Craig's Corner - Wealth Planning Insights

Monday, December 23, 2013

More Americans Borrow a Tax-Avoidance Device from the Corporate Playbook

Nevada Law Helps High Income Families Save Money When Shifting Wealth

Residents of high-tax states such as New York and California have long been frustrated by the money they need to pay out when transferring money to their children via probate and trusts. They have also been frustrated by the annual income taxes levied on trusts set aside in estate plans. The frustration is perhaps understandable: the money has been made, the taxes have been paid. Why should taxes be paid again when the money is passed to an individual’s heirs? And is there a way to accumulate wealth faster by avoiding paying income tax on trust income?

As Bloomberg discusses in a recent news article, residents of high-tax states are increasingly adopting a highly effective and perfectly legal method of lowering the taxes they pay. Like corporations have done for decades, individuals are moving funds to low- and no-tax locations such as Nevada.

Nevada has no income tax. Nevada also has a tax-reduction device known as a Nevada Incomplete Gift Non-Grantor Trust (NING). The combined advantages of Nevada tax and trust laws can be highly advantageous to out-of-state trust holders. With the assistance of an experienced Nevada estate planning attorney, individuals from other states can:

  • Avoid paying income tax on the money their Nevada trusts accrue
  • Avoid paying estate tax on their trusts
  • Safeguard their trust assets from creditors

If you live in a state where you face high income and estate taxes on a trust and are interested in an asset structure that protects your wealth and reduces your taxes, you are not alone. Trusts are private property, so comprehensive data on how much money high tax-state residents have moved to Nevada is limited. However, the Nevada government estimates that out-of-state Nevada trusts have more than double in value from $8 billion in 2008 to $18 billion in 2013.

Though the tax-saving advantages of moving trust assets to Nevada are clear, the transaction can be complex and can involve numerous factors that will need to be carefully considered. To learn more about possible tax-saving opportunities in Nevada, contact Stone Law Offices, Ltd. at 702-998-0444.

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S. Craig Stone II of Stone Law Offices, Ltd. serves clients throughout Clark County, Southern NV, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County. Also serving clients with asset protection nationwide.

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