Nevada Asset Protection Trust History
The person who establishes or creates a Trust is called the Settlor, Trustor, Donor, or Grantor. If a Settlor received benefit from the trust in any way, such as receiving distributions, retention of power to serve as a trustee or amend the trust, old trust law allowed for creditors to satisfy debts by using the assets within the trust. The only way for a Settlor to be protected from creditors was to give up complete control and all benefit from the trust.
Some foreign jurisdictions attempted to allow Settlors to keep some control of their trust and provide benefit from the assets held in a trust. These foreign jurisdictions created laws for assets held in self-settled trusts to be protected from creditors. These newly created “offshore trusts” provided additional protection of assets from creditors.
Increased risk of litigating in foreign jurisdictions and geographic distance make offshore trusts an effective means of discouraging creditors from seeking to attach trust held assets. These same benefits to some Settlors can be a headache to others.
After 9/11 Trust Laws
After the attacks on 9/11, the United States government sought increased regulation and reporting requirements for offshore trusts and holdings. All U.S. citizens and resident aliens alike, must report the existence of and income derived from an offshore trust to the Internal Revenue Service (IRS). Due to the new regulations and the ever increasing climate to sue in the U.S., many Settlors needed smart protection of their assets.
Nevada Asset Protection Trust
Nevada is one of a few states that enacted legislation allowing for the creation of self-settled spendthrift trusts, these on-shore trusts are often referred to as Domestic Asset Protection Trusts. The Nevada Asset Protection Trust (NAPT), is Nevada’s law regarding the Domestic Asset Protection Trust. Nevada Asset Protection Trusts are better than other state Domestic Asset Protection Trusts because creditors only have two years after the transfer of an asset to the trust to make a claim under the statute of limitations. The statute of limitations begins for a particular asset when an asset is transferred into the Nevada Asset Protection Trust.
Nevada Asset Protection Trusts are Irrevocable Trusts, but Nevada has special laws that apply. For example, Settlors retain rights to change the allocation of assets after the initial appointment of asset distribution to beneficiaries. Additionally, a Settlor of a Nevada Asset Protection Trust may also be a beneficiary of the trust. This is not the case in most other states. Nevada Revised Statute 166 provides these additional protections, making Nevada the best place to set up an asset protection trust. A Nevada Asset Protection Trust is recommended for those who are at risk for professional liability lawsuits and those with high-value assets.