In the US, some of the easiest ways to set asset protection with an irrevocable trust are made possible by Nevada law. One of the first states to allow domestic asset protection trusts (DAPTs), also called self-settled spendthrift trusts, was Nevada (SSST).
When people set up a Nevada asset protection trust, they get a number of benefits that are talked about in this article.
Learn how a Nevada self-settled spendthrift trust can help you protect your assets and why you might want to set up a DAPT, especially if you work in a high-risk career field where you could be sued.
I. What is an Asset Protection Trust in Nevada?
An asset protection trust (APT) protects the grantor's real or personal property by keeping creditors or claims against the estate from getting to trust assets. In an APT, the grantor is a beneficiary who is allowed to use the trust funds, but only under certain conditions.
An APT is a trust that cannot be changed. Unlike a revocable living trust, any assets you transfer to an APT are somewhat protected from lawsuits. Nevada's APTs are considered domestic asset protection trusts (DAPTs) because they work in the U.S.
A DAPT is a trust for spendthrifts. The spendthrift provision clause in Nevada keeps the grantor's creditors from getting direct access to the trust funds. An independent trustee must be in charge of giving out any assets. The independent trustee is in charge of things like taking money out of the trust and selling its assets.
A grantor can give a DAPT cash, stocks, real estate, and business assets, among other things. Grantors can even put a limited liability company in a trust to avoid probate or plan for when they won't be able to handle their business.
When a person transfers assets to a DAPT, they give up a lot of control over those assets. However, they can still ask for distributions to beneficiaries and tell the trust how to invest its money.
II. The Laws of Nevada
In 1999, Nevada passed the Spendthrift Trust Act, which let people set up a Spendthrift Trust on their own. In this kind of trust, the grantor can also be the person who gets the money. The grantor can also name other people as beneficiaries, such as his or her spouse, children, grandchildren, or anyone else.
In Nevada, only a trustee who is not part of the trust can give out money from an asset protection trust. A Nevada trust company should be this trustee.
Nevada's laws on self-settled spendthrift trusts do a better job of protecting the beneficiary's interests than many other states' laws. This is why.
Nevada doesn't tax trust income like most other states do. But you would still have to pay federal income tax.
In most states, DAPTs start protecting your assets after three or four years, but in Nevada, they only start protecting your assets after two years.
Once property is given to an asset protection trust in Nevada, no one, not even a former spouse, can take it back. Almost every other state recognizes ex-spouses as exception creditors.
Nevada lets people set up directed trusts, which means the trustee can hire a fiduciary, like a financial advisor, to help manage some parts of the trust.
Some of the most flexible rules about changing or "decanting" an irrevocable trust are in Nevada.
Nevada law is always changing to make it easier to run asset protection trusts. In 2009, a law was passed to recognize the role of trust protectors.
These people look out for the interests of the beneficiary by keeping an eye on trustees and making sure the trust follows its terms.
Lawyers and investment advisors who help set up DAPTs in Nevada are also protected from lawsuits from third parties, unless the claimant can show that the lawyer or advisor acted in bad faith and caused the damages.
III. Getting in Contact with the Right Attorneys
At the Law Office of Paul Hilton, we can facilitate engagement with the right Nevada attorneys and professionals to give you the best representation possible and protect your at-risk assets from creditors.
