A Comparison of Revocable Trusts in Kentucky and Nevada
Learn about the similarities and differences of revocable trusts in Kentucky versus Nevada, including administrative details and community property.
Both Kentucky and Nevada let you use a revocable living trust to keep assets organized, name a successor trustee, and avoid probate for assets titled in the trust. That core function is the same across state lines. The real differences show up in taxes, community-property rules, and practical administration.
A revocable living trust is primarily a probate-avoidance and incapacity-planning tool. You stay in control, and you can change or revoke it anytime. That’s true in both Kentucky and Nevada. Revocable trusts are usually “grantor trusts.” That means trust income is reported on the grantor’s personal return, regardless of where the trust is based. If a Kentucky resident creates a Nevada revocable trust, the income is still taxed to the Kentucky resident at the personal level.
For everyday families, revocable trusts in Kentucky versus Nevada function much the same: they streamline transfers and keep affairs organized. Key distinctions arise from Kentucky’s inheritance tax exposure for some beneficiaries and Nevada’s community-property system and tax climate.
Revocable Trusts in Kentucky Versus Nevada
Example 1: Louisville homeowner using a Kentucky trust
Maria owns a house in Louisville and a checking account. She retitles both to a Kentucky revocable trust. When she passes, her successor trustee can transfer those assets to beneficiaries without a court process, saving time and keeping details private. In Kentucky, this can mean avoiding formal probate steps that otherwise involve filings and delays. Note: Kentucky still has an inheritance tax for some beneficiaries (although no estate tax), and a revocable trust doesn’t erase that—tax depends on who receives property.
Example 2: Las Vegas couple and Nevada’s tax climate
Alex and Jordan live in Nevada and hold most assets in a Nevada revocable trust. Nevada has no state income tax and no state estate or inheritance tax, so there’s no state-level hit on trust income or transfers at passing. Their revocable trust helps avoid probate while they live in a generally tax-friendly state. (Federal rules still apply.)
Example 3: Kentucky resident considers a Nevada revocable trust
Sam lives in Kentucky but hears Nevada is “better” for trusts. He sets up a Nevada revocable trust with a Nevada co-trustee. For day-to-day results, Sam still gets probate avoidance and flexibility—the same benefits he’d have with a Kentucky trust. His trust income remains on his own federal and Kentucky returns while he’s alive because it’s a grantor trust. Also, if Kentucky-sited assets go to non-exempt beneficiaries, Kentucky’s inheritance tax can still apply.
Community-Property Nuance
Nevada is a community-property state. Married couples who hold assets as community property can receive a favorable “double” step-up in basis at the first spouse’s passing, which can reduce capital gains if assets are sold later. Couples in Nevada often coordinate community-property status with a revocable trust to capture that benefit. Kentucky, a common-law state, doesn’t provide the same automatic community-property framework.
Administration Details That Matter
- Probate avoidance requires funding. In both states, assets must be retitled to the trust. Anything left outside may still pass through probate.
- Local rules still govern local property. Real estate in Kentucky follows Kentucky transfer and tax rules even if your trust is from Nevada.
- Non-grantor planning is different. Nevada’s no-income-tax policy can help certain irrevocable, non-grantor trusts, but that’s a different tool than a revocable trust.