Exploring Revocable Trusts in Iowa and Nevada
Explore the differences in revocable trusts in Iowa versus Nevada, focusing on probate, privacy, asset protection, and taxes.
When comparing revocable trusts in Iowa versus Nevada, the differences may surprise you. Neither state has an estate tax or inheritance tax, which is huge. Both states allow revocable living trusts, but how they treat them varies in key ways—especially around privacy, asset protection, and taxation.
A revocable trust—also called a living trust—is a flexible estate planning tool that allows someone (called the grantor) to transfer ownership of assets into a trust while maintaining control during their lifetime. Upon their passing, the assets are distributed to beneficiaries without going through probate.
Both Iowa and Nevada allow residents to create revocable trusts. But that’s where the similarities end. Iowa trusts are perfectly functional and help avoid probate. But Nevada trusts offer enhanced privacy, stronger asset protection for beneficiaries, and tax advantages. Nevada trusts have an edge in the areas of privacy, probate, asset protection, income tax, and trust jurisdiction, or geography (i.e., you don’t have to live there).
Comparing (in More Detail) Revocable Trusts in Iowa Versus Nevada
Probate
One of the main reasons people use revocable trusts is to avoid probate. A revocable trust avoids this process, allowing for faster, more private asset distribution. However, probate in Iowa can be more time-consuming and sometimes costlier than in Nevada.
Example:
Mary, a retired teacher in Des Moines, creates a revocable trust to hold her home and financial accounts. When she passes, her assets avoid probate. However, the trust still may be subject to more court involvement than in Nevada.
Privacy
In Nevada, the probate system is more streamlined, and trusts enjoy even greater privacy. Nevada doesn’t require trust documents to be filed with the court unless litigation arises. This appeals to individuals who value confidentiality.
Example:
Carlos, a business owner in Reno, places his real estate and business shares in a Nevada revocable trust. His beneficiaries receive everything privately and efficiently, without court filings or delays.
Asset Protection
Revocable trusts don’t offer creditor protection during the grantor’s lifetime in either state. But Nevada offers stronger protections for surviving spouses and beneficiaries than Iowa does.
In Iowa, assets in a revocable trust are considered part of the estate for liability purposes. That means creditors may still make claims during probate, and surviving spouses have specific elective share rights, which can override trust terms.
In contrast, Nevada offers certain protections for beneficiaries of revocable trusts. While the protections aren’t absolute, they make it harder for creditors to reach assets. That’s especially true when the trust includes spendthrift provisions or is paired with Nevada’s asset protection strategies.
State Income Tax
Iowa has a state income tax, and trust income may be taxed depending on where the trustee and beneficiaries live. Nevada has no state income tax, making it a favorable jurisdiction for high-net-worth individuals or trusts expected to generate income.
Example:
Lena, an Iowa resident with a brokerage account in her revocable trust, pays Iowa income tax on the interest and dividends. If she moves to Nevada and establishes Nevada residency for her trust, she may eliminate that state tax burden entirely.
Trust Jurisdiction, or Geography
One key detail many people miss: you can establish a trust in Nevada, even if you don’t live there full time. You’ll need a Nevada-based trustee or trust company, and some connection to the state. However, it’s a legal and common strategy for those seeking added privacy and protection.
Example:
A couple living in Iowa but owning property in Las Vegas sets up a Nevada revocable trust, naming a Nevada trust company as trustee. They gain the benefits of Nevada law without moving full time.