Wednesday, July 24, 2013

Upcoming Event: Saturday July 27, 2013


Be sure to visit Sandy Simpson at the JEFFREY BURR booth on
Saturday, July 27th at the Spotlight Spectacular!
 

Upcoming Events

July 25, 2013
3:00 p.m.
Vintage Park at San Martin
 
“State of Nevada Board of Examiners for Long Term Care Administrators”
Presented by: Corey J. Schmutz, Esq. of JEFFREY BURR
Topic will cover:
Priority Factors to ethical decision-making
-  Roles that the social worker plays within the ethical construct
-  Duties a social worker owes within the ethical construct
-  Family Consent Laws
-  Legality of out-of-state documents

Please contact Natalie at (702) 263-6313 to reserve your spot. It's not too late.

Wednesday, July 10, 2013

Nevada Small Estate Probate Avoidance Statutes


In previous blog articles, I wrote about the importance of avoiding probate.  However, where probate is unavoidable, there are several provisions in Title 12 of the Nevada Revised Statutes that can alleviate the burden of a full probate proceeding where the estate is less than $200,000:

 1.  Affidavit of Entitlement - NRS 146.080 allows estates with a total value of less than $20,000 (not including any real property) to be distributed directly to beneficiaries through the use of an affidavit.  The affidavit does not require court supervision and can be presented to any person who holds estate property.  The property is then distributed directly to the rightful beneficiaries of the estate without going through a formal probate.

There are certain requirements outlined in NRS 146.080 that must be adhered to for the affidavit to work.  For example, among other things, the affidavit may not be filed until 40 days after the date of death and the affidavit must state that all funeral expenses and debts have been paid or provided for.
 
2.  Set Aside - NRS 146.070 provides for the “set-aside” of small estates in two situations.  The first is where "the gross value of [the estate], after deducting any encumbrances does not exceed $100,000" and the estate assets are distributed to the surviving spouse and/or minor children.  The court, at its discretion, can direct that the entire estate be set-aside for their support and the decedent’s debts, if any, are discharged.

The second situation is where there is no surviving spouse or minor children.  The court can set aside the estate to the intestate heirs or beneficiaries of a last will and testament provided that the gross value of the estate is less than $100,000.  In the second situation, the creditors of the estate must be paid.  Although NRS 146.070 requires that a petition be filed with the court, the procedure is much faster and easier than a full probate administration.

3.  Summary Administration – NRS Chapter 145 provides that if the gross value of the estate after deducting encumbrances is less than $200,000, then summary administration is appropriate.  Although the steps for a summary administration are similar to a full probate administration, the provisions of NRS Chapter 145 provide for some relief in a summary administration.  For instance, the creditor claims period is shortened to 60 days and the initial petition for issuance of letters does not need to be published.

Should you have any questions regarding probate, feel free to contact our office. 
 

Tuesday, July 2, 2013

NINGs, WINGs, and DINGs?


Estate planners in particular seem to love acronyms.  So what is a NING (aka WING or DING)? A NING is a Nevada Incomplete-gift Non-Grantor Trust.  It is an irrevocable trust where the trust is its own taxpayer (in contrast to most trusts that are formed as “grantor” trusts).  The Trust is taxed in the state where the trust is established instead of the state where the Grantor resides.  The transfer of assets to the NING is an incomplete gift for gift and estate purposes, therefore the assets going to the trust do not utilize the grantor’s lifetime gift exclusion and the assets could be used by (or distributed to) the grantor later.
Who would be interested in this type of trust?

NINGs are beneficial for those living in states with high income tax.  Here’s an example: 

Yoda lives in a state that imposes a 10% state income tax on income and capital gains.  Many years ago Yoda invented the light saber, a high-tech battle weapon preferred by Jedi knights.  Yoda is thinking of selling his patent rights to STARK, Inc., a weapons manufacturer.  Yoda thinks that the patent rights might be worth $10 million, and Yoda’s development costs for the light saber were minimal so Yoda’s estimated capital gain if he were to sell the patent would be $9.8 million.
Yoda could transfer the patent, an intangible asset, to a NING.  The NING would be established in Nevada and would be managed by a Corporate Trustee in Nevada.  Upon the Trustee’s sale of the patent to STARK, Inc., the gain on the sale for tax purposes would be recognized entirely by the Nevada Trust.  Federal income taxes on the capital gain would be reported and paid by the Trust on a Form 1041.  Using this structure Yoda has effectively avoided the additional state income tax on the capital gains because the trust is taxed as a Nevada entity and Nevada does not impose income tax on individuals or trusts.  Yoda may be the beneficiary of this trust and can receive distributions from the trust.

The popularity of these trusts soared in the early 2000’s after states like Delaware, Alaska, and Nevada passed self-settled spendthrift trust statutes.  Thereafter in 2001, the IRS issued numerous Private Letter Rulings beginning that set the ground work for the income tax and estate tax issues concerning these trusts.  The attractiveness of these trusts continued through 2007 until the IRS indicated that they were taking a new approach to the DING/WING/NING.

However, in 2013, the IRS issued a new Private Letter Ruling (PLR 201310002) that renewed the favor of the NING.  This PLR, based upon Nevada’s self-settled spendthrift trust statute (NRS 166), renewed interest in this type of planning.  There are many more details to this type of trust that are provided in the PLR and details of the Grantor’s state income tax laws and the Grantor’s specific situation must be carefully analyzed by counsel before moving forward. 

To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing, or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein.