The basics of Nevada trust creation and administration

May 11, 2013

Many people, when hearing that someone has a trust, assume that there must be a large amount of money involved, or that trusts are only useful for people with a very high net worth. This is simply not the case. The trust is actually a powerful estate planning tool that can provide tax benefits, prevent expensive and time-consuming probate issues, and stave off possible legal challenges.

Creating a trust is more complicated than drafting a will, and it must be done meticulously in order to take advantage of the many "pluses" that result.

How do trusts work?

While there is some variation depending on the type of trust it is, essentially trusts serve two important purposes: managing property and avoiding probate. Probate, the process by which assets are transferred from the decedent to beneficiaries or creditors (guided by a will, other estate documents or state statutes), can be relatively painless, or if disputes arise, can be a huge, years-long legal headache. A key benefit of establishing trusts instead of - or in addition to - using a will is the simplification of property transfer after death.

There are three key benefits associated with trusts that might not be possible using other estate planning methods or less-comprehensive legal tools:
- Management of property during the lifetime of the grantor of the trust (the person who owns the property or assets that will be going into the trust)
- Easy transfer of the property/assets in the trust to a named beneficiary or beneficiaries upon the grantor's death, without the need for the involvement of the probate court
- Management of the remaining property/assets of the trust in the time following the grantor's death (this is often seen in what are known as "charitable remainder" trusts, where someone leaves funds to be utilized by a particular charitable organization in a particular manner, requiring oversight by the trustee)

Trust administration

Trust administration is the process by which the person named to be in charge of the trust - the trustee - handles the assets of the trust. The trustee has several different duties that must be done in an exacting manner to avoid both the loss of assets from the trust and any personal liability for the debts of the trust. Possible trustee duties include:
- Using trust funds to pay creditors
- Selling trust assets as required to meet debt obligations
- Paying out trust assets to beneficiaries as required by the terms of the trust
- Dealing with tax issues on behalf of the trust and/or the beneficiaries
- Providing an accounting to the beneficiaries upon request detailing the exact amount of trust assets and obligations

Trusts are very powerful estate planning tools, and they can make the process of giving assets to beneficiaries much simpler, less expensive and faster, but that ease comes with a price: trusts need to be drafted and administered in an exacting manner to avoid possible legal disputes, tax consequences and other issues.

If you need help creating a trust, administering one as a named trustee, or receiving assets allocated to you by a trust document, consider speaking with an experienced estate planning attorney in your area to learn more about your legal rights and options.

Article provided by Barlow Flake LLP
Visit us at www.barlowflakelaw.com