Nevada is well known for having some of the strongest asset protection laws in the country. Our homestead laws are very generous. Recent changes in the law have increased protection for annuities and life insurance. Clearly the strongest of all our asset protection tools is our asset protection trust statute.
Many people are vaguely aware that we now have an asset protection trust, but don’t know many of the particulars of what they are, how they work, and how strong they really are. The following are some questions and answers that hopefully will be helpful in providing information about these amazingly powerful trusts.
Won’t my living trust provide asset protection?
No, living trusts don’t offer any asset protection, period. As a revocable trust, the bad guys have the same rights to access your assets as you do.
Can I really have complete asset protection?
Absolutely! We have the strongest asset protection trust in the nation. In a recent independent study by Forbes Magazine, Nevada trusts received the only A+ rating, the highest in the nation for all asset protection trusts!
Is it legal?
Yes. All you have to do is comply with the statutory requirements and you can have 100% protection that is 100% legal.
How does the trust work?
You are the trustee of your trust and maintain control over all trust assets throughout your life. You can buy, sell, trade or reinvest assets at any time without the knowledge or consent of anyone else. The trust is not recorded or filed. No one even knows that your trust exists. All assets and transactions are strictly confidential. The result is to allow you full use and control of your assets while keeping the bad guys out. “Bad guys” are defined as anyone trying to get your assets.
Why must the trust be irrevocable?
NAPTs, by law, must be irrevocable. This is a good thing, not a bad thing. It must be irrevocable to provide asset protection. If the trust were revocable, the bad guys would have easy access to all trust assets.
Doesn’t that restrict what I can do?
Not in the slightest. As described above, you can be the trustee. You are in complete control of your trust and the assets. You can invest trust assets any way you like. You can take assets out any time you like. You can put assets in whenever you like.
Would my NAPT replace my living trust?
No. They serve different purposes. Your living trust will avoid probate. It will transfer your assets upon your demise to your beneficiaries in the way you desire. You can amend it at any time, for example, to change successor trustees or beneficiaries.
Your NAPT simply serves to protect your assets while you are alive. Generally the assets held in your NAPT pass to your living trust to then be held or distributed to your beneficiaries as you have set forth within your living trust.
When is the trust effective?
Asset protection begins after the assets have been held in your trust for two years. Asset protection trusts in most other states require a four-year waiting period. After two years your trust becomes “bulletproof.” No creditor can penetrate or attach any assets in your trust. You cannot be forced to distribute any assets.
What assets can I hold in my trust?
Your trust can hold your home, any other real estate, investments, cash, securities and any other asset whether located in Nevada or elsewhere. You typically would not hold any vehicles in your trust, as they can be a source of liability. You don’t want to expose your valuable assets to unforeseen liabilities. Similarly, you can hold rental properties in an LLC and your LLC can be owned in your trust. Your LLC will protect your other assets held in your trust from any claims or liabilities arising from the rental.
What if I move out of Nevada?
You do not have to be a Nevada resident to have a NAPT. The only requirement is that at least one of your trustees be a Nevada resident. This person can be a friend or relative residing in Nevada, a Nevada bank or trust company, your attorney, accountant or other advisor. You still retain your position as the principal trustee with complete control over your assets held in your trust.
What if the liability has already happened?
Creating asset protection barriers, even after the fact, can still be beneficial. You won’t be 100% protected, but you can still put strong defenses in place. At a minimum, if your assets are harder to attach, you encourage settlement on more favorable terms.
Why doesn’t everybody create an asset protection trust?
They should. With all of the uncertainties of life, bizarre outcomes of lawsuits and exorbitant jury awards, you can never be too safe. You can realize huge dividends by arranging your affairs now to protect yourself from the unforeseen. Nevada law affords you this excellent protection. Why not take advantage of it?
Is a NAPT expensive?
No. Not having a NAPT is. Creating a NAPT is a one-time expense. There are no annual administration costs or maintenance fees.
Robert L. Bolick is an estate planning and asset protection attorney in the Firm’s Las Vegas office. Mr. Bolick frequently presents about estate planning and asset protection throughout Las Vegas.