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Nevada Asset Protection Trusts: Everything You Need to Know About Keeping Your Assets as Secure as Possible

protect assets

Individuals who have concerns about protecting their assets have several options available. Comprehensive asset protection strategies can employ a variety of different tools—including tools available in the United States and abroad.

While all asset protection tools have their own unique sets of benefits and limitations, one of the best tools for many high-net-worth U.S. citizens and residents is the Nevada asset protection trust. These trusts offer several key benefits without many of the limitations inherent in other tools. If you are thinking about implementing an asset protection strategy, this article covers some of the main reasons to consider using a Nevada asset protection trust.

What is a Nevada Asset Protection Trust?

A Nevada asset protection trust is a specific type of irrevocable trust established under Nevada law. While most (if not all) states have laws that allow for the creation of trusts as asset protection and estate planning tools, each state’s trust laws are different. Some provide more benefits and flexibility than others—and Nevada’s are among the most beneficial and most flexible for asset protection purposes.

As a general rule, trust laws in the United States exchange benefits for limitations. The Nevada asset protection trust’s status as an irrevocable trust is a good example. While revocable trusts provide maximum flexibility, they provide very little in the way of asset protection. In contrast, irrevocable trusts generally provide less flexibility; but, in exchange for this limited flexibility, grantors (individuals who establish trusts) receive significant asset protection benefits.

As we discuss below, however, while Nevada asset protection trusts are irrevocable, unique provisions in Nevada’s trust laws still provide grantors with the ability to modify how they hold their assets over time. This is one of the key distinguishing factors between Nevada asset protection trusts and asset protection trusts formed in other states.

Why Are Nevada Asset Protection Trusts Preferred in Many Cases?

Several factors make Nevada asset protection trusts a preferred tool for shielding high-net-worth individuals’ wealth from commercial and judgment creditors. Again, however, while these benefits will make establishing a Nevada asset protection trust the right choice in many circumstances, it is critical to work with experienced counsel to develop a comprehensive asset protection strategy that is custom-tailored to your individual risks and needs.

So, which might you want to form a Nevada asset protection trust? Some of the main benefits that these irrevocable trusts offer include:

  • The Grantor’s Ability to Maintain Control of the Trust’s Investments – While some trust laws require separation between the grantor and the trustee who manages the assets held by an irrevocable trust, Nevada’s asset protection trust laws do not. In Nevada, a grantor can serve as their trust’s investment trustee, maintaining complete control over investment transactions—including the divestiture of trust assets. Grantors can also reserve veto power over their distribution trustee’s decisions, which effectively gives them full control over when (and to whom) the trust’s assets are distributed over time.
  • Quicker Access to Asset Protection Benefits – Under Nevada’s asset protection trust law, existing creditors are unable to “claw back” assets from a newly formed trust after just six months, and new creditors can only file claims for two years from the date of the trust’s formation. Both of these time periods are significantly shorter than they are in other states with asset protection trust statutes.
  • Protection From All Types of Creditor Claims – In many states, the protections afforded by an asset protection trust are limited by the rights of so-called “exception creditors.” These creditors (who typically include former spouses, parents of shared children, and tort claimants) have the ability to pursue claims against a trust’s assets indefinitely. However, there are no exception creditors under Nevada’s asset protection trust law.
  • The Ability to Benefit from Nevada’s Tax Laws – Nevada does not have a state income tax or a state inheritance tax. Thus, any income generated from a Nevada asset protection trust’s investment activities is only taxed at the federal level. Similarly, while transfers upon death may trigger federal inheritance tax (though this tax is subject to significant exemptions and can often be avoided with careful planning), there will be no taxation at the state level.
  • The Ability to Form a Dynasty Trust that Provides Protection (and Tax Benefits) for 365 Years – Another uncommon characteristic of a Nevada asset protection trust is its ability to be designated as a dynasty trust. Dynasty trusts can survive the grantor’s passing, and can provide asset protection and tax deferral benefits for up to 365 years. Combined with the other benefits discussed above, this makes Nevada asset protection trusts valuable tools when seeking to preserve a financial legacy for multiple generations.  

Depending on a high-net-worth individual’s specific goals and financial circumstances, forming a Nevada asset protection trust can potentially provide a variety of other benefits as well. But, these benefits apply across the board—and they are the primary reasons why Nevada asset protection trusts have become the go-to choice for domestic asset protection in the United States in recent years.

Why Might You Not Want to Use a Nevada Asset Protection Trust?

As we discussed above, while forming a Nevada asset protection trust makes sense in many circumstances, it isn’t the best choice for everyone. When developing an asset protection strategy, a custom-tailored approach is critical. You need to know whether forming a Nevada asset protection trust is the right choice for you—and, if it is not the right choice, you need to know this so that you can pursue other options.

When might you not want to use a Nevada asset protection trust? Here are three possibilities:

  • A Nevada Asset Protection Trust Doesn’t Offer the Right Protection – Forming a Nevada asset protection trust generally won’t be the right choice if you don’t have sufficient assets to place into the trust. For example, if you do not have substantial assets in Nevada (and it doesn’t make sense to move assets to Nevada), then the annual maintenance costs may not be worth it. In this scenario, choosing a different asset protection tool will likely be a better choice.
  • A Nevada Asset Protection Trust Doesn’t Offer Enough Protection – As noted above, while the protections afforded by a Nevada asset protection trust come into play much more quickly than they do in other states, they do not come into play immediately. If you need protection sooner, then choosing a different tool (such as an offshore asset protection trust) may be a better option.
  • You Can Achieve Your Asset Protection Goals Through LessRestrictive or More Cost-Effective Means – Finally, forming a Nevada asset protection trust may not be the best choice if you can achieve your goals through less-restrictive or more cost-effective means. For example, limited liability companies (LLCs) can offer certain asset protection benefits with greater flexibility, and generally at a lower cost than maintaining a Nevada asset protection trust. But, before choosing an alternative based on these factors alone, it is important to ensure that the alternative will still be sufficiently suited to your asset protection goals and needs.

Here, too, these are just examples. Developing a comprehensive and custom-tailored asset protection strategy requires clear foresight and careful decision-making with a comprehensive understanding of all relevant options and their respective benefits, limitations, and risks. To ensure that you are making informed decisions, you should discuss your options with a highly experienced asset protection attorney.

Choosing an Asset Protection Attorney to Help You Develop a Comprehensive and Custom-Tailored Strategy

When choosing an attorney to assist you with developing an asset protection strategy, it is important to choose wisely. The decisions you make now could have significant financial implications not only for you and your immediate family, but also for generations to come. There are several reasons to hire a Nevada asset protection attorney—and there are just as many reasons to make sure you choose an attorney who is capable of advising you effectively.

At Oberheiden P.C., our asset protection lawyers have extensive experience helping high-net-worth individuals protect their wealth with Nevada asset protection trusts and other asset protection tools worldwide. Using our experience, we can help you carefully evaluate your options and develop a strategy that is suited to your specific set of circumstances. We can also help you manage your asset protection strategy in the years ahead; and, if you need to make changes in the future, we will use the flexibility that we have built into your asset protection strategy to modify your Nevada asset protection trust and/or other asset protection tools when the time comes.

Contact the Asset Protection Lawyers at Oberheiden P.C.

If you would like to know more about Nevada asset protection trusts and the alternatives that are available, we invite you to get in touch. We represent high-net-worth individuals throughout the United States and worldwide. To speak with a senior asset protection lawyer at Oberheiden P.C. in confidence, please call 888-680-1745 or tell us how we can contact you online today.

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