SimplyTrust Knowledge Base

A: 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.

A: Kentucky does not impose a separate estate tax on the estate itself. Instead, the Kentucky inheritance tax is a tax on the right to receive property, and the amount owed depends on who receives it. Two heirs can face different outcomes on the same asset, depending on their relationship to the person who passed.Kentucky adopted an inheritance tax in 1906, making it one of the state’s oldest General Fund taxes. Over time, lawmakers refined exemptions and rates. A major update in 1995 fully exempted “Class A” beneficiaries and expanded that class to include siblings alongside spouses, children, stepchildren, grandchildren, and parents. This change shifted the burden toward more distant relatives and unrelated heirs, where the tax still applies today. Kentucky groups beneficiaries into classes. Class A beneficiaries are fully exempt. That generally includes a spouse, children, stepchildren, grandchildren, parents, brothers, and sisters. No return is required when only Class A beneficiaries inherit; courts often accept an affidavit of exemption instead of a tax filing. Class B beneficiaries include certain relatives such as nieces, nephews, aunts, uncles, sons-in-law, daughters-in-law, and great-grandchildren. They get a small exemption and then pays graduated rates. Class C is everyone else not in A or B. They get an even smaller exemption and faces slightly higher starting rates.

A: Before 2005, states could “pick up” a credit against the federal estate tax. The 2001 federal tax law phased out that credit, and Kentucky’s linked estate tax went dormant. Later federal legislation cemented the change, keeping the state estate tax at zero unless Kentucky enacts a new stand-alone tax—which it hasn’t. Kentucky’s inheritance tax remains in force, and the state updates it periodically. For example, the Department of Revenue’s 2025 guidance reiterates how transfers to non-exempt beneficiaries can be taxable, including certain gifts made within three years of someone’s passing. Beneficiaries in “Class B” and “Class C” may face exemptions as low as $1,000 or $500 with graduated rates up to 16%.

A: Trust jurisdiction is the legal home of a trust. It’s the state whose courts, statutes, and tax rules apply to the trust document and its assets. This concept plays a powerful role in estate planning because different states offer different advantages. Some prioritize privacy, others offer tax benefits, and some provide better protection from creditors.The idea of selecting a favorable trust jurisdiction gained traction in the late 20th century. As certain states (like Nevada, South Dakota, and Delaware) began modernizing their trust laws to attract wealth planning, others retained more traditional rules. This created a system where people could legally “shop around” for the most favorable jurisdiction—similar to choosing a state for incorporation.Trust jurisdiction became especially important as high-net-worth individuals began using them advantageously. Not just to avoid probate but also to manage taxes, protect assets, and maintain long-term control over distributions.

A: 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).