Moving Your Trust to Nevada

A Guide to Trust Migration and Decanting

If you have heard that Nevada is one of the most trust-friendly states in the country, you have heard correctly. But what does that actually mean for you, and how do you move your trust to Nevada if it was created elsewhere? This guide walks through the key concepts and available options in plain terms.

Why Move a Trust to Nevada?

Trustees and beneficiaries often choose to establish their trust in Nevada for several important reasons:

• Directed Trusts. Nevada law expressly permits directed trusts, allowing grantors to separate investment and administrative responsibilities between specialized advisors and a directed trustee. This structure helps prevent any single party from controlling every aspect of the estate plan.
• Asset Protection. Nevada is one of only a handful of states that allows a person to create a trust, remain a beneficiary of that trust, and still shield the assets from certain future creditors. This structure is commonly known as a Nevada Asset Protection Trust. Once assets have been held in the trust for two years, they are generally protected from creditor claims while they remain inside the trust.
• Decanting Irrevocable Trusts. Nevada law permits the decanting of irrevocable trusts, allowing trustees to transfer assets from an existing trust into a new trust with updated or more favorable terms.
• Limited State Taxes. Nevada has no state individual income tax, state estate tax, state gift tax, state generation-skipping transfer tax, or state inheritance tax. Federal taxes and taxes imposed by other jurisdictions may still apply.
• Greater Flexibility. Subject to the terms of the trust, Nevada law gives trustees and trust protectors broad authority to modify trust terms, change administrative provisions, and respond to circumstances that the original drafter may not have anticipated. In many cases, these changes can be completed without court involvement.
• Dynasty Trust Potential. Nevada allows certain trusts to last for up to 365 years, making it an attractive jurisdiction for families seeking to preserve wealth and minimize estate taxes across multiple generations.

The Two Main Paths to Nevada

There are two primary ways to migrate a trust to Nevada. The appropriate method depends on the language of the existing trust document and what the trustee, grantor, or beneficiaries are trying to accomplish.

For both methods, Nevada law generally requires at least one Nevada-based trustee or corporate trustee to establish and maintain Nevada as the trust’s governing jurisdiction. If the existing trustees are located outside Nevada, this typically means appointing a Nevada co-trustee or directed trustee to serve alongside them.

At Solomon, Dwiggins, Freer & Steadman, Ltd. (SDFS), we routinely work with Nevada professional trust companies that can serve as a co-trustee or directed trustee when a family does not have a trusted Nevada resident available to fill that role.

1. Changing the Governing Law With or Without Decanting

If the trust permits it, it may be possible to amend the trust’s governing-law provision to designate Nevada as the controlling jurisdiction. This change, combined with the appointment of a Nevada-based trustee, may establish a legitimate Nevada situs, or legal home, for the trust under NRS 164.045.

A Nevada situs is not merely a formality. It connects the trust to Nevada law for purposes that may include creditor protection, trustee powers, and trust administration.

However, depending on the terms of the existing trust, changing the governing law alone may not allow the trust to take full advantage of Nevada’s favorable statutes. In that situation, a trust decanting may also be appropriate.

Amending the trust so that it is governed by Nevada law is often the first step in completing a decanting under Nevada’s favorable decanting statutes. For example, unlike the laws of many states, Nevada law does not necessarily require a trustee to notify beneficiaries before completing a decanting, although providing notice may still be prudent depending on the circumstances.

2. Decanting Into a New Nevada Trust

Decanting is generally the more powerful and flexible option when substantive changes to the trust are needed.

Think of decanting as pouring the assets from an old bottle, the existing trust, into a new bottle, a newly drafted Nevada trust with improved or more appropriate terms. The original trust is then terminated or wound down, and the new trust takes over ownership and administration of the assets.

Nevada’s decanting statute, NRS 163.556, authorizes a trustee with sufficient discretionary distribution authority over principal or income to distribute trust assets into a new trust for one or more beneficiaries of the original trust.

Depending on the trust’s terms and the applicable law, decanting may be used to accomplish significant improvements, including:

• Updating outdated trust provisions;
• Adding or strengthening asset-protection language;
• Correcting drafting errors or ambiguities;
• Dividing a trust into separate trusts;
• Changing certain tax characteristics of the trust;
• Updating administrative provisions;
• Changing trustee or trust protector provisions; and
• Adapting the trust to changes in tax law or family circumstances.

What Trust Decanting Cannot Accomplish

Although Nevada’s decanting laws provide considerable flexibility, decanting is not available in every situation and cannot be used to accomplish every objective.

The Trustee Must Have Discretionary Authority

NRS 163.556 generally requires the trustee to hold the power to make discretionary distributions of principal or income to a beneficiary. If the trustee is limited to a fixed distribution schedule or a more restrictive distribution standard, decanting may not be available without taking additional legal steps.

Vested Interests Cannot Be Eliminated

Decanting generally cannot be used to remove vested, non-discretionary beneficiaries or improperly reduce their established interests in the trust.

New Beneficiaries Cannot Be Added

Decanting generally cannot be used to add beneficiaries who were not beneficiaries of the original trust.

The Applicable Perpetuities Period Generally Cannot Be Extended

In many cases, a decanting cannot be used to extend the perpetuities period that already applies to the original trust.

Tax Consequences Must Be Carefully Analyzed

Depending on the trust’s structure, a decanting may have gift tax, estate tax, income tax, or generation-skipping transfer tax consequences.

Decanting also cannot be used improperly to eliminate an income interest or benefit that was required to obtain a tax benefit, such as a charitable deduction, marital deduction, or favorable treatment under a particular provision of the Internal Revenue Code.

Practical Steps for Moving a Trust to Nevada

If you are a trustee or beneficiary considering a Nevada trust migration, the process will generally include the following steps:

1. Engage Nevada Trust Counsel. This is an essential first step. Nevada trust law is highly specialized, and the legal analysis should be completed by an attorney who regularly works with trust migration, decanting, and Nevada trust administration. The decanting attorneys at SDFS can guide trustees and beneficiaries through each stage of the process.
2. Review the Existing Trust Instrument. The original trust document determines what can and cannot be accomplished without beneficiary consent or court involvement. Counsel must carefully review provisions addressing governing law, trustee authority, amendments, distributions, trust protectors, and situs changes.
3. Determine the Appropriate Migration Method. Based on the document review, counsel can advise whether changing the governing law and appointing a Nevada trustee will be sufficient or whether the trust should also be decanted into a newly drafted Nevada trust.
4. Coordinate With the Trust’s Tax Advisor. Any proposed migration or decanting should be evaluated from a tax perspective before documents are drafted, signed, or implemented.
5. Choose Between a Judicial and Non-Judicial Process. Many Nevada trust migrations can be completed without going to court, including through a non-judicial settlement agreement. This may save time and expense. However, when the matter involves contested issues, minor or incapacitated beneficiaries, unclear trust provisions, or questions about the trustee’s authority, filing a Petition for Instructions with the court may be prudent.
6. Prepare and Execute the Decanting Documents. If decanting is appropriate, the trustee will generally need to sign a document exercising the trustee’s authority to appoint some or all of the original trust’s assets into the new Nevada trust.

Speak With a Nevada Trust Migration Attorney

Every trust migration is unique. The appropriate approach depends on the trust’s specific terms, the family’s goals, the trustee’s authority, and the potential tax consequences.

The attorneys at Solomon, Dwiggins, Freer & Steadman, Ltd. focus on Nevada trust and estate law and regularly guide trustees and beneficiaries through governing-law amendments, trust decanting, and Nevada trust administration.

If you are considering moving a trust to Nevada, contact SDFS to discuss whether your trust may qualify and which approach may be appropriate for your circumstances.