Realize the Benefits of a Nevada Trust

The State of Nevada’s trust-friendly laws and legal and tax benefits for out-of-state residents as well as for those who have established residency make it an ideal solution to consider.

Benefits include (but are not limited to):

• Directed Trusts:
  As of the date of this edition, more than 40 states have some form of statute that allows a trustee to be directed on matters such as investments, distributions, tax compliance or perhaps a combination of some or all of these functions. Nevada has been a leader in developing the law of directed trusts.
• Savings on fiduciary income taxes:
  In many states, a trust’s realized capital gains and accumulated ordinary income are taxed at rates between five and 10 percent, with rates in California as high as 13.3 percent. Thus, when considered in addition to the 20 percent rate on capital gains at the federal level plus the potential net investment income tax of 3.8 percent, state income taxes can greatly reduce trust earnings, especially over several generations.
• Dynasty Trusts:
  Nevada’s statute permits a Nevada trust to last 365 years. For an individual who has created wealth and now wants to pass it to children, grandchildren and successive generations, the long-term trust can provide a family savings vehicle.
• Ability to Use Electronic and Digital Media:
  Nevada permits the use of electronic trusts. The statute refers to the Nevada Uniform Electronic Transactions Act (UETA), which is Chapter 719 of the Nevada statutes. For an electronic will to be valid, it must be created and maintained in an electronic record as defined in the UETA, and contain the date and electronic signature of the testator. It must also include an authentication of the testator which can be any of the following: a fingerprint, retinal scan, voice recognition, video recording, digitalized signature or facial recognition. The statute also requires the electronic signature and seal of a notary, or of two or more attesting witnesses.
• Confidential Trusts:
  For a variety of reasons, your clients may not want to inform their trust beneficiaries about their trust or their interests in it. Nevada statutes provide this flexibility, allowing the trustee to withhold information about the trust from beneficiaries for a period of time directed by the trust instrument.

Favorable Tax Treatment for Long-Term Trusts

A client’s ability to contribute assets to a trust that will continue for generation after generation without the imposition of any transfer tax, and potentially no state income tax, is an extraordinary opportunity when compared to the alternative of passing assets outright, from generation to generation, subject to a federal transfer tax at each generation. Based on a $13.61 million contribution to a trust, utilizing the basic exclusion amount for 2024, a 5% after-tax rate of return on the investment assets, a new generation every 25 years, and a federal estate tax of 40% applied at each generational transfer, the GST-exempt trust would have a value of $528,512,855 million after only 75 years. The same sum of $13.61 million held outside of a trust (and subject to a gift tax or estate tax upon transmittal to each successive generation) would have a value of $114,158,777 million.

Assumptions:

1. Federal estate tax rate: 40%

2. Return on investment assets: 5% annually

3. No state income taxes

4. No distributions from trust or consumption of principal or income

5. No basic exclusion amount used to offset taxable amount in future years

Explore additional solutions enabled by Nevada Trusts for common high net worth client situations.

 Request the full paper to learn more about:

• Directed trusts
• Flexible provisions to achieve the grantor’s objectives
• Timing of notice to beneficiaries
• Methods for modifying a trust in Nevada
• Two procedures specific to modifying a Nevada trust
• Decanting existing trusts
• And more…