville Health System Foundation but needs a reliable income stream during her retirement years. She doesn’t want to sell the stock and pay a large capital gains tax.

The right choice: A Charitable Remainder Trust (CRUT or CRAT).
Why: She can donate the appreciated stock to the CRT, receive an immediate tax deduction, and get a steady income stream for the rest of her life. When she passes away, the remainder of the trust goes to the foundation as she intended.

Scenario B: The Legacy-Builder

David, a successful business owner in Greenville, wants to leave a significant inheritance to his children but also wants to support the Greenville Center for Creative Arts. He has a valuable piece of commercial real estate downtown that he wants to pass down.

The right choice: A Charitable Lead Trust (CLAT or CLUT).
Why: He can donate the property to a CLT for a set term of years. The trust will generate income for the Greenville Center for Creative Arts for that period. At the end of the term, the property and any appreciation will pass to his children with significantly reduced gift tax consequences.

The Power of Blended Philanthropy and Legacy Planning

For Greenville residents, CRTs and CLTs can be integrated into a comprehensive estate plan to meet personal needs, leave a family legacy, and support chosen charities. These trusts offer a tax-advantaged way to make a difference. Due to the complexities of these trusts and South Carolina law, an informed approach is essential. The De Bruin Law Firm provides expert guidance for real estate and estate planning, ensuring philanthropic and financial goals are precisely executed and legacies safeguarded.

If you are a resident in Greenville or the surrounding area considering a sophisticated charitable giving strategy, we are here to help you explore your options. Contact us today at (864) 982-5930 or message us online to schedule a consultation and begin the conversation about your charitable and estate planning goals.