THE NEVADA ASSET PROTECTION TRUST
Personal Asset Protection Tool
No matter who you are or what you do, we all have some risk that we will be personally involved in a lawsuit and that we may end up with a judgment against us personally. Some Professionals (such as doctors, lawyers, architects, chiropractors, etc.) are at increased risk of personal liability, due to malpractice risks. Many businesses entrepreneurs are also at high risk for personal liability, due to the nature of their business (e.g., contractors, real estate investors, real estate brokers, etc.). But, even ordinary, average individuals in our day and age, also have a substantial risk of being involved in a lawsuit that may result in personal liability (e.g., car accidents, landowner liability, economic hardship, etc.).
Personal asset protection is something that we all should be concerned with. It is never too soon to start your personal asset protection planning – in fact the sooner you do the planning, the more sound your protection will be.
There are many common mis-perceptions about personal asset protection. Some of the common mis-perceptions are:
1) That Business planning/entity structure alone will protect my personal assets [business entities are important, in terms of shielding yourself individually from business liabilities – but they don’t not shield personal assets if the individual is sued personally];
2) My Living Trust will protect my assets. [Living Trusts are great estate planning tools but they do not protect your personal assets from judgment creditors, bankruptcy, etc.];
3) Putting my personal assets into a corporation will protect the assets that I transfer to the corporation. [corporations are effective business liability shields; however, an individual’s equity ownership in a corporation generally is “fair-game” for a judgment creditor if an individual is personally sued];
4) Transferring assets after the problem has arisen will protect my assets – [Probably not so, because of fraudulent transfer law restraints – pre-planning before the issues arise is critical to ensure sound protection]; and
5) A Land Trust will protect the assets held in the Trust [Land Trusts can protect assets, if they are structured properly; usually they are not, because people don’t want to give up the control that would enable the protection].
A. The Nevada Asset Protection Trust – Domestic Asset Protection Tool
The Nevada Spendthrift Trust (a/k/a: “Nevada Asset Protection Trust” or “Nevada Wealth Preservation Trust” or “Nevada Domestic Asset Protection Trust” ) is probably the best asset protection tool available in the United States. The Nevada Spendthrift Trust offers unparalleled protection while allowing the individual to retain maximum control. More specifically:
Nevada law allows any individual to create a valid trust whereby he or she is a Trustee (i.e. in control of the assets and has the transactional authority for the trust), he or she is the Beneficiary (i.e. entitled to receive the benefit of trust assets) and the assets are still protected from creditors while in trust;
1. You need not be a Nevada resident to take advantage of the Nevada Spendthrift Trust Act [requires either that: (1) the trustor/creator of the Trust be a Nevada resident; or (2) the primary assets of the Trust be Nevada based or controlled property; or (3) that a Trustee of the Trust that has the primary administrative function is a Nevada Resident, Nevada Trust Company or Nevada Bank;
2. Any type of asset (real property, personal property, cash, stocks, bonds, mutual funds, investment accounts, savings accounts, jewelry, valuable collections, family heirlooms, etc.) in any location can be protected by the Nevada Spendthrift Act;
3. The Nevada Spendthrift Trust Act provides protection from an individual’s own potential judgment creditors (subject to fraudulent transfer restraints).
In addition to the ordinary asset protection concerns of protecting personal assets from personal judgment creditors, the Nevada Spendthrift Trust provides the following added benefits:
a. Potentially protecting the assets in the event of a future bankruptcy (subject to time limits and fraud constraints – the trust is anticipated and addressed in the most recent bankruptcy law amendments);
b. Shielding assets in the event of a future marriage;
c. Estate Planning/Probate Avoidance; and
d. Anonymity/identity concealment (a better alternative than nominees)
It is important to note that the Nevada Legislature determined that it is good public policy to allow individuals to plan in advance to protect their own personal assets, so that individuals don’t have to live in fear that some unforseen event will occur that will subject the individual to liability that may result in the individual losing substantially all of his/her assets. The Nevada Spendthrift Trust, in essence, is a gift from the legislature. Every individual should take advantage of the opportunity to protect all or a portion of their personal wealth.