Modern Trust Drafting: Reducing Litigation Through Thoughtful Design
Attorney Jane Dearwester
If your trust was drafted before 2020, it’s time to revisit, revise, and consider a trust amendment with the enactment of new laws and other changes in modern estate planning and trust drafting. Estate planning in the modern world is dynamic. Gone are the days of the nuclear family and predictable outcomes. In 2026, North Carolina estate planning attorneys must consider and advise our clients on issues such as: blended families, estate tax changes, digital assets, long-term care planning. While trusts are typically touted as a way to streamline estate planning, they are becoming the subject of an increasing amount of litigation between feuding family members about distribution of assets, vague language, disagreements between family members and fiduciary litigation. A modern trust must be flexible to accommodate changes in law and life – and that flexibility can be built into the document with careful and strategic trust drafting.
Estate planning is no longer just about distributing assets—it is about anticipating conflict, adapting to evolving laws, and creating flexible structures that stand the test of time. For elder law attorneys in North Carolina, modern trust drafting requires a careful balance between precision and adaptability. With recent legislative changes, including the SECURE Act, SECURE 2.0, and the so-called “One Big Beautiful Bill” (a nickname often used to describe sweeping federal tax reform efforts), the stakes have only increased.
Below are five key considerations for drafting trusts that minimize the risk of litigation while addressing today’s legal and practical realities.
Detailed Trustee Removal and Replacement Provisions
One of the most common sources of trust litigation is conflict involving the trustee. Whether due to perceived mismanagement, family tension, or simple personality clashes, disputes over trusteeship can quickly escalate.
A well-drafted modern trust should:
- Clearly define who has the authority to remove a trustee
- Establish objective and subjective grounds for removal
- Provide a structured process for appointing successor trustees
- Include fallback options if named successors are unable or unwilling to serve
By eliminating ambiguity, these provisions reduce the likelihood of court involvement and empower beneficiaries to address issues efficiently.
The Role of a Trust Protector
The inclusion of a Trust Protector is becoming increasingly common—and for good reason. A Trust Protector serves as a neutral third party who can step in to resolve disputes or adapt the trust to changing circumstances without the need for litigation.
Typical powers of a Trust Protector may include:
- Removing and replacing trustees
- Resolving beneficiary disputes
- Modifying administrative provisions to reflect changes in tax law
- Clarifying ambiguities in the trust document
This role acts as a built-in dispute resolution mechanism, often preventing minor disagreements from becoming costly legal battles.
Addressing Digital Assets and Electronic Access (RUFADAA)
In today’s digital world, failing to address electronic assets can create significant administrative hurdles—and potential litigation.
North Carolina has adopted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which governs a fiduciary’s ability to access digital accounts. However, statutory authority alone is not enough. Trust documents should explicitly grant trustees broad authority to access and manage digital assets, including:
- Email accounts
- Online banking and financial platforms
- Social media profiles
- Domain names
- Cryptocurrency wallets and exchanges
Best practices include:
- Advising clients to maintain a separate, regularly updated inventory of accounts, usernames, and passwords
- Including express consent language in the trust to override restrictive service provider terms where possible
- Granting trustees broad discretion to manage, transfer, or terminate digital assets
Clear drafting in this area can prevent delays, reduce administrative costs, and avoid disputes among beneficiaries.
Asset Protection and Distribution Standards
Distribution provisions are another frequent source of conflict. Vague or overly rigid standards can lead to disagreements between trustees and beneficiaries.
Modern drafting typically involves one of three approaches:
- HEMS Standard (Health, Education, Maintenance, and Support): Provides an ascertainable standard that offers some structure while maintaining flexibility.
- Pure Discretionary Distributions: Grants the trustee broad authority, offering stronger asset protection but less predictability for beneficiaries.
- Hybrid Approach: Combines elements of both, tailoring distributions to the client’s goals.
The choice depends on the purpose of the trust:
- Asset protection for beneficiaries
- Tax planning considerations
- Beneficiary maturity and financial acumen
Careful drafting here not only protects assets but also reduces misunderstandings that can lead to costly litigation.
Incapacity Planning and Special Needs Considerations
As people live longer, trusts must be designed to address prolonged periods of diminished capacity—not just legal incompetence.
A modern trust should:
- Clearly define “incapacity” (e.g., certification by one or more physicians rather than a court determination)
- Provide a mechanism for transitioning control of trust responsibilities
- Address temporary and/or fluctuating incapacity
Additionally, for beneficiaries with disabilities or potential future needs, incorporating special needs trust provisions is critical. These provisions:
- Preserve eligibility for public benefits
- Provide supplemental support without disqualifying the beneficiary
- Reduce the risk of disputes over appropriate use of trust funds
Legislative Changes: Why They Matter
Recent federal legislation has significantly impacted trust planning:
- SECURE Act (2019) eliminated the “stretch IRA” for most beneficiaries, requiring inherited retirement accounts to be distributed within 10 years.
- SECURE 2.0 (2022) further refined retirement rules, including changes to required minimum distributions (RMDs).
- Broader tax reform efforts (often referred to informally as the “One Big Beautiful Bill”) have altered estate tax exemptions and planning strategies.
These changes mean:
- Trusts designed as retirement account beneficiaries must be carefully structured to avoid adverse tax consequences
- Conduit trusts may no longer be optimal in many situations
- Accumulation trusts require thoughtful drafting to balance tax efficiency with asset protection
Failure to account for these developments can lead not only to tax inefficiencies but also to disputes among beneficiaries over diminished inheritances.
Schedule Your Free Consultation
Modern trust drafting in North Carolina demands more than technical compliance—it requires foresight, flexibility, and a proactive approach to conflict prevention. By incorporating detailed trustee provisions, leveraging Trust Protectors, addressing digital assets, carefully structuring distributions, and planning for incapacity, attorneys can significantly reduce the risk of litigation.
Ultimately, the most effective way to avoid contested estate proceedings is to create a clear, comprehensive, and adaptable estate plan—one that reflects both the client’s intent and the realities of today’s legal landscape.
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Don’t wait until it’s too late—take control of your future today!
Attorney Jane Dearwester
Estate Planning & Elder Law Attorney
McIntyre Elder Law
Hendersonville, NC
