Nevada is an estate friendly State because of its lack of State income, estate and inheritance tax. (4) Additionally, Nevada affords individuals more privacy regarding disclosure of income and asset information. Moreover, Nevada's economic infrastructure and wealth regulatory laws may provide reason for planning an estate in Nevada. This article will discuss estate planning in terms of reducing taxes, protecting assets, expediting estate management after death and estate asset allocation.
• Reduce taxation
• Protecting Nevada Estates and expediting their management
• Nevada estate asset management
Reducing estate taxes in Nevada
There are two good ways to reduce taxation on estates, first lower the taxable value of the estate and second shelter income and assets in the estate in safe financial instruments, policies and/or accounts. In Nevada several options are currently available to estate owners to lower their taxes or the taxes on descendents who inherit the estate. Even though inherited assets are not necessarily taxable by the State of Nevada, they may be by the U.S. Federal Government making the use of tax protected financial instruments less redundant than might be expected.
• Nevada trusts' income are State tax free
• Life insurance policy distributions are tax free
• Inherited assets are not taxed by the State, but may be taxed by the Federal Government
• Not all investments outside a trust or insurance policy are taxable ex- Tax free mutual funds
• Individual Retirement Accounts can be transferred to Beneficiary Retirement Accounts
After dying one or more of the following parties may become involved in the estate's management: Estate executors, trustees, beneficiaries, family, accountants, lawyers and government officials. Depending on the clarity and complexity of the estate, and matters surrounding the estate, it's management after death may be simple and short or lengthy and complicated. Some steps may be taken in advance to help relieve potential problems regarding re-distribution and allocation of estate assets. A few such steps are listed below:
• Keep beneficiaries up to date on accounts, policies and property
• Maintain legal and State applicable Will, and Power of Attorney
• Place and record assets as trust rather than individual owned
• Transfer assets as gifts prior to transfer of the estate
• Utilize both tax-free and creditor secure financial instruments
Asset management of Nevada estates
Increasing the value of an estate in Nevada can include present and after tax values. To increase the after tax value involves some of the aforementioned tax techniques. However, increasing present value of an estate is also financially important. Estate wealth building techniques vary on the asset base of the estate's portfolio and the allocation and redistribution of assets within such. However, some techniques can be applied with or without estate specific assets in mind.
• Make use of the $1 million federal gift tax exemption and annual tax exempt gift amounts
• Assess value of gifts given under 0% Nevada State gift tax
• Transfer assets to spouse to avoid 'unlimited martial deduction'
• Increase size of life insurance policy value
• Optimize Roth IRA contributions
• Invest in tax free financial vehicles
• Allocate portfolio assets in accordance with financial goals
• Consult a financial planner, estate accountant or estate lawyer if necessary
Additional financial Instruments of interest may include the following when estate planning in Nevada. These items help protect estate assets from creditors and/or taxes making them worth consideration when managing an estate portfolio.
• Nevada Asset Protection Trust
• Trust owned life insurance policy
• IRA transferable to a Beneficiary IRA
• Generation Skipping Trust
That said Nevada may assess tax on both real and personal property making expensive housing and automobiles within an estate subject to taxation if not legally protected from such. Considering this, a highly liquid portfolio or one that minimizes taxable ownership of property may be worth consideration.
Summary
Estate planning in Nevada may be worthwhile given the nature of the State's economic and regulatory structure. These regulations limit taxes on estates but do tax property that is not tax sheltered. Protecting assets in an estate from creditors and costs is an important part of estate planning in addition to building the wealth of the estate through use of sound portfolio management. The content presented in this article is not intended to replace the advice of a financial planner, accountant or lawyer certified or licensed to practice in the State of Nevada or otherwise. The subject matter of this article is for informational purposes only and is to be used or not used at the reader's own discretion.
Nevada and general estate information resources consulted:
1. http://articles.moneycentral.msn.com/RetirementandWills/InvestForRetirement/WhatToDoWhenYouInheritMoney.aspx
2. http://www.buschfirm.com/articles/ep_art_nevada_asset.html
3. http://www.investopedia.com/articles/pf/05/EstateTaxPhaseOut.asp
4. http://www.bankrate.com/brm/itax/edit/state/profiles/state_tax_Nev.asp
5. http://www.pacificlife.com/Channel/Educational+Information/Life+Insurance+Concepts/Maximizing+Life+Insurance+Benefits.htm
6. http://tax.state.nv.us/DOAS_MAIN.htm
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