What is a Nevada Real Estate Trust?

A Nevada Real Estate Trust is a Trust that is designed by R.D. Johnson Law Offices for the purpose of holding title to real estate investment properties.

It accomplishes three essential things for the individual Real Estate Investor:

1) It is designed to protect the real estate property from your own future personal judgment creditors, in the event that you personally get sued in the future (from a claim unrelated to the property, such as a car accident or some other unforeseen event) and end up with a money judgment awarded against you (first and foremost, you should plan to protect your investments
from this kind of risk);

2) Because, under Nevada law, the Trust is legally its own “person” (just as a corporation or LLC is) that is legally separate and apart from you individually, the Trust will shield you
personally from liability that may arise from the property (such as a slip and fall incident or other tenant or guest claim against the property owner/landlord) and any claimant would have to look to the Trust alone for any recovery;

3) Because the Trust serves as what is essentially a “Will replacement” as to the property that the Trust owns, it will avoid probate of the real estate property and the property will pass to the beneficiaries that you designate in the Trust document – without having to go through the long and expensive probate process (as with a revocable living trust, you will specify in the Trust document who you want to receive the property or proceeds upon your death and the successor trustee will be bound to carry out your wishes and make the distributions as you’ve specified in the Trust). The Nevada Real Estate Trust won’t interfere with your other estate planning measures that you may have for your personal assets.
Unlike an LLC or corporation, the Nevada Real Estate Trust is not registered with the secretary of state’s office and it has no government registration requirements. As such, you will not have to pay any initial or annual filing fees to the secretary of state or to a resident agent, as you would with an LLC, Corporation or Limited Partnership. This fact alone can save you thousands of dollars over time.

The Nevada Real Estate Trust is ordinarily established as a “grantor trust”, which means that it is a “flow-through” entity for federal taxation purposes. Much like a single member LLC, any income or loss from the real estate investment will ultimately be reported on your individual tax return. So, there is no negative tax impact to you for having the real estate property in the Trust.*

Although there is no limit on the number of real estate investment properties that you put into the Nevada Real Estate Trust, as with any business entity that you establish to hold your real estate investment properties, it is wisest to separate your real estate properties into separate entities (traditionally, separate LLCs have been used for that purpose), so that multiple properties are not exposed to and subjected to liability and risk of loss, if an injury or other event on one property causes a lawsuit. As with LLCs, you can establish a separate Nevada Real Estate Trust to hold each real estate investment property, to minimize your exposure. There is no legal limit on the number of Trusts that you have.
In sum, the Nevada Real Estate Trust works much like a traditional real estate holdings LLC, but the Nevada Real Estate Trust has benefits and protections to go beyond that of an ordinary LLC. Contact R.D. Johnson Law Offices today for a free consultation and evaluation to determine if a Nevada Real Estate Trust is right for you. (create link to:
https://www.rdjohnsonlaw.com/contact-us/ )

*You should always consult with and use a qualified tax professional to properly advise you on taxation issues and for filing your personal and business tax returns. R.D. Johnson Law Offices, LLC does not engage in tax planning, it does not give tax advice nor does it file any tax returns.

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With regard to a residency owned by a Trust, the applicable U.S. Treasury Regulation at 26 C.F.R. 1.121-1(c)(3)(i) states that, if a residence is owned by a trust, for the period that a taxpayer is treated under sections 671 through 679 (relating to the treatment of grantors and others as substantial owners) as the owner of the trust  or the portion of the trust that includes the residence, the taxpayer will be treated as owning the residence for purposes of satisfying the 2-year ownership requirement of section 121, and the sale or exchange by the trust will be treated as if it was made by the taxpayer.

Thus, a revocable living trust would clearly not disqualify the tax exclusion on the gain of from a sale or exchange of property owned by the revocable living trust. Likewise, a residence that is owned by a Nevada Asset Protection Trust or Nevada Real Estate Trust would also not disqualify the taxpayer from the tax exclusion on the gain from a sale or exchange of the residence that is owned by these types of trusts, as long as they are established and maintained as a “grantor trust”.

Ordinarily, the Nevada Asset Protection Trusts and Nevada Real Estate Trusts that R.D. Johnson Law Offices, LLC creates for its clients are intentionally established so as to be treated as “grantor trusts” for U.S. taxation purposes. With a grantor trust, the income or loss of the Trust “flows through” and is attributed to the grantors (a/k/a: the people that established the trust) for federal taxation purposes, even though the trust may often have it’s own EIN (U.S. taxpayer I.D. number).

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