The Dilendorf Law Firm’s experience and knowledge of the various asset protection strategies allows us to develop the most flexible, effective plans to meet our clients’ objectives. One of these is the Nevada domestic asset protection trust.
A domestic asset protection trust (DAPT) is a popular way for individuals to protect and preserve wealth from potential legal claims while maintaining control over the assets for future generations. A DAPT helps to legally protect assets from the claims of lawsuits and creditors without the beneficiary being accused of asset concealment or tax evasion. Rather than putting the total value of the assets at risk, the creditor would be limited to the value of the beneficiary’s interest in the trust.
In the state of Nevada, a domestic asset protection trust is also referred to as a self-settled spendthrift trust. Self-settled trusts are preferable for individuals with the desire to create and benefit from the trust, in cooperation with appointed trustees. While many of the benefits of a Nevada DAPT overlap with those of other states, the Nevada self-settled spendthrift trust statutes offer unique features that may appeal to certain investors.
Why select a Nevada DAPT?
Many domestic and international families are choosing to protect their assets using a Nevada domestic asset protection trust, as it includes a spendthrift provision that prevents potential creditors and beneficiaries from gaining direct access to the trust’s assets. This provision includes the previous spouses of beneficiaries.
In 1999, the State of Nevada enacted laws concerning the use of a self-settled spendthrift trust, which is also known as a Nevada domestic asset protection trust, or DAPT. Ten years later, in 2009, the laws were enhanced to include additional guidance for grantors and advisors. For example, the statutes allow a grantor to create an irrevocable trust into which he or she will transfer assets, while remaining a beneficiary of said trust. Before distributions can be made to the grantor, Nevada requires the appointment of an independent trustee who resides in the state of Nevada.
Once the assets become a part of the trust, they do not become protected immediately, but only after the two-year statute of limitations has passed from the date of transfer. For existing creditors, this time period is shortened to a six-month timeframe after the creditor has discovered the transfer.
Another statute in Nevada requires the trustee, or at least one independent co-trustee, to be a Nevada resident. However, this requirement could be satisfied through the use of a Nevada financial institution with legal power to manage the trust.
What are the advantages of a Nevada Domestic Asset Protection Trust?
The Nevada DAPT, or self-settled spendthrift trust, is known as one of the more powerful asset protection and estate planning methods available under Nevada law.
The advantages to setting up a DAPT in Nevada include:
- Most states tax the income of trusts, but Nevada does not.
- Most states require a three to four-year statute of limitations to establish protection of transferred assets in the trust, but Nevada’s is only two years.
- Only two states offer zero exception creditors, including divorcing spouses, and Nevada is one of them.
- Nevada allows the grantor, or settlor, to appoint an independent financial advisor to manage the assets in the trust, which is also known as a directed trust.
- Nevada has no rules against perpetuities, meaning the state allows for perpetual, or dynasty, trusts. The state allows the creation of a trust that continues for up to 365 years, thereby minimizing the transfer taxes that may otherwise be assessed.
- Nevada also offers one of the best decanting statutes, providing an effective means to accommodate changing family needs and dealing with outdated trust provisions.
- The trust no-contest clause afforded in Nevada helps to eliminate challenges to trust provisions and beneficiaries.
- Nevada offers some of the most flexible and protective limited liability and limited partnership laws.
- Nevada’s trust laws provide the highest level of confidentially to settlors and trust beneficiaries.
- The Nevada legislature is continually working to improve the trust laws of the state to be a more welcoming and effective asset protection strategy.
- Anyone, even international families, and businesses, can set up an asset protection trust in the state of Nevada. The only requirement is that the trustee or co-trustee resides in Nevada.
Before starting the process of creating a Nevada domestic asset protection trust, it is important to consult with qualified legal counsel, as these trusts must be irrevocable. The asset protection attorneys at the Dilendorf Law Firm are ready to help our clients understand the unique advantages associated with every type of trust and will recommend the most flexible and effective option.
- What Should You Kow About Asset Protection Trust
- The Estate and Gift Tax Implications of Self-Settled Domestic Asset Protection Trusts: Can you Really Have Your Cake and Eat it Too?
- Fresh Look at State Asset Protection Trusts Statutes
- Domestic Asset Protection Trusts: Debtor’s Friend and Creditor’s Foe
- Emerging Challenges in Asset Protection Planning
- Nevada Asset Protection Strategies
- Domestic Asset Protection Trusts: Ushering in the Klabacka Era
- Modern Trust | Art of Property Passing and Receiving Wealth
- Dynasty Trust State Ranking Charts
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- US Senate Report | Tax Haven Abuses: The Enablers, The Tools and Secrecy
- Spendthrift and Discretionary Trusts
- Table of Contents for Asset Protection Strategies
- Steve’s Leimberg’s Asset Protection Planning