Why Your Family’s Money Belongs In Nevada — No Matter Where You Live
By Michele Lerner
Nevada may be known for its casinos and high-stakes poker games, but high-net-worth families will find it no gamble to keep their money there.
“Nevada is one of the most trust-friendly states — and a great alternative to placing your money offshore,” said S. Victoria Kahn, a vice president and client advisor with The Whittier Trust Company of Nevada, Inc. in Reno.
Kahn noted that Nevada’s leaders watched other states, such as Delaware and South Dakota, amend their laws related to trusts to attract money from high-net-worth individuals. They knew becoming trust-friendly would grow their economy.
They were right, as Whittier Trust can testify. Kahn said that more and more of its wealthy clients, with their interest in wealth planning — and particular in efficiently passing wealth from one generation to another — have recognized that Nevada can offer both flexibility and significant tax savings.
“We have clients in over 30 states and they’re able to set up a Nevada trust by having Whittier Trust as a trustee,” Kahn said.
Here are three things that establishing a trust in Nevada can do for your family, according to Kahn.
1. Increase your wealth.
Nevada’s laws support wealth maximization for future generations through beneficial tax policies, Kahn said. The Silver State imposes no income tax, transfer tax or estate tax.
Nevada also allows for what is often referred to as a “dynasty trust,” which provides for a term of as long as 365 years. By contrast, in neighboring California a trust can last for less than a third of that time.
One family that works with Whittier Trust held multiple long-term trusts in an East Coast state. Transferring those trusts to Nevada let the family avoid state inheritance and income taxes, said Kahn.
2. Protect your assets from creditors.
“Nevada has a lot of very forward-thinking laws regarding asset protection that other states, like California, do not have,” said Kahn. “It’s a great alternative to establishing a trust offshore in the Cayman Islands and other jurisdictions.”
Nevada law provides for asset-protection trusts, known as self-settled spendthrift trusts, that prevent most creditors from attaching trust assets and compelling distributions, said Kahn.
“We’ve had clients who are not Nevada residents establish Nevada asset protection trusts in order to protect a substantial portion of their wealth from potential future creditors and ensure they have a safety net fund,” said Kahn.
3. Take advantage of flexibility in estate management.
One of the most powerful advantages of Nevada’s laws, said Kahn, is their flexibility as concerns drafting new documents, amending existing documents and managing investments.
“We all know circumstances change,” said Kahn. “In a lot of states currently, once a trust is in place it’s “irrevocable,” making it hard to modify, even though those changes may be warranted.”
Unlike other states, such as California, Nevada has statutes that provide for a “trust protector,” a role that either an individual or a trust company like Whittier Trust can fill, said Kahn.
“A trust protector can modify an irrevocable trust agreement, and they’ll often do so to respond to changes in law or otherwise to direct action that would be in the best interest of beneficiaries,” said Kahn.
Developing Your Family’s Assets In Nevada
Residents of any state can set up accounts in Nevada to benefit from the state’s wealth-friendly legislation. Here are some ways of doing so:
1. Decant a trust.
Many clients come to Whittier Trust with trusts established in other states that they want to decant to Nevada — that is, redistribute assets from a trust elsewhere to a new one in Nevada, on better terms. Indeed, Nevada boasts some of the best decanting statutes of any state in the country, said Kahn.
“Nevada continues to enhance its decanting statute to allow for greater flexibility,” she said.
“A lot of states have decanting statutes, but they vary in terms of what they allow,” she added. “Nevada allows for a lot of changes that some of the other jurisdictions do not.”
Recently, a married couple with adult children came to Whittier for help with trusts established in another state.
“As we do with all families, we did a deep dive to get to know them and understand their life balance sheet, estate plan, and goals,” said Kahn.
The family succeeded in decanting those trusts into new Nevada trusts with improved terms that boosted flexibility and satisfied the family’s goals.
2. Implement a directed trust.
Other clients, often business owners or families with concentrated positions in real estate or a particular security, take advantage of Nevada’s directed trust laws, Kahn said.
“Clients may want to be involved in investment decisions, or they may want another trusted advisor or family member who makes decisions about distributions [involved],” she noted. “A directed trust allows for flexibility — for clients to still maintain some of that control, but using a very favorable trust structure.”
3. Execute a dynasty trust.
“A lot of clients come to us looking to maximize wealth for the next generation,” said Kahn. “We often work with their CPAs, attorneys and other advisors to plan how to structure the estate plan.”
For some families, that means creating a Nevada dynasty trust funded with closely-held stock from the client’s company, Kahn explained. “That creates the ability to pass on large amounts of wealth free of state income taxes and Federal estate taxes.”
Regardless of where you live, said Kahn, aspects of Nevada law can benefit your high-net-worth family now and for generations to come — all without the potential complications of heading offshore.
Michele Lerner, a Washington, D.C.-based freelance writer, has been covering personal finance and real estate for more than 25 years. Her work has appeared in numerous publications including The Washington Post, Bankrate.com, The Motley Fool, REIT magazine, Fox Business News, National Real Estate Investor magazine, DailyFinance.com and NewHomeSource.com.