By Greg Custer | Special to the NB Indy
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.
High net-worth families in California are rightly concerned that future generations will have the flexibility they need to adjust to changes in tax policy and regulations to preserve wealth.
“Nevada is one of the most trust-friendly states — and a great alternative to placing your money offshore,” said Victoria Kahn, a Vice President and Client Advisor with The Whittier Trust Company of Nevada, Inc. in Reno.
Three things that establishing a trust in Nevada can do for your family:
1. Increase Your Wealth
Nevada’s laws support wealth maximization for future generations through beneficial tax policies. Nevada imposes no income, transfer or estate tax. And offers a “dynasty trust,” which provides for a term of as long as 365 years; in neighboring California a trust can last for less than a third of that time. Transferring trusts from a high tax state to Nevada avoids state inheritance and income taxes.
2. Protect Your Assets From Creditors
Nevada law provides for asset-protection trusts, known as self-settled spendthrift trusts, that prevent most creditors from attaching trust assets and compelling distributions. You do not have to be a Nevada resident. It’s a great alternative to establishing a trust offshore in the Cayman Islands and other jurisdictions.
3. Take Advantage of Flexibility in Estate Management
One of the most powerful advantages of Nevada’s laws is their flexibility around drafting new documents, amending existing documents and managing investments. 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. Nevada has statutes that provide for a “trust protector,” a role that either an individual or a trust company like Whittier Trust can fill. 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.
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 on Nevada, on better terms. Indeed, Nevada boasts some of the best decanting statutes of any state in the country, Kahn said.
“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. Nevada allows for a lot of changes that some 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,” Kahn said.
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.
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. 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,” Kahn said. “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,” she added.
Regardless of where you live, 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.
Greg Custer is the Executive Vice President and Manager of Whittier Trust’s Orange County office, located in Newport Beach. Reach the office at (949) 216-2200 or whittiertrust.com.