Monday, June 19, 2017

AFR's for July

The 7520 rate is 2.2%
The AFRs Annual Semi-annual Quarterly Monthly
are as follows
Short-term 1.22% 1.22% 1.22% 1.22%
Mid-term 1.89% 1.88% 1.88% 1.87%
Long-term 2.60% 2.58% 2.57% 2.57%

Friday, June 16, 2017

Nevada Supreme Court Upholds Public Policy of Domestic Asset Trusts

Just a few weeks ago, the Nevada Supreme Court issued their ruling in a case involving a domestic asset protection trust (DAPT) or a self-settled spendthrift trust (SSST), which our office calls the Nevada On-Shore Trust.  The court decision can be accessed here.

This case involved a dissolution of a marriage and whether a SSST can be invaded to satisfy a judgment for child support.  In this case, Klabacka V. Nelson, the Nevada Supreme Court expressly upheld the validity of Nevada’s “self settled spendthrift trust” statute, found in Nevada Revised Statutes, Chapter 166.  In the Court decision, the requirements for establishing a SSST were reinforced:
A spendthrift trust is created ‘if by the terms of the writing (construed in the light of [NRS 166] if necessary) the creator manifests an intention to create such a trust.’  In addition to the spendthrift requirements, to create a valid SSST, NRS 166.015(2)(a) requires the settlor to name as trustee a person who is a Nevada resident.  Further, NRS 166.040(1)(b) provides that the SSST must (1) be in writing, (2) be irrevocable, (3) not require that any part of the trust’s income or principal be distributed to the settlor, and (4) not be ‘intended to hinder, delay or defraud known creditors.’
We also note that the Court’s decision specifically stated that Nevada’s SSST statute is not subject to any type of “exception creditors.”  Many states which have joined Nevada in offering DAPTs, have built into their statutes exceptions for certain types of creditors, such as child support, alimony, tort creditors, or contract creditors.  While these other states may have their own purposes and public policy in mandating certain exceptions to the protection of an SSST, the Nevada Supreme Court has made it very clear that the intent of the law in Nevada is that Nevada-based DAPTs are to be free from exception creditors.  The Klabacka case states:
“We conclude Nevada SSSTs are protected against the court-ordered child support or spousal support obligations of the settlor/beneficiary that are not known at the time the trust is created.”
This court decision adds to the commentary and writings of many practitioners in this area of the law and reinforces the claim that Nevada is the best state for establishing DAPTs/SSSTs, or the Nevada On-Shore Trust.  If you would like more information regarding the Nevada On-Shore Trust, please investigate our website or contact our office to schedule a consultation.

Friday, June 9, 2017

Nevada Passes Assembly Bill 314 Regarding Probate and Trusts

On June 2, 2017, Assembly Bill 314 was approved by the Governor and will become Nevada law on October 1, 2017.  Assembly Bill 314 has been in the works for the past two years by the Probate and Trust Section of the Nevada bar.   The new Nevada law makes positive changes to existing probate and trust law in Nevada. 

Some of the major provisions of the bill include:

  • Increasing the judgment exemption amount for Individual Retirement accounts from $500,000 to $1,000,000;
  • Allowing the court to release Testamentary Trusts from on-going court supervision;
  • Clarifying the existing no-contest laws;
  • Explaining the rights of creditors related to non-probate transfers;
  • Creating law to allow individuals over the age of 18 to authorize another person to order a burial or cremation in the event of his or her death; and
  • Amends and clarifies many important issues relating to probate and trusts.
We are excited for the passage of Assembly Bill 314 and expect the new bill will make positive changes for our clients.

Attorney – Corey J. Schmutz

Thursday, June 1, 2017

Introducing the Passport Trust

Clients that come into our office looking for asset protection in the form of a domestic asset protection trust (“DAPT”) often ask us what additional protections an offshore trust could offer them.  Some of those additional protections include a shorter statute of limitations for creditors to attack assets after the assets have been transferred into the trust, a higher standard of proof that creditors must meet to undo a transfer into an offshore trust, and the fact that the creditor must go to the foreign jurisdiction to pursue their claims.  After reviewing these benefits, many clients are anxious to set up an offshore trust, but that excitement wanes considerably when the fees for setting up an offshore trust are discussed, as well as the formalities and complexities that must be adhered to in order to obtain those extra protections.

To obtain those protections for our clients, but reduce the upfront costs in setting up an offshore trust and avoid some of the more stringent formalities of an offshore trust, our firm has created the Passport Trust ™.  The Passport Trust ™ is an asset protection vehicle that combines the flexibility and simplicity of a domestic asset protection trust (DAPT) with the advantages of an offshore jurisdiction’s additional protections against creditors, if the need arises.

A Passport Trust ™ includes “passport” provisions in the trust agreement that enable a DAPT to be redomiciled in a foreign non-US jurisdiction such as Nevis or the Cook Islands if there is ever a distress event.  Typically there will be no new waiting period for creditor claims in the new jurisdiction – the original transfer date of assets into the DAPT will be used as the transfer date for purposes of the foreign jurisdiction’s rules regarding creditor claims.

Passport Trusts ™ lower the entry cost to obtain the additional protection an offshore jurisdiction can provide by allowing you to begin with a NOST and ‘start the clock’ on the waiting period for protection from creditor claims and later convert to an offshore trust, if necessary, for the best of both worlds.

The Passport Trust™ begins as a DAPT with all the protections that Nevada’s self-settled spendthrift law provides, but includes a special passport provision that enables the Trustee to move the trust’s domicile to a foreign jurisdiction.  In conjunction with this passport provision, application will be made to a foreign trust company upon the creation of the DAPT to pre-approve the DAPT for re-domiciliation.  The foreign trust company shares in the due diligence regarding the creation of the trust.  As a result of their early involvement, the foreign trust company agrees to serve as a special trustee, dormant and waiting with ‘open arms’ to receive the trust assets if a distress event occurs.

To find out more about the “Passport Trust” and how it might be a part of your integrated estate plan, please contact our office.

Tuesday, May 23, 2017

Where There's a Will, There's a Way

Nevada law provides for two ways of creating a valid and binding Last Will and Testament.  The first method is by drafting a will, in writing, that is signed by the testator or by an attending person at the testator’s direction, which is attested to by at least two competent witnesses who subscribe their names to the will in the presence of the testator.  The second method is often referred to as a “holographic will,” wherein the signature, date and material provisions of a will are written by the hand of the testator.  For a holographic will, there is no requirement that it be witnessed or notarized.

When a document meant to be a Will does not comply with the requirements for either a witnessed or holographic Will, a court may not enforce the directions provided about who beneficiaries are and what they should receive.  Instead, a court may substitute Nevada’s default rules governing disposition of a person’s estate, which may be completely different from a testator’s wishes.

To ensure that your estate is distributed according to your wishes, it is important to seek professional legal assistance in drafting a Last Will and Testament or other testamentary documents.  Be wary of download-able forms, templates, or non-legal professionals who attempt to provide low-cost alternatives for drafting Wills or Trusts, as these ‘low cost’ alternatives tend to be the much more expensive option in the long run, as families and loved ones have to pay extra attorney's fees and court costs if these documents are not drafted properly.

To review a Will you have already created, or discuss the requirements of what constitutes a valid Last Will and Testament under the laws of Nevada, contact an attorney at JEFFREY BURR today.

-Attorney Rebecca J. Haines

Wednesday, May 17, 2017

Enforcement of No-Contest Clauses

Most wills and trusts, in my experience, contain no-contest clauses, which say something like: if a beneficiary contests the terms of my will or trust they get nothing. Most clients like this language. They think it protects them from a beneficiary who comes swinging out of the corner so-to-speak and tries to claim more than what was left to him or her. The problem is that sometimes the no-contest clause protects a will or trust, but sometimes it doesn’t.

Nevada law states that no-contest clauses will be enforced with certain exceptions. It will not be enforced if a beneficiary seeks (1) to enforce the terms of the will or trust, (2) to enforce his or her legal rights under the will or trust, or (3) to have a court construe or determine the legal effect of the will or trust. Also, a no-contest clause will not be enforced in certain circumstances if legal action is brought in good faith and based on probable cause. These exceptions combined with the overarching principle that law abhors forfeitures can at times render a no-contest clause seemingly meaningless. So if you suspect you will have problems with your beneficiaries, please consider consulting with an attorney at Jeffrey Burr, Ltd. about planning around your particular circumstance.

Wednesday, May 10, 2017

Amending Your Trust

The main component of the estate plan for most people is a revocable living trust that they establish during their lifetime. When you create a revocable living trust, you can only plan for the present and for the near foreseeable future.  However, an unanticipated change in circumstances in your life may necessitate the amending of your revocable living trust.  Simple examples are when you wish to change the successor trustee or provide for a specific bequest to a new beneficiary or change the amount of a monetary bequest going to a beneficiary.  In these situations, how do you amend the trust?

First of all, oral changes to a trust agreement will never be legally enforceable (i.e. trustor tells someone that his car should go to a child or grandchild.)  The reason for the unenforceability of oral amendments is that once the trustor is deceased, he or she is not there to verify (or deny) the purported oral amendment.  If this was not the rule, anyone could allege that the trustor orally changed the trust before he or she died, and there would be no way to prove or disprove this. In order to determine how to properly amend your trust, the provisions of the revocable living trust agreement must be closely examined. The agreement will specifically state how the trust can be amended.  Oftentimes the trust agreement will provide that any amendment to the trust must be in writing, dated, signed by the trustor and delivered to the trustee.  It is essential that the terms of the trust regarding amendment be strictly adhered to.  Even when amendments are made in writing, there can be problems. People will sometimes attempt to amend their trust by marking out some provision and handwriting something in its place. They may even date and initial the change.  However, if the trust agreement requires that the amendment be signed by the trustor and it is not re-signed, the amendment fails to satisfy the amendment conditions as set forth in the trust agreement.  This, of course, can have serious ramifications, including the possible failure of the trustor’s intentions being carried out once he or she has died. The successor trustee or an interested party could petition the court to take jurisdiction of the trust and determine what the intent of the now deceased trustor was.  This seems to be a failure, however, since one of the main advantages of a revocable living trust is to avoid court involvement and the accompanying costs and fees.  Also the court may construe the trust contrary to what the true intent of the deceased trustor really was.

Accordingly, it is best to always consult a qualified estate planning attorney to assist you in the proper amendment of your trust.