What is a Nevada Asset Protection Trust?
A Nevada Asset Protection Trust (NAPT) is an irrevocable trust under Nevada's unique law that permits an individual to set up a Nevada trust (a Self-Settled Asset Protection Trust) for his or her own benefit to protect assets from creditors beginning two years after the transfer of the particular assets to the trustee.
Nevada became one of the first states to enact this legislation in 1999. While Nevada does not permit an individual from hiding assets from existing creditors, it does allow for the protection of assets from future creditors. It is critical that planning be done before liability is incurred, rather than after.
Pursuant to Nevada law, even if an asset is fraudulently transferred into a Nevada Asset Protection Trust (i.e. transferred for the specific purpose of defrauding one's creditors), the creditor has only 2 years from the date of the transfer to bring a claim against the asset. If the creditor fails to bring the claim within the 2-year period, then the asset is permanently protected.
The level of risk an individual faces and his or her net worth are very important factors that should be considered when deciding to set-up a Nevada Asset Protection Trust. There is no group in particular that should consider a NAPT; however, these Self-Settled Asset Protection Trusts have been beneficial for professionals that are exposed to a substantial degree of professional liability. A NAPT appeals to any individuals that are interested in protecting the wealth they worked so hard to accumulate, as well as young professionals who are in the process of building their estate.
What are some of the significant features of the Nevada Asset Protection Trust?
- Shortest Statue of Limitations: A significant advantage Nevada has over other states offering the similar asset protection laws is its short two-year statute of limitations. Nevada law prevents creditors from bringing on a suit against an individual in respect to transferred assets beginning two years from the date of transfer.
- No Residential Requirement: Both Nevada and non-Nevada residents can benefit from a Nevada Asset Protection Trust. You do not need to reside in the state to set up a NAPT in Nevada.
- Preexisting Tort Creditor Protection: Nevada, unlike several other states, offers this significant protection. However, a tort creditor, as of the date of transfer of the assets to the trustee, might be able to proceed against the trust, subject to the statute of limitations.
- Fraudulent Transfer Requirement: Nevada's amended laws make it even more challenging for a creditor to bring an action with respect to a transfer of property into a Nevada Asset Protection Trust. Creditors must prove "clear and convincing evidence" that the transfer of property was fraudulent or "violates a legal obligation owned to the credit."
For more information and to speak to a corporate analyst about setting up a Nevada Asset Protection trust, please call 1-800-508-1729.