In its simplest terms, estate planning is the process of preparing documents so that a person’s property is distributed according to their wishes when they pass away. Many people are most familiar with wills, which can outline how property such as homes, vehicles, investment accounts, and other assets are distributed upon a person’s death.
Trusts are another type of legal document that are used extensively in estate planning. These documents also have beneficiaries that can receive property upon a person’s death. However, they are not subject to probate and they have a number of other benefits. There are many different types of trusts available in Nevada and they all have different purposes. Below, our Nevada trusts lawyer explains the purpose of GST trusts, and whether they are revocable or irrevocable.
What are GST Trusts?
GST trusts are generation-skipping transfer trusts, meaning they are meant to hold property for multiple generations. It is a common misconception that the ‘generation-skipping’ aspect of these trusts is to literally skip a generation. For example, some think that the property in a GST trust will not go to the children but instead, the grandchildren. This is not true. Instead, the children can still be beneficiaries of a GST trust but the estate tax implications will skip to the next generation. If the trust is executed properly, the taxes can continue to skip for 365 years.
GST trusts have many benefits. Beneficiaries can access the property within the trust and not risk the loss of assets to creditors or through other intervening factors such as divorce or death. In some instances, individuals are advised to work with an independent corporate trustee to assist with the administration of a GST trust.
Corporate trustees are third parties appointed to help manage the property in the trust, file tax returns, and keep records. GST trusts can be very lengthy and so, hiring a third party to act as a trustee ensures that the property is protected for future generations.z
On the other hand, when heirs are responsible and will manage the trust properly, they may be given significant control over the trust established for a particular beneficiary. Additionally, a beneficiary can be given the authority to designate a successor trustee for subsequent heirs to determine how an estate will be distributed among them.
Are GST Trusts Revocable or Irrevocable?
Today, the majority of trusts created are revocable meaning that the grantor, or the person who created the trust, transfers property into the trust and acts as the trustee during their lifetime. Trustees can control the property within the trust during their lifetime, selling it or transferring it. Grantors also name a successor trustee to take control of the trust when they pass away. As long as the grantor is alive, they can also typically terminate the trust and all of its terms.
Irrevocable trusts, on the other hand, cannot be revoked. This means that after an irrevocable trust is dated, it is much more difficult to modify. Still, flexibility can be written into the terms of the trust when it is originally drafted and so, grantors should not be intimidated by the thought of an ‘irrevocable’ trust.
State law in Nevada also allows for the decanting of an irrevocable trust. Decanting refers to a process that moves all property from one trust into another. The trust the property is transferred into must have many similarities as the previous trust, but it can allow certain provisions to be changed.
GST trusts in Nevada must be drafted as irrevocable trusts. Still, the grantor can act as the trustee during their lifetime and maintain the authority to determine investment of the trust estate and can generally distribute the property among beneficiaries for the health, maintenance, education, and support of the beneficiaries.
GST trusts have many benefits, including avoiding the probate process, which can be costly and time-consuming for heirs and beneficiaries. However, these legal tools must be drafted properly in order for them to provide the intended protection.
Our Nevada Trust Administration Attorney Can Draft Your Estate Planning Documents
GST trusts are very helpful estate planning tools but like all other documents, it is critical that they are drafted properly. At Boyer Law Group, our Nevada trust administration lawyer can advise on whether a GST trust is right for your family, help you transfer property into it, and ensure it is executed properly so you and your loved ones are protected now, and in the future. Call us now at 702-255-2000 or fill out our online form to schedule a consultation and to get the legal help you need.