Five Things to Know about Trusts

Read this practical piece written by Brian Steadman and published in the COMMUNIQUÉ (Jan. 2024).

By Brian Steadman

  1. A trust is a contractual relationship. A trust is an agreement involving at least four elements: (1) the individual or entity that creates the trust and sets forth its terms; (2) the appointment of a trustee; (3) the identification of current and future beneficiaries; and (4) a right or interest that is transferred to or acquired by the trust. The most common type of trust is a “revocable living trust” and is used primarily to plan for incapacity and pass assets to heirs upon death.
  1. Trusts are governed by both federal and state law. Federal laws generally govern the federal income, estate, and gift taxation of trusts. State laws generally govern that state’s income, estate, and gift taxation, along with the validity, construction, and administration of trusts. A trust can be subject to more than one state’s laws, depending on the residency of the creator, trustee, beneficiary, and location of the trust’s interests and assets.
  2. A trust is often used as a substitute for a last will and testament. If someone dies with a last will and testament, the assets in the decedent’s name will generally be required to pass through probate and ultimately be distributed with court oversight to the beneficiaries listed in the will. This process is public and can be expensive and time consuming. Revocable living trusts use a statutory process that allows assets to be distributed to beneficiaries after death generally without court oversight. Thus, while a revocable living trust generally costs more than a will, the time and costs to distribute assets to beneficiaries after death are generally lower.
  3. Trusts are (mostly) private. In most states, including Nevada, the terms of a revocable living trust can remain private after death, and are generally only provided to the trustee and beneficiary once the creator has passed away. However, in the event of a dispute among the various parties to a trust, a petition is generally filed in a court of equity (typically referred to as “probate court”) which may make the terms of the trust public. Note that, in Nevada, you can file trust petitions under seal under certain circumstances. SB 407 in Section 13 of the 2023 Nevada legislature, effective July 1, 2023.
  4. Trusts are not only for the wealthy. In most states, if someone passes away owning real estate or assets with values in excess of small thresholds (in Nevada, $25,000 to non-spouses or $100,000 to spouses) in their individual names, some type of probate court proceedings will be necessary to distribute the assets to heirs. NRS 146.070 and 146.080. A revocable living trust can be used for anyone who wants to ensure their assets pass to their intended beneficiaries outside of probate court.

About the author

Brian Steadman, named partner and management committee member at Solomon Dwiggins Freer and Steadman, focuses his practice in the areas of tax planning, estate planning, business planning and asset protection. Brian has extensive experience in assisting clients with all areas of tax, estate and charitable planning.

About the article

This article was originally published in the Communiqué (Jan. 2024), the official publication of the Clark County Bar Association. See https://clarkcountybar.org/about/member-benefits/communique-2024/communique-jan-2024/.

© 2024 Clark County Bar Association (CCBA). All rights reserved. No reproduction of any portion of this issue is allowed without written permission from the publisher. Editorial policy available upon request.

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