SimplyTrust Knowledge Base

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.

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.

A: Unlike an estate tax, which applies to the overall value of someone's estate, an inheritance tax is applied to the portion each individual inherits. The rate varies based on who inherits and how much they receive. Iowa previously had both an inheritance tax and an estate tax.

A: Iowa once imposed both an estate tax and an inheritance tax. These are different. An estate tax is based on the total value of someone's estate. An inheritance tax, on the other hand, is based on what individual heirs receive.