Navigating the Trust Administration Process in Nevada: A 10-Step Guide
Craig Freidel Associate Attorney
When a loved one passes away, the legal and administrative tasks involved in handling their estate and trust can be overwhelming. During these challenging times, it is crucial to have a trusted law firm like Solomon, Dwiggins, Freer, & Steadman, Ltd. (SDFS) by your side. With their niche focus on trust and estate law, the firm offers comprehensive guidance on all aspects of trust administration in Nevada. From handling large and complex trust administrations involving significant family-owned businesses to assisting individuals with more modest estates, the firm’s expertise spans across the spectrum of trust and estate matters.
In the most basic of terms, trust administration involves the management and distribution of assets held in a trust according to your loved one’s (aka the Settlor’s or Grantor’s) intent as set forth in the terms of their Trust. It is a private process that does not require court supervision. However, unfortunately, trust don’t typically come with an instruction manual for the successor trustee regarding how to navigate the often-foreign sounding legal jargon contained in trusts, let alone the overlay of Nevada statutes trustees are expect to know and follow generally found in NRS Chapters 163-165. This is where SDFS’s decades of experience in guiding trustees through the trust administration process can provide you peace of mind and confidence that your loved one’s trust is properly administered under Nevada law. By way of general overview, the following is a 10-step guide to the trust administration process in Nevada:
Step 1. Review the Trust Agreement. The successor trustee, who is appointed to administer the trust after your loved one passes away (typically your loved one will have been the original trustee), must carefully reviews the terms and provisions outlined in the trust agreement because, as a general matter, the terms of the Trust control (with statute generally only providing the default rules if the trust is silent as to an issue). SDFS will thoroughly analyze the trust document, ensuring a comprehensive understanding of your loved one’s post-death intentions.
Step 2. Prepare Certificate of Incumbency (aka Affidavit of Successor Trustee). The signing of Certificate of Incumbency formally appoints the designated successor trustee as the trustee of the Trust and is evidence of the same to third parties (e.g. financial intuitions, life insurance companies, etc.). If real property is owned by the Trust, this document is also recorded in the county recorder’s office to provide notice the successor trustee now holds formal title to the real property in their fiduciary capacity.
Step 3. Mail and Publish Notice to Creditors and Pay Valid Debts. In order to cut off the right of creditors to bring claims against your loved one or their trust, it is imperative to mail notice to all “known or readily ascertainable creditors” and publish notice in the legal news for three consecutive weeks to cover all unknown creditors. The notice should be in substantially the form set forth in NRS 164.025.
After the 90 days from mailing and publication pass, any creditors who have not filed a claim are “forever barred.” NRS 164.025(3). The trustee must then determine whether to accept or reject a creditor’s claim based on whether the creditor timely filed, proper supporting documentation has been provided, the validity of the claim, etc. All accepted claims must be paid. If the trustee rejects a claim, the creditor must be noticed via registered or certified mail within 10 days of rejection of their claim and then has 60 days to file suit in the proper court if they disagree with the rejection. NRS 164.025(6). Compliance with the foregoing steps related to creditors is crucial to any trust administration because, otherwise, a trustee may be held personally liable for the loved one’s or trust’s debts in the event they distribute the assets of the trust before doing so. NRS 164.025(3).
Step 4. Send Notice of Irrevocability of Trust. When a revocable trust becomes irrevocable because of the death of a settlor or by the express terms of the trust, the trustee should typically mail or personally deliver notice to any beneficiary of the irrevocable trust, any heir of the settlor or to any other interested person. NRS 164.021(1); NRS 155.010(1)(a). To the extent any such beneficiary, heir, or other interested person cannot be located, the notice should by published for three consecutive weeks in the legal news. NRS 155.010(1)(b).
The notice provided by the trustee must contain: (a) The identity of the settlor of the trust and the date of execution of the trust instrument; (b) The name, mailing address and telephone number of any trustee of the trust; (c) Any provision of the trust instrument which pertains to the beneficiary or notice that the heir or interested person is not a beneficiary under the trust; (d) Any information required to be included in the notice expressly provided by the trust instrument; and (e) A statement set forth in a separate paragraph, in 12-point boldface type or an equivalent type which states: “You may not bring an action to contest the trust more than 120 days from the date this notice is provided to you.” NRS 164.021(2). If a person receives the notice of irrevocability but fails to file an action contesting the validity of the trust within 120 days, they are barred from ever contesting the validity of the trust in the future. NRS 164.021(4). Assuming all interested persons are noticed, this provides the successor trustee the assurance that the trust instrument is the valid and binding governing document that controls trust administration and distribution.
Step 5. Gather Trust Assets and, If Necessary, File a “Pour Over Will Set Aside.” Part of a Trustee’s duties are to gather trust assets titled to or otherwise held by the trust. During such process it is not uncommon for a successor trustee to learn that their loved one forgot to title or otherwise place all of their assets into the Trust. Instead, they are still titled in your loved one’s individual name and are thus part of their estate. For this reason, it is very common amongst trust drafting attorneys to include with any trust they draft a separate Last Will and Testament that designates the trust as the sole beneficiary of your loved one’s estate (often referred to as a “pour over” will because its primary purpose it to “pour over” assets from the estate to the trust).
Assuming there is a “pour over” will, Nevada law has recently adopted a new procedure whereby the executor designated in the will (commonly the same person(s) designated as successor trustee(s)), can file a single pour over will set aside petition with the court requesting that all of the assets in the estate be distributed to the trust. NRS 146.070(1)(b). If no “pour over” will exists, an attorney at SDFS can help you explore other options, such as Heggstad petitions, that may help avoid full probate administration of your loved one’s assets that were not held in the Trust to reduce costs of administration.
Step 6. Manage and Preserve Trust Assets. A Trustee has a duty to prudently manage and preserve trust assets during the administration period of the Trust. This can be as simple as making sure to pay certain expenses, such as property taxes, necessary utilities, insurance, etc., and collect rent, to being required to run a multi-million dollar business. Regardless of the scope of your management duties, SDFS has decades of experiencing assisting trustees in complying with their fiduciary duties to manage and preserve trust assets.
Step 7. Provide Accounting to Beneficiaries. A Trustee is generally required to account “in the form, manner and to the persons as required by the terms and conditions stated in the trust instrument.” NRS 165.1204(2). Generally, “[t]o the extent that the trust instrument does not provide otherwise, the trustee….shall satisfy the duty to account … by delivery of an account” upon written demand by a current or remainder beneficiary pursuant to NRS 165.141. “Except as may otherwise be required pursuant to the terms of the trust instrument or by order of the court, the trustee shall deliver a required account within 90 days after the end of the period of account, which may be extended by consent of the beneficiary, or by order of the court for good cause shown.” NRS 165.1214(1). The “trustee is not required to provide an account more than once in any calendar year unless ordered by a court upon good cause shown.” NRS 165.1214(3). The accounting should generally comply with NRS 165.135, a detailed statute which generally requires the accounting to set forth (1) the trust principal held at the beginning of the accounting period, in what form held, and the approximate market value thereof (3) all receipts received, all gains on sales or other disposition of assets, all disbursements and distributions, and all losses on sales or other disposition of assets, if any, during the accounting period; and (3) the trust principal held at the ending of the accounting period, in what form held, and the approximate market value thereof. This is true because, if such form is utilized, the account will be deemed approved and final as to any “beneficiary who received a copy of the account if no written objection is delivered to the trustee…within 90 days after the date on which the trustee provided the account to that beneficiary.” NRS 165.1204(4).
Step 8. File Taxes. The Trustee should typically obtain an Employee Identification Number (EIN) for the trust. The trustee, potentially in coordination with the personal representative of the estate, will also be required to file one or more of the following: (1) any unfiled federal income tax returns (IRS Form 1040) for the year prior to the decedent death (most common if decedent died prior to April 15th); (2) the final federal income tax returns (IRS Form 1040) covering the partial year in which your loved one passed away; (3) the federal trust and estate tax return (IRS Form 1041) covering all items of income and deduction from the date of death until the trust termination (however, where all trust assets are distributed to a surviving spouse, such tax information may be able to be reported on the surviving spouses income tax return); (4) the federal estate tax return (IRS Form 706), but only when trust assets and lifetime gifts exceed a certain amount established under federal tax law (as of 2023, this amount is $12,920,000); and (5) state specific estate and inheritance taxes to the extent the trust holds assets in other states your loved one died in a state other than Nevada (Nevada does not have a state estate or inheritance tax.).
Notably, a trustee should generally not agree to distribute all of the trust’s assets until all taxes have been paid and there are assurances it will not be subject to audit. Otherwise, the trustee could be held personally liable for the same. The attorneys at SDFS regularly work with accountants to ensure compliance with the foregoing and eliminate the risk of trustee personal liability to the greatest extent possible.
Step 9. Distribution and Release of Trustee. After completing all of the foregoing steps, the trustee may proceed to distribute the trust per your loved one’s intent as set forth in the distribution provisions thereof. Prior to or in conjunction with final distribution of the trust, a trustee should consider requiring all trust beneficiaries to sign a document in which they acknowledge the amount of cash or in-kind distribution they are to receive, release the trustee from liability, and agree to refund asset to the trust in the event of additional tax assessments.
Step 10. Termination. A Trust terminates automatically after it no longer holds any assets. Although anticlimactic, there are no special forms that need be executed.
The foregoing is a general overview of the trust administration process only and should not be considered legal advice. There are certainly additional legal nuisances that an attorney at SDFS can help you navigate, particularly when the asset held by the trust are complex or the trust is not your ordinary living trust.
Indeed, when it comes to trust administration in Nevada, Solomon, Dwiggins, Freer, & Steadman, Ltd. is the trusted partner you need. Their team of experienced attorneys has a wealth of knowledge in handling a wide range of estate and trust administration matters. Whether you have a large and complex trust involving significant family-owned businesses or a more modest estate, the firm is dedicated to providing personalized guidance tailored to your unique needs. You can be confident that your trust and estate administration matters will be handled with meticulous attention to detail, adherence to the relevant Nevada Revised Statutes, and a deep understanding of the complexities involved. Our expertise extends beyond mere legal compliance to strategic advice, fiduciary duty compliance, effective trust administration, prompt settlement of debts, and, ultimately the smooth distributions of trust assets to intended beneficiaries.
Reach out to Solomon, Dwiggins, Freer, & Steadman, Ltd. today to schedule a consultation and discover how their expertise can help you navigate the complexities of trust administration in Nevada and bring you peace of mind.