By Attorney Catherine Colombo of CMC Law Group, LLC.
If you’ve recently purchased a home in Nevada or if you are thinking about purchasing a home, it may be the perfect opportunity to think about your estate plan. Many people believe that estate planning is only for the ultra-affluent. However, estate planning is something that anyone owning assets (especially real estate) should think about, as the failure to properly plan one’s estate can lead to unintended consequences and administrative messes. A little planning can go a long way to protect your assets and your family members from the unexpected.
If you die without any estate planning documents in place, the State of Nevada will determine how your assets are distributed and this may be contrary to your wishes. For example, if you die leaving a spouse and children, your assets will be distributed to both the spouse and the children, despite your possible intentions to leave all of your assets to your surviving spouse.
If you have a last will and testament, then your assets will pass according to the terms of your last will and testament, but they will be subject to the probate process. Probate is a public proceeding where a court oversees the disposition and distribution of your assets. Probate can be an expensive, lengthy, and emotionally draining process. The good news is that the probate can be avoided in its entirety through the use of revocable trust.
A revocable trust is an agreement where you (as the grantor) transfer your assets to yourself (as the trustee). The Trustee then in turn manages and controls the property owned by the trust. During your lifetime, through your roles as both the grantor and the trustee, you maintain full access, control and use over the trust assets and can amend the terms of the trust at any time and for any reason. Upon your death, the terms of the trust direct the distribution of the trust’s assets to your named beneficiaries. Like a will, a revocable trust can provide for the distribution of property upon your death. Unlike a will, a revocable trust can (i) avoid probate, (ii) help to reduce or eliminate estate taxes, (iii) help you plan for incapacity and (iv) pass assets onto family members in a protected manner.
Avoid Probate. As discussed above, probate is the process where a court oversees the disposition of your assets after your death. As a general rule, after death, any assets titled in your individual name will need to go through probate to pass to your intended beneficiaries. However, if assets are owned by a revocable trust, those assets will avoid the probate process. For example, if the title to your house is held in your individual name, upon your death your home will need to be probated to pass to your intended beneficiaries. If on the other hand, your home is owned by your revocable trust, it will transfer to your named beneficiaries free from the probate process. Note that the use of a revocable trust is especially important if you own real estate in multiple states. This is because a probate proceeding will need to be initiated in each state in which you own real property.
Eliminate or Reduce Estate Tax. With special planning drafted into your revocable trust, it is possible for you to reduce or in some cases even eliminate any estate taxes, which would be due and payable upon your death.
Planning for Incapacity. A revocable trust can also be structured to protect you in the event you become incapacitated and are unable to manage your affairs. This is done by naming a successor trustee who can step in and manage your affairs in the event you become incapacitated. In doing so, you can effectively prevent guardianship proceedings (i.e. court intervention) should you be unable to handle your affairs at some point in the future. For example, if you become incapacitated and are unable to access your bank account to make your mortgage payment, your named successor trustee can step in and pay your bills for you.
Protection for Family Members, Pets, etc. In addition to providing protection for you in the event of incapacity, a revocable trust can also be structured to allow you to leave your hard-earned money and property to your beneficiaries (and even your pets) in an asset protected structure. For example, if you die leaving minor children as beneficiaries of your estate and leave assets outright to them, the law requires that a guardian or conservator be appointed to oversee the minors needs and finances until minor becomes a legal adult. This can be prevented by designating a guardian and a trustee to look over your minor beneficiaries. The guardians and the trustee will oversee distributions and use of the trust assets until the minor reaches a specified age. A revocable trust is also a useful tool to protect adult beneficiaries from squandering their inheritances through bad decisions and/or the influence of others. This result can be achieved by holding assets in trust for the benefit of the beneficiary. Under Nevada law, you can set up a trust to ensure that your pets are taken care of and provided for.
Homestead. In addition to setting up a revocable trust to avoid probate and to provide for family members, all real estate owners in Nevada should also take advantage of Nevada’s Homestead Exemption. Under Nevada law, you can protect up to $550,000 of equity in your primary residence from certain creditor claims (e.g. unpaid medical bills, bankruptcy, credit card debts, business/personal loans, accidents). The Homestead exemption does not protect you against debts secured by a mortgage or deed of trust, payment of taxes, IRS liens, mechanic’s liens, child support or alimony payments. To homestead your property, you must file a declaration of homestead with the recorder’s office in the county in which your primary residence is located.
With proper planning, you can ensure that your needs will be taken care of and that your assets will pass to your intended beneficiaries as seamlessly as possible. By setting up a revocable trust and appointing individuals to act in the event of either your incapacity or death, you can avoid costly court proceedings and have peace of mind knowing that your assets are protected for your loved ones.
For more information, contact Attorney Catherine Colombo of CMC Law Group, LLC. Catherine is the founding member of CMC Law Group, LLC and her practice specializes in estate, business and asset protection planning. She can be reached at (702) 216-5940 or via e-mail at firstname.lastname@example.org.
We would like to give a big thanks to Cathernine Colombo for taking the time to provide this important information! If you would like more information regarding estate planning, feel free to contact Catherine and the CMC Law Group, LLC.
And of course, if you have any real estate questions or need a vendor referral, we are always here to help!
The Machat Group