ESTATE PLANNING
What is Estate Planning?
Estate planning is one of the most important steps any person can take to make sure that their
final property and health care wishes are honored, and that loved ones are provided for in their
absence. Though often overlooked or put off in favor of more immediate concerns, a comprehensive
estate plan can resolve a number of legal questions that arise whenever anyone dies: What is the
state of their financial affairs? What real and personal property do they own? Who gets what? Does
a personal guardian need to be appointed to care for minor children? How much tax will need to be
paid in order to transfer property ownership? What funeral arrangements are appropriate?
What is an "Estate"?
Your "estate" consists of all property owned by you at the time of your death, including:
- Real Estate
- Bank accounts
- Stocks and other securities,
- Life insurance policies,
- Personal property such as automobiles, jewelry, and artwork.
How Can an Estate Plan Help?
Regardless of your age, or the size and complexity of your estate, an estate plan can accomplish
the following:
- Identify the family members and other loved ones that you wish to receive your property after
your death.
- Ensure that your property will be transferred to those you have identified, as quickly and
with as few legal hurdles as possible.
- Minimize the amount of taxes that will need to be paid in order for your property to pass to
others after your death.
- Avoid the time and costs associated with the probate process by utilizing estate planning
devices like living trusts and "payable on death" bank accounts.
- Dictate the kinds of life-prolonging medical care you wish to receive should you be unable
to make your wishes known when the time comes.
- Set forth the kind of funeral arrangements you would like, and how related expenses are to be
paid.
Understanding the estate plan options that are right for you can be a complex undertaking.
Alikhan Law Office, LLC can help you identify your estate planning needs, recognize potential
solutions, and help you at every step of the estate planning process. Described below, are various estate planning and asset protection instruments. The advantages and disadvantages of Wills, Revocable Trusts, Irrevocable Trusts and Spendthrift Trusts are discussed below.
WILLS
Only effective for assets that are subject to administration in probate. This excludes non-probate assets, which are passing by operation of law or by operation of contract .
Operation of Law – joint tenancy, community property with right of survivorship, transfer-on-death arrangements, and beneficiary deeds.
Operation of Contract – life insurance, retirement plan benefits, IRA accounts, and other contractual assets.
REVOCABLE TRUSTS
Avoid probate and guardianship proceedings [for both settlor and the beneficiary].
Private versus public nature of disposition via will.
Do not provide protection against claims of a settlor’s creditors but do provide protection against beneficiaries creditors if properly drafted .
Tax savings provisions will not have effect until trust becomes irrevocable – “grantor trust” – all taxes and deductions are attributed to the settlor as if the trust did not exist.
IRREVOCABLE TRUSTS
More effective at tax planning and asset protection.
Inflexible b/c settlor gives up right to revoke and amend the trust.
Types:
(1) Life insurance trusts
(2) Charitable trusts, including lead trusts and remainder trusts
(3) Spendthrift trusts, including self-settled spendthrift trusts
(4) Grantor retained interest trusts, including qualified residence trusts [QPRT] and grantor retained annuity trusts.
SPENDTHRIFT TRUSTS
The beneficiary cannot pledge or transfer his interest in the trust, and the beneficiaries creditors cannot garnish, attach or place a lien against the Trust assets.
Beneficiaries must be named.
Payment of discretionary benefits to keep the beneficiary from terminating the trust by a voluntary transfer.
Settlor – if beneficiary, the trust must be irrevocable, in writing, have a connection to Nevada (such as a Nevada trustee, trust administration in Nevada, or a Nevada settlor) and require that someone other than the settlor approve distributions. The article below provides an indepth discussion of Nevada Domestic Asset Protection Trusts.
NEVADA DOMESTIC ASSET PROTECTION TRUSTS [“DAPT”]
On October 1, 1999, Nevada State Law made “Self-Settled Spendthrift Trusts” a viable option for
asset protection through the Spendthrift Trust Act of Nevada (“Act”). The Domestic Asset Protection
Trust (“DAPT”) permits an entity to protect its assets from attack by potential future creditors
while concurrently maintaining limited control over and beneficial use of such assets.
Nevada law provides that the enforceability of a “self-settled” spendthrift trust, whether
created in or outside of Nevada, will be respected so long as: (1) all or a part of the property
transferred into the trust is located in Nevada; (2) the declared domicile of the trust’s settlor
is in Nevada; or (3) all or part of the trust’s administration (including the preparation of income
tax returns and maintaining trust records or documents) is performed in Nevada by a qualified Nevada
trustee.
The Nevada Revised Statutes, Chapter 166, state that a Nevada DAPT must have as one of its
trustees either a: natural person who resides in and has his domicile in Nevada; legally organized
trust company that maintains an office in Nevada; or a legally organized bank that maintains an
office in Nevada, and possesses and exercises trust powers. Further, the Act specifies that a
Nevada DAPT must be irrevocable; must not be intended to hinder, delay or defraud known creditors;
and all distributions to the settlor must be discretionary.
The Act sets a two-year statute of limitations for fraudulent conveyance claims and gives
existing creditors six months to file a complaint after learning of the transfer, if longer.
Notably, any conveyance could potentially be set aside by a court, if made within the two-year
time period after the DAPT has been formed. To date, no case law exists testing the viability of
DAPTs as an asset protection tool.
Possible advantages of using a Nevada DAPT include protecting: gifts and inheritances; assets
of minors, spendthrifts and other vulnerable persons; against failure of future ventures; against attack
in divorce proceedings; against the collection of personal injury awards; and against frivolous
lawsuits. For further information on either asset protection or estate planning, please call
Alikhan Law Office, LLC, at (702) 374-6619 to schedule a confidential consultation.
Disclaimer: The information presented in the article above is general information only.
It should not be construed to be legal advice and does not create a lawyer/client relationship.
Tel: (702) 374-6619 Fax: (702) 933-6770 Email: info@alikhanlaw.com
4445 S. Eastern Ave., Suite B, Las Vegas, NV 89119 United States
