Home Means Nevada-those are three words that every Nevadan knows. Aside from being the title of our state anthem, these words are plastered on bumper stickers, t-shirts and souvenirs across the Silver State. Nevada is renowned for its stunning natural landscapes and bustling entertainment scene and it continues to attract new residents drawn by its unique opportunities and lifestyle. Regardless of whether you’re a seasoned local, a recent arrival, or a resident of another state, Nevada assures a wealth of advantages for your financial prosperity. For many affluent Americans, home may not mean Nevada for their families, but Nevada is where their family’s wealth resides.
This decision to be a welcoming destination for wealth wasn’t an accident. In the early 1990s, leaders in Nevada noticed other like-minded states, including South Dakota and Delaware, adjust their trust laws and regulations to prioritize the needs of high-net-worth families. As a result, they passed legislation to become more trust-friendly to boost the state’s economy and level up Nevada to the top echelons of trust jurisdictions. Ever since some of the nation’s wealthiest family offices and trust companies have flocked to the state. Still, it is Nevada residents that stand to gain the most from Nevada’s favorable tax and trust climate.
What makes Nevada especially attractive to high-net-worth families? Here are four key reasons why.
1. Taxes
Nevada’s lack of a state income tax makes it an attractive option for individuals seeking to minimize their tax obligations. By establishing a Nevada irrevocable non-grantor trust, residents of states with income taxes can strategically transfer their assets to Nevada, potentially reducing their state tax burden. However, it’s important to be aware of exceptions to this approach, particularly regarding income distributions from the trust. These distributions shift a portion of trust taxes to the recipient of that distribution. The distributed funds may incur state taxation if the beneficiary resides in a state with income taxes. Notably, this issue does not affect beneficiaries who reside in Nevada.
Seventeen states and the District of Columbia currently levy an estate or inheritance tax. These taxes diminish the transfer of wealth from one generation to the next. Nevada, however, does not fall into this category.
The Generation-Skipping Transfer Tax (GSTT) represents another aspect of taxation often overlooked by those outside the realm of trust and estate management. These federal taxes play a role in limiting the transfer of wealth between generations by imposing taxes when assets skip a generation, such as when grandparents pass assets directly to their grandchildren. One common strategy to mitigate these taxes involves utilizing dynasty trusts, which have the potential to last for up to 365 years in Nevada.
2. Asset Protection
Nevada Asset Protection Trusts offer families a robust safeguard for their assets, particularly against legal claims and creditors. Nevada sets itself apart with its shorter statute of limitations for creditors and more stringent requirements for challenging transfers to the trust. Nevada also allows for self-settled trusts, meaning individuals can protect their own assets, which is not permitted in all states offering asset protection trusts. Nevada’s asset protection trusts provide enhanced protection and flexibility, often making it a preferred choice compared to other states.
3. Flexibility
Nevada stands out in trust decanting and nonjudicial settlement agreements (NJSAs). Trust decanting allows trustees to modify or distribute assets from an existing trust into a new trust, providing the flexibility to adapt to changing circumstances or correct drafting errors. Similarly, NJSAs enable trustees and beneficiaries to resolve trust-related issues without court involvement, ultimately streamlining the process and reducing legal and administrative costs.
4. Privacy
Silent trusts in Nevada offer a unique advantage compared to other states due to the confidentiality they provide. Most often, individuals establish trust for their children to foster their productivity and independence rather than hinder it with excessive wealth. Through the creation of silent trusts, individuals can limit the information disclosed to beneficiaries and help ensure that their wealth becomes an asset to the family rather than a liability.
While there are plenty of non-financial benefits to living in Nevada-spectacular natural beauty, sunny weather, entertainment opportunities, recreational opportunities, and more-it’s a top destination for high-net-worth individuals to strategically protect their growing assets.
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Written by Danny J. Schenker, Vice President, Client Advisor at Whittier Trust. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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