Why You Need to Establish a Trust Versus a Will: Protect Both Your Assets and Your Privacy

Have a will, but don’t think you need a trust? You may want to think again.

It’s a misconception that trusts are only for the ultra-wealthy. For many people, a trust should be an essential part of a sound and smart financial strategy. If you don’t think you need a trust, here are a few examples of why you might:

  • You want your money and assets equally distributed to your heirs.
  • You want your estate to go to your biological children and not your step-children.
  • Ensure higher education paid for before asset distribution.
  • Mitigate estate taxes for your family.
  • Protect your assets from your creditors or the creditors of your heirs.
  • More privacy surrounding your money and assets.

These are just a few examples. The list could go on and on.

Bottom line: if you have assets such as investments, a home, or other property such as a boat or vacation home and you want to avoid additional taxes and specify who inherits your assets, when they inherit, and how, you need a trust.

The Benefits of a Trust

Aside from detailing the fate of your assets, trusts have many specific benefits to both you and your beneficiaries.

Save Time and Money by Avoiding Probate

If you have a will but not a trust, your assets will go through the public process of probate. Upon your death, all of your assets will go into probate, and the court proves that your will is valid.

Typical Probate Process

  • The court inventories your property and assets;
  • The court then pays outstanding taxes and debts;
  • The court assesses your probate tax;
  • The court distributes the assets to the wishes of your will or by state law if you do not have a will in place or you did not correctly draft your will. Your estate plan should be reviewed regularly as estate laws evolve. Alliance can refer you to attorneys that will assist you.

The probate process can take up to a year, and in the meantime, your family will be without their inheritances. Sometimes the court allows some of your estate to be distributed during probate, but often your family is left waiting.

YOU Control Distribution

A trust allows you to detail exactly how, when, and to whom you’d like your assets distributed. You can choose to have your assets distributed over time or in one sum and even how you want the assets utilized. For example, you can specify that the money is only for the use of living expenses such as food and housing.

Controlling distribution can be highly effective in situations where you are unsure about how your beneficiaries will handle receiving a large sum of money. Often, grantors want to be certain bad decisions don’t squander their wealth.

A Trust is Difficult to Contest

While a will is easy to challenge, a trust is not. If you fear that someone will be unhappy with your decisions and wish to challenge the distribution of assets, a trust is a much safer option.

There are two ways to challenge a trust, both requiring significant proof:

  1. The grantor was not in the right mental state when setting up the trust.
  2. The grantor was under “undue influence” when drafting the trust and did so under someone else’s influence.

Even with these potential challenges, a trust is much more likely to withstand contest than a will.

Cover Educational Costs

Many grantors want to be sure that educational costs for their beneficiaries are covered first before the distribution of assets. You can specify whether each child should get the same amount after education costs, or whether distribution should be contingent on education costs.

An educational trust fund provides a lot of flexibility and control for a beneficiary to ensure their educational goals for their children are met even after their death.

Specify the Division of Property

Some assets are more difficult to divide than others, such as real estate or other personal property like boats or cars. A trust helps make these things easier to divide by allowing the grantor to specify precisely how to transfer the property upon their death.

A grantor can choose who gets what property, whether they can sell the property and if so, how they should sell the property and divide the proceeds. The trust can provide equal access to the property for each beneficiary or even allow them to buy each other out if they wish.

Avoid (or at Least Reduce) Estate Taxes

Assets placed into a trust are not subject to estate taxes. A trust gives grantors the ability to give tax-free gifts from the estate to their children up to the annual exclusion. The annual exclusion states that grantors can give gifts up to a certain dollar amount annually without incurring taxes.

Estate taxes only apply to estates worth $1 million or more, so they don’t apply to most. You do, however, need to be sure you understand the full value of your estate. Remember to factor in the value of your home and any other assets, not just your liquid assets and investments.

Enjoy More Privacy

As we mentioned earlier, if your estate is in a will and goes into probate, it is a public process. With a trust, your assets remain private. While a public record is sometimes necessary, it is not common. In many cases, you can find ways to work around disclosing records publically.

Keep Family Harmony Intact

After the death of a family member, there is grief and many emotions involved. A trust is an easy and straightforward way to ensure that emotional factors don’t play a part in the distribution of assets.

It can be easy for family feuds to arise during the division of an estate. A trust can be customized to precisely specify what each heir will inherit, leaving nothing to be argued over. A trust can even ensure that only the beneficiary has access to their inheritance and exclude spouses, step-children, or anyone else a grantor desires.

Who controls the trust? You do! Or a trusted family member, friend, or independent corporate trustee whom you appoint. Unlike a will, you control every aspect of a trust before and after your death to ensure your family is immediately protected.

Nevada carries the most advantageous privacy and asset protection laws in the U.S. You do not have to live in Nevada to take advantage of Nevada’s trust jurisdiction. Alliance Trust Company of Nevada has vast experience with both domestic and international complex estate planning and taxation strategies. Moreover, Alliance had a significant network of Nevada attorneys, advisors, and CPAs that we can refer you to. Do not hesitate to reach out to learn more about what Nevada can do for you!

Using NING Trusts to Significantly Reduce State Income Tax Liabilities

Why Wealthy Families are Choosing to Shift Their Wealth to the Tax Favored State of Nevada

The state of Nevada is considered a tax-favored environment, allowing maximum tax protection over trusts and estates. That’s just one of the reasons why more and more people are choosing Nevada as to establish their trusts.

The “NING” trust or Nevada Incomplete-gift Non-Grantor trust reduces state income tax liabilities and simultaneously provides asset protection benefits.

For people with substantial income, assets or large capital gains who could generate significant Federal and state income tax shifting a trust from its current state to a state with more favorable tax laws, such as Nevada, could create significant income tax savings.

While moving to Nevada would allow someone to take advantage of these benefits, relocating family is often not an option. However, by establishing a NING and transferring assets from the existing trust into the NING, the trust will only face Federal capital gains taxes.

Non-Grantor vs. Grantor Trusts

Trusts are set up as either grantor or non-grantor, and it’s important to understand the difference.

Grantor trusts expose the creator of the trust to the taxes incurred by the trust. Non-grantor trusts are set up as their own entities incurring all taxes at the trust level instead of passing them on to the owner of the trust.

Things get murky because every state has its own taxation rules and definitions about which trusts should be considered a resident.

For example, to take advantage of a NING or Nevada’s favorable tax laws in general, a non-grantor trust with a Nevada trustee should be established. By establishing a non-grantor trust in Nevada and appointing a Nevada trustee you can be sure that you’ll minimize or completely eliminate taxes from your state of residence.

A New Aggressive Strategy for Substantial Gains

If a substantial gain is on the horizon, wealthy families can take advantage of ING trusts to adopt a more aggressive tax strategy. ING’s help reduce state income tax at the trust level by establishing it one or more years before a large gain becomes available.

One word of caution, there are specific steps you should follow to ensure that your strategy is not viewed as tax evasion, it’s always best to employ professional guidance to understand how to establish your ING ethically.

Structuring a NING for Maximum Benefit

Since the purpose of establishing a NING trust is to avoid additional taxing, it’s important to properly structure the trust to avoid gift tax. Proper structuring also ensures that the trust really is taxed in Nevada instead of the settlor’s home state.

Remember that NING stands for Nevada Incomplete-Gift Non-Grantor Trust, so when assets are transferred to the trust, it must be in the form of an “incomplete gift.”

Transferring assets as an “incomplete gift” allows the owner of the trust to include your investments in your estate without needing to file a Form 709 gift tax return.

NING Trusts vs. DING Trusts

The DING Trust did come before the NING trust, so one may wonder which is the better situs for a trust, Nevada or Delaware?

While both states allow settlors to appoint a trustee for their trust and take advantage of favorable tax laws, several Delaware rulings have allowed divorcing spouses and creditors to gain access to an asset protection trust. Nevada has never allowed such access in rulings and therefore has more iron clad protection than any other state.

How the Other States Feel About ING Trusts

It’s no surprise that other states aren’t happy about non-grantor trusts and their tax-avoidance benefits, some have even gone as far as banning such trusts.

While both Delaware and Nevada have successfully deflected attempts by other states to tax grantors, that likely won’t stop states from attempting to gain access whenever they can.

However, several statutes in the state of Nevada prove that the state values and protects trusts and estates which are established there and is the safest bet when choosing where to create an ING trust.

To learn more about establishing a NING, please contact Alliance Trust Company.

The Government of Kazakhstan knows my retirement account balance?

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The New York Times “Room for Debate” opinion pages recently asked Gregory Crawford, The President of Alliance Trust Company in Reno to comment on the Panama Papers and the advantages of and lawful usages of shell companies.  In this piece, Greg notes that the vast majority of these companies are used legally, providing a layer of security and privacy for international families in an increasingly dangerous world.

The interest of non-US citizens using foreign grantor trusts in Nevada is increasing dramatically.  Many countries are now recklessly sharing highly-sensitive and otherwise confidential individual financial information with rogue governments around the world under the OCED’s “Common Reporting Standards.” This program, which thankfully the United States is not participating in, gathers and automatically exchanges individual  names, addresses, tax identification numbers, and financial account balances with the governments of Azerbaijan, Cameroon, China, Georgia, Indonesia, Kazakhstan, the Philippines, Russia, Senegal, Tunisia, and Uganda, to name a few.  Where the information might go from there, no one knows.   Many of these countries have Horrific human rights records and serious corruption issues.  Automatically sharing this data will undoubtedly expose law-abiding individuals to the risk of extortion, kidnapping or worse.  The United States should remain proudly “non-compliant” with the CRS and its efforts to violate personal privacy.

it is worth noting that the State of Nevada offers excellent privacy provisions when establishing business entities such as LLCs, and there are options for the US and non-US citizens to keep their financial affairs private in trust.  Please contact Alliance Trust for more information at 775-297-4000.

 

Alliance Presentations in San Diego – Recap of the Gathering

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Last month Alliance Trust presented at the Southern California Institute’s annual “Gathering” of elite advisors from around the country in San Diego.  The topics of the two-day seminar included a panel debating the best family trust jurisdictions, and various methods and strategies to minimize and reduce estate, state and federal income taxes.  Advisors discussed asset protection trusts and other Nevada trust options, with case studies on how they work in practice.  As a Nevada Trust Company, Alliance Trust added insight and expertise on these topics from the perspective of a trustee.  Nevada is considered to have the best trust laws in the country, providing families valuable asset protection, flexibility for planning options and tax minimization for generations.  for more information on Nevada Trusts, please call Greg Crawford at Alliance Trust in Reno at 775-297-4684.

Awareness of NING Trusts Growing Nationally

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Nevada Incomplete Non-Grantor Trusts (or, “NINGs”) are growing in popularity and usage across the country.  NINGs provide the grantor of the trust asset protection and the potential to minimize local and state income taxes on investable/intangible assets.  As this NASDAQ.com Article on NINGS, these types of trusts are not for everyone.

However, a family living in a high-income tax state with significant taxable income and appreciated investments (or investments expected to appreciate) can benefit from a NING. This is just one of many Nevada trust planning strategies that makes Nevada the Asset Protection Trust Rankings   If you are interested in learning more about NINGs, please read this Article by attorney Gordon Schaller and call Greg Crawford at Alliance Trust Company in Reno at 775-297-4684.

Why Sand Hill Road Uses Nevada Trust Strategies

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Alliance Trust Company of Nevada spends significant time in Silicon Valley.  Our clients range from early stage Angel investors, the founders of many fast-growing technology firms, and the partners of some of the most prestigious venture capital firms in the world.  Why are so many people connected with Sand Hill Road using Nevada Trust strategies?  In a word: Flexibility.

Nevada offers exclusive options within its trust and estate laws, and you don’t have to be a Nevada resident to establish and benefit from a Nevada Trust for generations to come.

Simply put, Nevada offers flexibility around common asset protection, tax-minimization, and dynasty provisions that have many around the country recommending Nevada as the best state in the country for trusts.  Even Business Week magazine recently took notice, putting Reno on the cover for its trust and estates activity.

Interested in learning more?  Call Greg Crawford, President of Alliance Trust in Reno at 775-297-4684.

Alliance Trust Proud to Participate in Prestigious UCLA Law Panel

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Gregory E. Crawford, TEP, President of Alliance Trust Company of Nevada recently participated in a 90-minute discussion panel covering the topics of asset protection planning and the impact of the Uniform Voidable Transfer Act (UVTA).  The panel was moderated by Professor Jerry Hesch (ACTEC Fellow), and included nationally-recognized attorneys Jeffery M. Verdon and John R. Garland, as well as Neal Rubin, Managing Director, International Custody & Asset Protection Solutions of City National Rochdale.  Nevada was highlighted by the panel as one of the best jurisdictions in the United States and world for estate planning.  The UCLA Law School STEP Conference is in its fifth year and attracts hundreds of trust and estate professionals from around the world to Newport Beach, CA each January.  For more information, please review the conference details or call Greg Crawford in Reno at 775-297-4684.

Children Facing Challenges and Your Estate Plan – You Have Options

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For a family dealing with children with handicaps or other challenges, the journey does end when the child turns age 18.  Many parents and families worry about how their adult children will fare after the parents pass away.  Fortunately,  a well crafted family estate plan can provide solutions to these problems.  Children with medical difficulties and handicaps may need a special needs trust to preserve eligibility for government aid and other programs that could be jeopardized by a sudden influx of wealth. For children dealing with substance abuse, a special purpose trust could be the answer.  In some cases, a family may consider disinheriting a child to prevent an inheritance from furthering a destructive lifestyle.  While this is an option, special legal care is needed to ensure that money does not fall into the wrong hands and situation.  Nevada is considered the best state in the country for estate planning, and may offer options and flexibility for your family’s estate plan that your home state does not.  And you do not need to be a resident of Nevada to establish and benefit from a Nevada trust.  Contact Philip Brown at Alliance Trust in Reno at 775-297-4277 to learn more about the advantages of a Nevada Trust.

Nevada Asset Protection Trusts – The Best of the Best

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Why is Nevada considered the best state to establish your family trust?  Nevada trust laws offer a lot of benefits that most other states do not offer.  For many families it comes down to a few factors, including protecting their assets for their beneficiaries, reducing taxes and flexibility in planning strategies.  Two recent articles expand on the issue, including “A Guide to Asset Protection in Nevada” and “Nevada Asset Protection considered the Best of the Best.”  Both articles are worth reading and can help you determine if Nevada is a good option for your family’s trust planning.  For more information, call Greg Crawford, TEP, in Reno at 775-297-4684.

Family Partnership Discounting in Taxable Estates

The discounting of family assets held in partnerships and LLCs is a long-standing estate planning technique.  The discounts on illiquid and hard-to-value assets can significantly reduce the a family’s estate tax liability and transfer more of the family’s wealth to future generations.  However, the IRS is looking closely at the underlying assets held in these legal structures to see if such discounting arguments really hold validity.  Discounts for underlying investments which are easy to value, such as publicly traded stocks, will likely receive tighter rules and greater scrutiny very soon.  As this excellent article from Paul Sullivan at the New York Times notes, those considering using these discounting strategies should act quickly – new IRS guidelines are expected in mid-September.  Since Nevada is considered by many in the legal profession to have the best trust laws in the country, Alliance Trust is very familiar with these estate planning techniques.  Please call Greg Crawford, TEP, CFP, in Reno at 775-297-4684 for more information.

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