I recently received the following question via email:

“I have heard that in Nevada if there is certain language in a pour over assets are transferred to the trustee of a revocable trust without submitting to probate.  Is this information correct?”

Generally, to avoid probate, the assets must be owned by the Revocable Living Trust prior to death.  The purpose of a pour over will is simply a safety net.  Technically, if the decedent owned some property, not in trust, the pour-over will would act to transfer the property to the trust for ultimate distribution.  However, a probate would be required to transfer such property to the trust.  That is why it is vital to make sure your trust is properly funded with all of you assets.
 
Now, I am not quite sure what type of asset we are talking about.  There are some assets that otherwise may pass free of probate.  For example, an automobile may generally be transferred through the DMV without probate.  However, I think the best practice is to get all of the assets into trust prior to death.
 
If you have further questions please contact an estate planning attorney.

This week republicans attempted once again to effect a complete repeal of the estate tax. A 57-41 vote fell three votes short of advancing the bill.

Under current law the estate tax is scheduled to disappear in 2010. However, it rears its ugly head again in 2011 with only a $1 Million exemption.

Currently, an individual estate may exempt up to $2 Million and only pays estate taxes on those amounts exceeding $2 Million at a maximum rate of 46%. Through proper planning, a married couple could effectively exclude $4 Million from their taxable estate. In 2009 the exemption raises to $3.5 Million. In 2010 there is no estate tax. Then, in 2011 the estate tax reverts back to its pre 2001 levels. In this planners opinion, those having taxable estate should plan to die in 2010 (just a small joke to make sure you are awake).

It is my opinion that lawmakers will eventually “fix” the estate tax prior to ever seeing a repeal in 2010. I would expect an ongoing tax but a significant exemption potentially in the $3 to $5 Million range. Indeed, there was recently talk of compromise in the senate which would include an ongoing estate tax, exemptions in the $5 Million range, and lower estate tax rates.

If you have previously had an estate planning trust prepared, check your deeds to make sure all of your real estate is deed into the name of your trust.  The number one pitfall of the revocable living trust is failing to deed your property to it.  Your trust only governs the property it owns.

If you do not have a trust, you should check the status of your deed.  In nevada, I have seen many deeds prepared for a married couple as “husband and wife.”  In other words, no “right of survivorship.”  In nevada, even married couples, must hold property as “joint tenants with right of survivorship” or it is presumed that you hold the property as tenants in common.  Therein lies the problem.

I get about one new probate case a month where a widowed spouse is seeking  to sell their home only to find out that their deceased spouse is a tenant in common.  Ths means that we must go through the hassle of a Nevada probate simply because a deed did not say “with right of survivorship.” 

Although I will often suggest a revocable living trust, it is also important to be sure your real estate is properly titled.

Joel Schoenmeyer in his Death and Taxes Blog and Jennifer Sawday in her California Estate Planning Blog are both noted fans of the HBO series “Big Love” which depicts a polygamist family living in Utah.  Both planners have recently commented upon the unique story line in a recent episode that involved the plural wives making estate plans and decisions concerning guardianship of their family.  Most people throughout the country likely see this as an absurd situtaion occuring only in fiction.

Personally, I don’t subscribe to HBO and have not had the pleasure of viewing “Big Love.” However, those of us in Utah understand the legal difficulties of polygamist relationships reach beyond fiction.  I think that both Mr. Schoenmeyer and Ms. Sawday make some great points brought out by the fictional scenario facing the plural wives in Big Love.  But there exists another important lesson to be learned.

Generally, the law of our country makes certain presumptions and preferences based upon a person’s status of “married” or “single.”  However, the world we live in is not quite so black and white.  Those living in more non-traditional family units face unique challenges making proper planning even more important.  If you live in a not so traditional family unit you should seriously consider proper planning to plan for distribution of your estate, provide access and medical decisionmaking to loved ones, and determining guardianship of children.    Contact an estate planning attorney for more information.

Asset protection strategies have often led individuals to various offshore locales such as the Cayman Islands to create irrevocable trusts beyond the reach of United States judgments.  Such planning is expensive and troublesome for a number of reasons.  Nevada is one of a very few states that has created an alternative to offshore asset protection. 

Many states allow a trust to contain “spendthrift provisions” which protect the trust estate against claims of creditors.  However, most states spendthrift provisions do not allow a settlor, or creator, of a trust to protect his own assets.  Nevada is one of the few states that allows for a self settled spendthrift trust.  Such a trust is now commonly known as the Nevada Asset Protection Trust (NAPT).

A NAPT allows a person to transfer assets to an irrevocable trust that prohibits voluntary or involuntary transfers to creditors contrary to the terms of the trust.  The requirements of a NAPT are as follows:

1. There is some connection to the State of Nevada. One of the following must be true:
   
     
   1. Some or all of trust assets or income are located in Nevada; or 
   2. The settlor is a Nevada resident; or 
   3. At least one trustee: 
      
        
      1. has powers that include maintaining records and preparing income tax returns for the trust, and all or part of the administration of the trust is performed in this state; and 
      2. is an individual who is a Nevada resident or is a bank or trust company that maintains an office in this state for the transaction of business and possesses and exercises trust powers.

    

2. The trust is irrevocable, although the settlor may have a special power of appointment. 
3. The trust is not intended to hinder, delay or defraud known creditors. 
4. Distributions to the settlor are not mandatory and made only in the discretion of a person other than the settlor. 
5. The trust is subject to Nevada’s statutory rule against perpetuities.

If the trust qualifies as a NAPT, the creator may effectively sheild their assets from cliams of creditors.  However, the protection is not immediate.  As to current creditors, assets are protected 2 years after the transfer to the trust or 6 months after the creditor should have reasonably discovered the transfer.  As to future creditors, their claims must be brought within 2 years after the transfer.

The NAPT may be an appropriate vehicle for many to protect their assets from the claims of creditors.  Contact a Nevada attorney for more details.

It depends.  Generally, for basic estate planning purposes, people execute a revocable living trust.  This trust provides the many benefits that I have discussed in prior posts including probate avoidance, privacy, planning for incapacity, and estate tax avoidance.  However, a revocable living trust generally will not provide protection from your own creditors.

It is a common misconception that by transferring your assets to a trust you will keep them out of reach of creditors.  However, because grantors using revocable trusts have full powers to revoke, amend, and otherwise exercise dominion and control over the assets, creditors may still get to the assets of the trust.  Although, a beneficiaries creditors may not get to the assets of the trust if a proper “spendthrift provision” governs the trust.

In order to truly protect assets one must generally enter into an irrevocable arrangement.  The downside is that you generally lose control of your assets in an irrevocable trust.  Unfortunately, we can not have our cake and eat it too.  However, for some people, the irrevocable trust may make some sense.  Some advanced planning techniques may be appropriate to those who have increased liability risks.  One potential vehicle unique to our neck of the woods is the Nevada Self Settled Spendthrift Trust.  This vehicle is irrevocable, but provides some amount of control.  Stay tuned and I will write a new post in the next few days on this trust.

I had the “pleasure” to spend half of my day in the cattle drive known as the Friday probate calendar in the Eighth Judicial District Court, Las Vegas.  The upside is that the Probate Commissioner in Las Vegas may be the single most pleasant judge I have ever stood before.

Nonetheless, my client’s money could be better spent than simply waiting over two hours to take my turn, only to be continued.  One day in probate court provides abundant examples of why estate planning is vital.  One example pulled on my heart.  A young man in his twenties, without an attorney, stood before the court.  The young man explained to the court that his deceased father split up with his mother when he was very young.  He and his brother were raised by his father with virtually no contact with his mother growing up.  However, despite the 15+ years of separation, the mother and father never split.  The young man explained to the court what his father wanted done with his estate, and that was to distribute it to he and his brother.  The court explained to the young man that the law is not always cognizant of what is fair or moral.  Rather, the laws of intestate succession (he died without a will) directed a significant share of the estate to the dead man’s spouse, despite the long separation without contact.  The young man bowed his head, instructed the court that he did not want any share of the estate as he would not feel good knowing his father’s desires were not being followed, and slowly walked out of the courtroom.

 This is one of many cases today showing what happens without proper planning.  A simple will would likely have solved the problem.  Better yet, today was a good testament to avoiding probate completely.

Talk to an estate planner before it is too late.