Nevada’s Beneficial Trust Laws Set it Apart and Provide Strong but Flexible Protection
When it comes to asset protection and managing estates, Nevada stands alone paving the way for other states. Recent cases, such as Klabacka v Nelson, have set Nevada apart from other states with similarly beneficial trust laws and allowing Nevada to emerge with the most iron-clad wealth protection available in the U.S.
Nevada should be a serious contender when considering both wealth management and asset protection whether you are a U.S. or non-U.S. citizen. Nevada boasts additional benefits such as Dynasty trust provisions lasting up to 365 years and Domestic Asset Protection Trusts (DAPT’s), also known as Self-Settled Spendthrift Trusts (SSST), allowing you to protect your assets and wealth more than any other state.
With the addition of an abbreviated statute of limitations until assets transfer to an SSST and superior protection from creditors, which is unique to Nevada, the advantages of establishing your wealth and assets in the state of Nevada deserve a deeper look.
Nevada DAPT and DAPT Hybrid
Domestic Asset Protection Trusts (DAPT)
A relatively new type of trust, the DAPT is different because it allows the settlor to also be the beneficiary. This is beneficial for planning and allows for much more flexibility. These trusts also play a strategic role in income and estate taxes.
Few states permit DAPT’s and even fewer have as short of a seasoning period as Nevada (two years). To receive the benefits of a DAPT in Nevada, you must establish the trust in Nevada; this is possible without relocation if you utilize a corporate trustee such as Alliance Trust.
The Nevada DAPT is irrevocable. However, there is quite a bit of flexibility within a Nevada DAPT.
Most people believe that the Nevada DAPT will hold in court though it has never entirely gone through the court system. Several Nevada cases prove that Nevada honors DAPTs, but if you desire extra caution, a Hybrid DAPT is a simple option that reduces the risk of creditor access to assets and wealth.
In a Hybrid DAPT, you do not initially add the settlor as a beneficiary, but you can modify this later. This arrangement limits the uncertainty of a traditional DAPT.
While the term “irrevocable trust” sounds rigid and unchangeable, the process of decanting is a popular way to change the terms of the trust and increase flexibility.
Trust decanting allows you to move assets from one trust to another and essentially modernize the trust without court approval or notice to beneficiaries.
Often, terms of a trust need to be revised to reflect the circumstances of the family or if the trustee has changed their mind about the old terms.
Save Big on State Income Tax
Nevada is one of a few states with no state income tax, in theory, establishing your trust in the state of Nevada should allow you to save on state income tax after the two-year seasoning period. However, there are steps you need to take to ensure this transition isn’t viewed as tax evasion.
The most popular way to save on taxes and establish your trust in Nevada is by using a Nevada Incomplete Gift Non-Grantor Trust (NING). NINGs also help with estate planning and shield your trust from creditors. The NING trust has held up in court unlike its counterpart the DING (Deleware Incomplete Non-Grantor Trust) and is the preferable choice for wealth and asset management.
More Nevada Tax Advantages
State income tax savings are not the only benefit of establishing your trust in Nevada, Nevada also protects from federal or state transfer tax, and for Nevada Dynasty Trusts, the state shields assets from income tax through the 365 year period.
Additionally, Nevada does not tax trust income which is distributed to beneficiaries nor assess tax on the value of intangible personal property within a trust.
Nevada’s tax advantages keep slow erosion of assets and wealth via taxes from eating into the trust.
Protection from Creditors
In the case of Klabacka v Nelson, 133 Nev. Adv. Op. (May25, 2017): Nevada DAPT Protects Against Spousal/Child Support Claims, a divorcing spouse attempted to tap trusts and receive access to assets. The Klabacka v Nelson case took place in Nevada, and Nevada’s courts protected the trust, keeping the divorcing spouse from gaining access to the trust.
Nevada is the only state with creditor protection precedents set firmly in favor of trusts.
Nevada Dynasty Trusts
Nevada Dynasty Trusts can last up to 365 years and allow generation-skipping-transfer tax exemption to help limit estate tax liabilities, sometimes eliminating them.
With a Nevada Dynasty Trust, your assets are subject to tax (or lifetime exemption) once upon transfer and then not again at the estate level allowing many generations to enjoy gifted assets.
Domestic and international families alike can enjoy the benefits of Nevada Dynasty Trusts and favorable estate tax laws for an extended period of time.
Take Advantage of Nevada’s Trust Laws
If you’re considering establishing a trust or estate in Nevada, it’s highly advisable to speak with a professional who understands Nevada’s Trust Laws and statutes.
Alliance Trust Company of Nevada works with a variety of professionals around the world to provide flexible trustee services with the benefit of Nevada trust situs.
Contact us to understand further how establishing your trust in Nevada will benefit your family and how you may take advantage of some of the best trust laws in the world.