Protect Your Wealth for Future Generations
A Dynasty Trust holds assets in trust for multiple generations. The primary advantages include the minimization or elimination of distribution taxes, estate taxes, inheritance taxes, transfer taxes, and other potential future taxes. These trusts also provide an excellent degree of asset protection for third-party beneficiaries.
Nevada’s unparalleled trust laws make the Dynasty Trust a powerful estate planning tool as it has adopted laws that allow the assets of U.S. and non-U.S. citizens to remain in a trust, not subject to distribution for up to 365 years. When you have a trust with so many potential benefits, you want them to remain in place for a very long time.
Why Choose Nevada Over Other States
Because of their favorable trust laws, both Nevada and Delaware stand out as beneficial states to establish your Dynasty Trust. However, several precedents are set in Nevada, including Klabacka v. Nelson, 133 Nev. Adv. Op. 24 (May 25, 2017): Nevada DAPT Protects Against Spousal/Child Support Claims and in the Matter of Daniel Kloiber Dynasty Trust u/a/d December 20, 2002 (Court of Chancery of Delaware), which give Nevada an advantage over other states and make it the ideal situs to establish your Dynasty Trust.
In the Kloiber case, a divorcing spouse in the state of Delaware gained access to the ex-spouse’s assets in a Delaware Dynasty trust, thereby weakening the state’s trust protections when compared to Nevada. The case of Klabacka vs. Nelson helped establish Nevada’s status as the state with the friendliest trust laws as it effectively kept a divorcing spouse assets in a Nevada Self-Settled Spendthrift Trust.
In light of these two significant legal proceedings, estate planners are now creating more trusts in Nevada, and are migrating out-of-state trusts to Nevada for a stronger, more predictable legal environment.
The Tax Advantages of a Nevada Dynasty Trust
Although your assets are subject to federal gift/estate tax or your lifetime exemption when they are transferred to a trust, the Dynasty Trust ensures that they won’t be taxed again at the estate level, even though many future generations will benefit from your gifted assets. Allocating your generation-skipping-transfer tax exemption to a Nevada Dynasty Trust is an extremely powerful way to minimize or eliminate future potential estate tax liabilities.
Balancing Flexibility and Control
The creator of a Dynasty Trust has a lot of control over assets, beneficiaries, and rights. Your descendants and beneficiaries, however, cannot easily alter the terms of the trust. The irrevocable nature of the trust delivers the significant asset protection features and tax advantages described above.
Dynasty trusts are irrevocable, once created they cannot be altered when family and financial situations change.
Usually, families will appoint a Nevada trust company to manage and distribute assets on their behalf, based on the terms you choose at the inception of the trust. A trust is like a gift of assets over time. You can make your terms of your gift vague (or extremely detailed if you prefer). You can also grant beneficiaries the ability to allocate future trust assets or provide for trustee discretion around beneficiary needs.
Which Assets Should You Include in a Nevada Dynasty Trust
One of the primary benefits of Dynasty Trusts is the tax benefit they provide. Assets with high appreciation potential are particularly attractive, as the appreciation will occur within the trust and out of anyone’s particular estate (and the impact of potential estate taxes).
Assets like life insurance are a good option for Dynasty Trusts as the premiums will remain constant and the policy will not produce additional taxable income. Other popular asset funding options can include real estate, growth stocks, and tax-exempt bonds.
The Benefits of a Nevada Dynasty Trust
- In Nevada, Dynasty Trusts protect assets for beneficiaries for up to 365 years.
- Both domestic and international families can establish Dynasty Trusts.
- Nevada Dynasty Trusts provide estate tax benefits for an extended period of time.
- Minimization of distribution taxes, estate taxes, inheritance taxes, transfer taxes, and other future taxes are also typical benefits of a Nevada Dynasty Trust
Establishing a Dynasty Trust
Due to the length of time assets remain in a Dynasty Trust, the use of an independent, corporate trustee is highly recommended.
Alliance Trust Company of Nevada is a qualified financial institution available to serve in various capacities as trustee and directed trustee in Nevada Dynasty Trusts.