A ‘trust’ is like a ‘company’ in that it is a standalone entity. So, just as someone starting a new company would need to go to the state of incorporation and file paperwork to set up the entity and stay in compliance with a host of state and federal regulations, creating a trust is pretty much the same process. And just as you can start a company in any state you want, even if you don’t live there, so too you can start a trust in any state you want (though Nevada has, by far, the best trust law in the country).
This means that in the eyes of the law (and the IRS), a trust is a ‘person’. In other words, it’s not you personally because it is its own entity, with its own (regulated) management team (the Trustee) and can even files its own tax returns.
You have a role in your trust similar to one you’d have in a company. As the “Settlor”, you start the trust by having Prime Trust do all the paperwork and filings, just as an entrepreneur starts a company by having attorney’s do all the paperwork and filings. The “Grantor” contributes assets to the trust. The “Beneficiary” is the person who can receive income and distributions, which can be a Settlor’s children, other family, friends or of course even the Settlor him/herself. The “Trustee” (Prime Trust) is like the management team you’d hire for a company. The trustee manages the trust and runs the day to day business of the trust according to your directives in the trust agreement, keeping things in compliance and making all the periodic regulatory and tax filings.
Trusts are for everyone! Sure, rich people are smart (or have smart advisers) and so pretty much always have trusts to protect their assets. But the rest of us can have one too and use them to protect personal savings, college funding, real estate, business interests, estates, and just about any other type of asset.
Lawsuits. Creditors. Bankruptcy. Divorce. Family disagreements. Estate hassles. Even the IRS. This is where the rubber meets the road. A Nevada asset protection trust is built specifically to provide protection to you and your beneficiaries. It’s all legal (the rules were created by the government), and it’s bulletproof so long as the assets weren’t added to the trust via “fraudulent conveyance” and, if the Grantor is also a Beneficiary, a 24 months’ post-contribution no-claims period has settled. No-one can get your Nevada trust assets…they are protected by law.
It’s the lawful duty of the trustee to protect the assets in the trust for the beneficiaries. In fact, the trustee is prohibited by law from distributing assets (money) to a beneficiary if it knows or believes that the distribution would be seized by creditors.
The good news is that Prime Trust has brought trust services into the 21st century by using technology to make them available to anyone with savings or assets they want to protect. The price to open a college or personal savings protection trust at Prime Trust is $0! Otherwise, historically yes, this can be really expensive as attorneys’ and non-tech trust companies charge tens of thousands of dollars to create a trust for someone and the annual management fees can be huge. Plus they have usually been thick, leather-bound documents that are confusing and cumbersome to operate. These have been the biggest roadblocks to the majority of people taking advantage of all the great things they could do with a trust.
Prime Trust, as the trustee, is required by regulators to take the legal steps to create the trust, file regulatory-required reports, handle tax notifications and keep things in compliance with all applicable laws.
Yes. Under Nevada law a settlor can also be the beneficiary, with the assets fully protected so long as a Nevada-based trustee like Prime Trust is the trustee. This is called a “self-settled trust”. While many trusts are created for others (e.g. college savings), most personal savings trusts are created by and for the person who’s money is in it.
Cash. Real estate. Stocks. Bonds. Partnership interests. Royalty agreements. License agreements. Just about anything else of value that you want to protect at Prime Trust.
There is no minimum and no maximum. A trust can have a few hundred dollars or billions of dollars of assets.
Yes, absolutely. Real estate is simply retitled to the name of the trust, as would any other assets you want to protect. Our trust officers work with you to easily handle the details.
The trust agreement, like an operating or shareholders agreement in a regular company, spells out what can be done with the funds. The trustee, as fiduciary for the trust and its beneficiary, manages it in accordance to the plan. This can include distributing funds for college, for healthcare, for living expenses and for just about anything else.
One interesting and massively beneficial aspect to trust law is that the trustee is prohibited from making distributions to a beneficiary when it knows that such funds would be seized by a creditor. The workaround? Easy, the distributions are made directly to the intended source (e.g. college, hospital, landlord, tax authority, etc).
Once created, the trust agreement and related provisions cannot be changed…sort of. First, the trust should have enough flexible provisions to cover anything that comes up. Second, if things have really changed then you can “decant” a trust; which means creating a new trust, with revised provisions, to assume the original trust.
As long as you want. Some trusts are for a specific period of time, such as saving for college or for retirement, others are perpetual (up to 365 years for Nevada trusts). You can even set a trust expiration date and incorporate an “evergreen” clause to automatically renew it if you opt to keep it going rather than liquidate.
No. And yes. Although a trust cannot be terminated by a settlor or beneficiary, it can be terminated by the trustee in certain circumstances. It can also have a fixed expiration date. And it can be “decanted” (transferred) to another trust.
No. Although a trust is like a company, it’s not something that can have investors. It can’t issue shares or be acquired. It is an entity that is created for the benefit of the beneficiary. On the other hand, the trust may be holding assets that can be sold, such as stocks or real estate, and if selling those assets is appropriate to maximize the value of the trust (and benefit to the beneficiaries) then that can easily be done.
It means non-cancellable. A trust can have an expiration date. It can have a ‘decanting’ provision (so assets can be transferred to a different trust). It can have a clause allowing assets to be swapped out (e.g. giving the trust cash and the trust giving you the corresponding real estate or business interests, or vice-versa). But it can’t be revoked (terminated) by the settlor or beneficiaries.
Nevada has the best trust laws in the country, and is even a top-ranked domicile on the world stage. Legislators and regulators have done a great job to make sure people who open trusts in Nevada have both the best asset protection laws, as well as incredible privacy. And, of course, Nevada has 0% income, asset, capital gains and estate taxes.
Here are a couple of interesting Bloomberg articles on the topic:
Furthermore, for personal savings trusts, Nevada is one of the only states that permits the person who starts the trust to also be the beneficiary, while preserving asset protection, privacy and tax benefits. And of the states that do permit “self-settled” trusts (where the creator is also the beneficiary), Nevada is the only state that has no “exception creditor” exemptions which enable creditors to pierce the asset protection shield.
Yes! Just as you can start a company in any state you want, even if you don’t live there, so too you can start a trust in any state you want, including Nevada. And since Prime Trust is a Nevada chartered financial institution you don’t need a personal address or residence in the state for the trust to be effective and enforceable.
Easy, you just send funds (or other assets) to the trust. The trustee will then deposit them into your account. You can do this anytime you want, with no restrictions or limitations.
Of course! It’s totally normal for grandparents to send money into a grandchild’s college savings trust. Or for a parent to put money into trust for estate planning. Or for friends to contribute to someone’s health care trust. Any person can “grant” money (or other assets) to someone’s trust, which becomes an irrevocable gift. And Prime Trust gives you, and others, the ability to easily contribute funds to a trust, either online or with our mobile app.
No, of course not. Prime Trust, as trustee, is the fiduciary for your trust and can only use assets for the benefit of the beneficiaries, not for itself (other than customary and stated fees).
Your account with Prime Trust is insured up to $5,000,000 against various non-investment related issues; click here for more detailed information. Cash in your account is 100% FDIC insured. Investments and non-cash assets in your Trust are not FDIC insured and as such may gain in value or may lose some or all of its value.
The trustee, Prime Trust, is the ‘fiduciary’ for your trust. A fiduciary, as the manager of your trust, owes you the highest legal, good faith and ethical duty to act in the beneficiary’s best interests. And the Nevada Financial Institution Division, the regulator for Nevada banks and trust companies, conducts audits and examinations to ensure that’s exactly what happens.
The trust, like a company, can pay its own taxes. It can also, like certain forms of companies such as LLC’s or partnerships, allow taxes to be paid by the owners (the settlors). Whichever is best for you.
This means that if you are in a low tax bracket, then trust income & realized capital gains could be attributed to your tax returns (check with your tax professional adviser to make sure that’s the right strategy for you). And of course in this situation the trust can write you a check to reimburse you for any taxes you might have to pay.
If you are in a high tax bracket, especially considering state and local taxes, then it might be best for the trust to pay taxes directly (thus avoiding state taxes since Nevada is 0%). A Nevada trust, if filing taxes directly (instead of pushing the tax liability to the settlors), pays 39.6% federal tax on income and short-term gains, 20% federal tax on long-term gains, 0% in state or local income or capital gains, and 0% in state estate taxes. As always, check with your professional tax adviser to make sure that’s the right strategy for you.
There are 2 basic types of trusts, and a number of sub-categories within each.
A revocable trust can be terminated at will by the grantor, with assets being immediately distributed. Assets held in revocable trusts are considered the property of the trust, and in effect the grantor, and thus have no asset protection and can generally be seized by creditors just like your bank or brokerage account savings can. Revocable trusts neither avoid estate taxes nor protect your privacy. It can also negatively affect your Medicaid, college grants, financial aid, state benefits and other such things as they are considered the grantor’s personal assets.
An irrevocable trust is non-cancellable and can bring complete asset protection.
Irrevocable trusts can have expiration dates, can be decanted into other trusts, and can use assets for the benefit of beneficiaries to provide the greatest flexibility in use-of-funds while retaining asset protection.
Increases in the value of assets post-contribution do not count towards your estate and thus are shielded from those taxes. An irrevocable trust also keeps your affairs private by avoiding the public probate process.
Furthermore, assets in an irrevocable trust don’t count against you in later years when qualifying for Medicaid or supplemental security income; thus making it easier to pay for, say, nursing home or hospice care by avoiding depletion of your assets on things that Medicaid wouldn’t have covered if trust assets and income had been counted toward your personal assets or income.
A Nevada asset protection trust is an irrevocable trust that does exactly what it says; it protects the assets of the trust from any problems related to any settlor, grantor or beneficiary including judgments from lawsuits, creditors, divorce, bankruptcy, family disputes or business conflicts. When properly set up and managed by Prime Trust, the assets therein are generally bulletproof provided they weren’t placed into the trust by fraudulent conveyance and the two-year post-contribution settlement period has passed (if self-settled). Be sure to consult with your legal and tax professionals before opening a trust.
A college savings trust is an irrevocable asset protection trust that allows you to provide for children’s education and wellbeing. Anyone can contribute to the trust, including family, friends, godparents, etc, and all such contributions are then considered irrevocable gifts. And as the college savings trust is for the benefit of the named children, but not a direct asset of theirs, it doesn’t count against them in applications for grants, scholarships and financial aid. Furthermore, assets of the trust can be used for pre-college needs such as test prep, tutoring or resume-building activities, as well as indirect college costs such as housing, transportation and food. Excess funds post-college are not subject to any tax penalties and can be used for other needs of your college graduate.
A Nevada dynasty trust is an irrevocable trust that allows you to pass assets to both existing children and to generations or descendants yet to come. Advantages include: up to 365 years in length, no state taxes, protection from creditors, privacy of your financial affairs, and the ability to avoid estate, gift and generation-skipping taxes. You can set up rules which force future beneficiaries to focus on things which you deem important, such as tying distributions to the arrival of babies, certain social/charitable endeavors, getting a college education, or using the trust for home or business loans. Think of a dynasty trust as a roadmap, far more powerful than a will, that provides direction and rules on how future generations access and use (vs misuse) the assets that you spent your life building.
A Nevada family trust is a revocable trust and generally used as a vehicle to avoid issues in probate and disputes that might arise in the event of health/disability issues. It also enables the grantor to establish how the money in the trust is used and provides some mechanisms for estate planning (though not nearly as powerful as a dynasty trust since the family trust does not protect against creditors or estate taxes, among other things). A family trust is revocable and so doesn’t offer the benefits of asset protection, but can be liquidated anytime you want. Upon the grantors death, this becomes an irrevocable trust and the trustee is charged with managing the assets and distributions going forward.
A Nevada Incomplete-gift Non-Grantor” trust is an irrevocable trust that is focused on 2 things – avoiding (‘avoiding’ is legal, vs ‘evading’, which would be illegal) state income taxes of the settlor and asset protection. For wealthy people in high-tax states, this is a great way to legally move income and capital-gains producing intangible assets (generally meaning stocks, bonds, business interests, royalty agreements, etc, but not real estate) into a vehicle that, while still subject to federal tax, shields them from state taxes. And as an “incomplete gift” the NING trust does not trigger the need to file a Form 709 gift-tax return with the IRS and as such avoids unfavorable gift or estate tax issues. Nevada is the only state for which the IRS has approved this structure, though New York has explicitly passed legislation banning the use of NING trusts by its residents. When distributions ultimately take place, the income and capital gains on those are typically taxed by the state of residence of the beneficiary receiving them.
The above are the most common types of trusts, but there are many more. Each can address a niche/specific need of someone and can include life insurance trusts, charitable trusts, qualified personal residence trusts, annuity trusts, testamentary trusts, etc. In general, if you have an irrevocable trust then you are already covered for just about anything that life throws your way.