TRUSTS
Trusts are set up instead of using wills for many different reasons:
TRUSTS TO AVOID PROBATE:
In general if property has a title and the owner dies it will take probate to transfer title to the person who inherits UNLESS there is already in place a will substitute, as for example, if the property is held in joint tenancy or in a Payable on Death account. (See section on Wills.)
Probate is the process in which a will is taken to court and the property distributed according to the will. There are three problems with probate:
(1) Probate is usually expensive. Probate fees have come down from the "old days" in which attorneys charged the greater of an hourly rate or several percent of the probate estate. Clients are free to bargain with attorneys over probate fees. Even so, probate is usually time consuming and hugely expensive compared to a trust, especially for estates over $200,000. Few people can handle a probate proceeding without hiring an attorney. (By the way, an executor is under no obligation to use the attorney who drafted the will to help with probate. We welcome calls asking how much we would charge to do a probate and expect we will be quite competitive.)
(2) Probate is time consuming. Even for uncontested probates it take months for the process to be completed if the estate is worth more than $100,000.
(3) Probate is public. Probate records are open to the public. Leave your 19 year old daughter $300,000 in your will and that is a public record.
In contrast, a trust provides for the transfer of property outside the court system. Many people can handle the distribution of property in a trust without an attorney. But, if an attorney were required the attorney could help out with much less work and should charge a lot less. Trust transfers can proceed quickly and privately after death.
Our law firm drafts these trusts for a flat fee of $675 which is much lower than what many other attorneys will charge for the same document. Note that each piece of real estate transferred to the trust must be recorded in the county recorder's office in the county the real estate is located in. In Clark County, the recorder's office charges a fee of about $16-$17 to record a deed in proper format. Our fee of $675 for a trust includes our firm recording one parcel of Clark County real estate. If there is additional real estate we charge $50 for each additional Clark County real estate item plus the recording fee.
It is important to note that some attorneys work with a financial investment firm and that the chief interest of this team is to steer you into investing with them. Our firm does not offer investment advice or sell investment products. If we draft your trust I am only interested in helping you avoid probate and plan who gets your money and property when you die. How you invest your money is your business.
Probate can be effectively avoided with such a trust if the client(s) keep in mind certain rules, the most important of which are:
1) All property with a title such as real estate and financial accounts must be titled in the name of the trust.
2) At the time the trust is set up assets with a title such as real estate and financial accounts must be re-titled in the name of the trust.
3) When assets with a title are later acquired they must be titled in the name of the trust.
TRUSTS TO HANDLE MINOR'S MONEY:
People under 18 years of age are not considered legally competent to make contracts. Wills that anticipate minors may inherit money usually incorporate a provision providing that a specific person will hold the minor's money in trust until the minor reaches 18 or an older age. The provision may also contain guidelines as to what the money can be spent on for the minor's benefit until the minor is given the money. In the situation just mentioned there are trust provisions within a will. In other situations a trust document, not a will, controls the minor's money.
TRUSTS TO PROTECT THE BENEFICIARY AGAINST
SPENDING ALL THE MONEY:
One of the simplest ideas to prevent a person from quickly running through a large amount of money is to give it to the person in portions. For example, a will or trust could provide 1/3 of the sum be given to the person on reaching the age of 18, 1/3 upon reaching the age of 22, and 1/3 upon reaching the age of 25. These provisions can be put into a will in which case the provisions are called a testamentary trust. These provisions can also be put into a trust designed to avoid probate.
PROTECTING TRUST ASSETS AGAINST CREDITORS:
Nevada law allows a "spendthrift trust" to be set up for the benefit of another person and allows for this money to be protected against present or future creditors of the person being given the money.
(However, if creditors already have a claim to the money being transferred, this transfer may be attacked.)
Nevada law also allows a "spendthrift trust" to be set up for your own benefit. But if you are setting up the "spendthrift trust" for your own benefit, there are additional limitations. These are:
1) The trust is not intended to defraud, delay or hinder known creditors. (So, if you cause a terrible car accident and the victims have claims far in excess of your insurance coverage it is probably too late for you to set up a spendthrift trust for your own benefit as you would be intending to defeat the claims of the car wreck victims because they are potential creditors you know about.)
2) You have to irrevocably give up control of the money or property put into the trust. We believe that this limitation will be looked at very critically by a court if you are later sued and we believe it is hard to predict precisely how much control has to be given up to make sure that a court will allow this trust to protect you in a future lawsuit.
For these reasons our law firm will set up a spendthrift trust for the benefit of someone other than the person giving property and money to the trust. However, we are not comfortable attempting to set up a spendthrift trust for the benefit of the person funding the trust.
The Nevada laws regarding these types of trusts can be found in the Nevada Revised Statutes ("NRS") sections 166.010-166.170, et. seq. These statutes are collectively referred to as: "The Spendthrift Trust Act of Nevada".
PROTECTING TRUST ASSETS AGAINST THE IRS:
Unfortunately, there is no legal way to place your assets offshore out of reach of the IRS (Internal Revenue Service). If you are a U.S. citizen you owe taxes on your income even if earned abroad. If anyone offers you a plan to keep money safe from the IRS (when you owe the IRS money) they are scamming you and/or inviting you to break the law. (You will be amazed at how much money and time federal prosecutors have when they decide to go after someone.)
TRUSTS TO MINIMIZE ESTATE TAXES:
Until and unless estate taxes are permanently abolished, there will always be a demand among the wealthy for lawyers to devise inheritance plans that minimize estate taxes. Such estate planning is expensive and needs to be updated frequently as the laws concerning estate taxes are constantly changing. The IRS website, states "Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections or jointly held property) with a total value under [$3,500,000 in 2009] do not require the filing of an estate tax return. (This means no estate tax is owed for estates less than $3,500,000 in 2009.). The esate tax is supposed to be abolished in 2010, but then re-instated in 2011. The status of the federal estate tax after 2010 has not yet been determined. Welcome to the strange politics of the estate tax. At this time our firm does not draft trusts to minimize estate taxes.
SPECIAL NEEDS TRUSTS:
Special needs trusts allow people who are or may be on pubic assistance such as welfare or Medicaid to have money in a trust that they need not "spend down" to qualify for public assistance. The money in the special needs trust can be used for many ordinary living expense not covered by public assistance. Special needs trusts are often funded when a person who is on or will need public assistance is about to receive a large cash settlement for a personal injury claim. Special needs trusts can also be set up in anticipation of an inheritance. For example, suppose a parent has a disabled child. The parent could set up a specials needs trust for the child with a small gift of money--or a larger one if the parent were able. Then the parent could provide in his or her will or trust that additional money upon the death of the parent would go into the child's special needs trust.