Examining Nevada Asset Protection Trusts: Common Questions Our Trust Officers Receive
In Part 2, we examine typical questions regarding Nevada Asset Protection Trusts. Nevada Asset Protection is sought after globally, and among the primary reasons estate planners look to Nevada as their preferred trust jurisdiction.
In part 1, we answered six general questions we often receive about Asset Protection Trusts in general.
Nevada Asset Protection
What is a Nevada Asset Protection Trust?
Also known as a Nevada Self-Settled Spendthrift Trust (SSST) or Domestic Asset Protection Trust (DAPT), a Nevada Asset Protection Trust is an irrevocable trust that protects the beneficiary from lawsuits, divorce settlements, transfer tax, and bankruptcy regulations. A Nevada SSST provides each beneficiary ownership of an equitable interest without legal title to any assets.
A Nevada Asset Protection Trust is secure from creditor claims after it meets its two-year seasoning period (discussed in Part 1), the nation’s shortest seasoning period. The trust must be administered in Nevada and requires at least one trustee to be a Nevada resident. Often, families select a corporate trustee, such as Alliance Trust Company of Nevada.
Many consider Nevada as the leading asset protection trust jurisdiction because Nevada’s statutes carry no exception creditors, including divorcing spouses.
Who is Eligible for Nevada Asset Protection?
Almost anyone with assets is “eligible” for an asset protection trust both in the U.S. and abroad. But, it’s not about eligibility per se. It’s more about safeguarding wealth and legacies for many generations from vulnerabilities like lawsuits and creditor claims. That said, asset protection strategies especially make sense for people vulnerable to creditor claims, such as professional service providers, business owners, and professionals who may be at a higher risk for litigation.
What are the tax benefits of protecting my assets in Nevada?
Nevada is a tax-favored environment and creates significant income tax savings for many families. Nevada has no state or corporate income tax, a benefit that could preserve large portions of wealth and offer it unhindered growth.
With options such as the Nevada Incomplete-gift Non-Grantor trust, or NING trust, those who wish to protect their substantial income from considerable taxation can take advantage of Nevada’s tax-favored environment and generate significant tax savings.
Why is Nevada regarded as a Leading Trust Jurisdiction?
Nevada is considered across the U.S. and internationally as one of the most advantageous locations to establish a trust. Some key reasons for this include:
- You don’t have to live in Nevada to establish an asset protection trust in the state.
- There is no state or corporate income tax.
- Nevada carries Dynasty Trust statutes extending asset protection for up to 365 years.
- The settlor may serve as co-trustee and manage trust assets.
- Nevada holds precedents solidifying its iron-clad asset protection.
In the recent Nevada Supreme Court case, Klabacka vs. Nelson, Nevada’s no exception creditor, including divorcing spouses statute, was tested. The assets within the Nevada Asset Protection Trust remained safe.
If you have more questions about Nevada Asset Protection that we didn’t cover here, please contact us. We’re happy to answer your questions and help you take advantage of Nevada’s favorable tax and estate laws.