Pros and cons of a Nevada trust

On Behalf of | Jul 8, 2016 | Trusts

For individuals with an estate worth less than $5.45 million and couples with assets less than $11 million, a trust may not provide any tax advantages. This is because changes to estate tax laws provide exemptions that eliminate estate taxes for almost all Americans. In some cases, individuals who inherit assets through a trust as opposed to a traditional inheritance could face several disadvantages.

First, when an individual inherits an asset through a trust, there is no step up in basis. Income derived from a trust is also taxed at the highest rate of 39.6 percent if it is more than $12,300 in a year. However, despite their flaws, there may still be good reasons to create a trust anyway. For instance, they may provide protection from creditors or make it easier to provide assets to children in a controlled manner.

For those who choose to create a trust, it is important to choose a trustee who is responsible and charges reasonable fees. A trustee can be anybody, such as a family member or friend whom an individual believes can do a good job. It may also be an entity such as a bank or financial firm. Adding a trust protector may make it possible to remove a trustee in the future if he or she is not meeting his or her expectations.

Those who are interested in creating a family trust or need general trust planning advice may want to talk to an attorney. He or she may be able to help draft trust documents or review a current trust to ensure it still meets an individual’s needs. Legal counsel may be able to work with an individual to explain the pros and cons of such a document to determine if one is worth creating.