Nevada Asset Protection Trust
Nevada is one of a limited number of states that allow a person ("grantor") to create an asset protection trust for his/her own benefit.
Asset protection statutes in Nevada are very similar to the laws in offshore jurisdictions. One difference is the cost. Establishing and maintaining a Nevada Asset Protection Trust (“NAPT”) is less expensive than offshore asset protection trust. The statutes also offer greater protection for a Nevada resident who uses a NAPT than using offshore asset protection.
Nevada is one of only two states with no statutory exception creditors
Transferring Assets
You need to pre-plan to take full advantage of the protections offered by an asset protection trust. Assets need to be transferred into your trust well before a liability occurs. One of the biggest advantages of setting up a NAPT, is that Nevada has one of the shortest waiting periods.
Assets transferred to a Nevada Asset Protection Trust are generally protected from creditors two years after the date the transfer to the trust takes place.
The waiting period for pre-existing creditors of the grantor, however, is different.
Pre-existing creditors have a waiting period of either two years from the date of the asset transfer to the trust or six months from the date the creditor discovered the transfer or reasonably should have discovered the transfer, whichever is longer.
Asset Protection Trust
The NAPT must be irrevocable to provide creditor protection. Despite being irrevocable, the trust may be flexible. It can be modified by drafting the trust to allow the grantor to change the beneficiaries at death.
Statutes require an independent trustee before grantor can receive distributions. In addition, at least least one of the Trustees must be a Nevada resident.
A NAPT can be combined with one (or more) Nevada limited liability companies (‘LLC’) giving you a second layer of protection from creditors, called charging order protection.
Related Articles: Revocable Living Trust
Charging Orders
A charging order is a type of lien that gives the lien holder economic interest only over the member’s interest in the LLC to which the lien has attached. Nevada law makes the charging order the exclusive remedy of a judgment creditor. Charging orders are a limited remedy that are restrictive for creditors.
Judgment creditors will often settle lawsuits for significantly less than what is owed to them because creditors are unable to force a distribution from the LLC. Creditors are also unable to make any management or investment decisions over the LLC’s assets.
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