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Posted on September 8, 2023 in trust
Many individuals who embark on the task of estate planning in Nevada pose the question, “What is the irrevocable trust law?” To understand how Nevada’s laws apply to an irrevocable trust, you should first understand what a Nevada revocable trust is. A revocable trust is a trust that can be revoked or recalled by the grantor. This means that the grantor may cancel or terminate a revocable trust at any time after legally establishing it. Thus, an irrevocable trust, on the other hand, is one that cannot be revoked, undone, or canceled, no matter what, but Nevada’s irrevocable trust law is different from other states.
Most states do not even allow for a modification of, change to, or a rewrite of an irrevocable trust once it is submitted into law and declared a legally binding contract. In Nevada, however, an irrevocable trust can be modified under certain conditions by the trustee.
An irrevocable trust can be modified in Nevada if all beneficiaries, the trustor, and the trustee are in agreement with the modification. When everyone does agree, it is an easy process to modify an irrevocable trust, but one that is still recommended to be carried out under the supervision of an estate planning attorney.
Nevada law even allows for the modification of irrevocable trusts established outside of Nevada. Even if the state where it was established doesn’t allow an irrevocable trust to be amended and all parties are in agreement, it can be amended within the Nevada court system.
The process of modifying a trust is called decanting. It is used as a metaphor for pouring the assets of one trust into a new trust, transferring the assets but with new provisions and terms. There are two primary ways to modify an irrevocable trust in Nevada. These are via non-judicial settlements and judicial reformation. In a non-judicial settlement, the trustor, the trustee, and the beneficiaries unanimously agree to modify an existing trust without involving the courts. A judicial reformation is used when a court order is recommended or necessary to amend an irrevocable trust.
There are many reasons why an individual with an irrevocable trust might end up getting a modification, and it happens more often than many people realize. Some of the most common reasons why irrevocable trusts end up needing to be modified are listed below.
Since it is much harder to get an irrevocable trust modified and impossible to have it canceled or revoked, many people wonder why you would want to put your assets into something so legally binding anyway. While both irrevocable and revocable trusts provide benefits for individuals seeking to protect their assets following their passing, an irrevocable trust can be much more secure and offer unique benefits, especially in Nevada.
Some benefits of a Nevada irrevocable trust include investment flexibility, confidentiality of assets, protection of business interests such as membership in an LLC, minimization or complete avoidance of taxed assets, and special types of trusts such as a dynasty trust or self-settled trust. A dynasty trust allows a trust to be set up for up to 365 years in order to pass on assets to future generations without incurring gifts, generation-skipping, or estate taxes. It is because of these unique benefits that many people move their trusts to Nevada just to take advantage of them, and this is especially true in cases of high-net trusts.
An irrevocable trust in Nevada affords many benefits, including the protection of assets from creditors and debt collectors, taxes, and third-party protesters of the trust or the contest of the trust following the creator’s passing. An irrevocable trust also protects assets from having to go through probate.
A: An irrevocable trust can include any asset the grantor wants to include, such as stock portfolios, real estate, life insurance policies, business interests, and other financial accounts. You cannot, however, include a health savings account, medical savings account, retirement assets, vehicles, cash, and assets owned outside of the US.
A: Nevada is unique in that it allows beneficiaries and trustees to modify an irrevocable trust as long as they agree to the new terms. However, the trust cannot be changed by the grantor, as the grantor is no longer the owner of the assets. Instead, the assets belong to the trust, and thus, they can only be altered by the future owner of the assets, the beneficiary named in the trust, to receive the assets at the time that the trust indicates.
A: Assets cannot be added or taken out of a trust by the grantor, but in some situations, Nevada courts will allow the transfer of assets out of a trust if the beneficiary gives permission to do so since the grantor is technically no longer the owner of the assets.
If you have more questions about an irrevocable trust, a revocable trust, or any other component of estate planning, the ideal resource for answering your questions is an experienced estate planning attorney. The law firm of Ken R. Ashworth & Associates is comprised of a legal team that has ample experience in establishing trusts as well as modifying trusts in Nevada. Contact Ken R. Ashworth & Associates and get all the answers to your questions regarding irrevocable trusts in Nevada.