Issues With Asset Protection When Drafting a Nevada Estate Plan
Estate planning is a necessary step when preparing for your future. It ensures your wealth is protected, your assets are distributed according to your wishes, and your loved ones are safeguarded in the event of your passing. Among the various states in the United States, Nevada has gained a solid reputation for being one of the best states for estate planning.
When trying to protect your assets in Nevada, a solid estate plan is a good start. In particular, the Nevada Asset Protection Trust can prevent the unnecessary access of assets by creditors and others. However, even in Nevada, there are issues with asset protection that all individuals should understand.
To overcome these obstacles, it is best to speak with an experienced Nevada asset protection attorney. At John Park Law, we can help you protect your assets, explore your options, and create an estate plan that is best for you.
What is a Domestic Asset Protection Trust?
A Domestic Asset Protection Trust (DAPT) is a special trust created in certain states like Nevada. It’s unique because the person who creates the trust can still receive money from it, but at the same time, the trust keeps those assets safe from creditors and legal issues.
How does it work? If you set up a DAPT as part of your estate plan, you can draw money from it in your retirement years or even just go on vacation. However, even if you run into financial trouble or get sued, the assets in the trust are protected. Your creditors can’t just take everything in the trust to pay off your debts.
Now, not all states have these kinds of trusts. Currently, there are 17 states in the U.S. with laws that allow you to set up a DAPT for this added protection, and Nevada is one of them. However, Nevada is only one of two states with NO statutory exception creditors, making Nevada an exceptional state to establish a trust.
You Must Adhere to Nevada Laws and Regulations
Nevada’s asset protection laws are structured to provide a high level of security for your assets, but these protections come with strict guidelines. For your Domestic Asset Protection Trust to be effective, it must adhere to the state’s laws and regulations, which means thorough attention to detail during the setup and management of the trust. Deviating from these requirements can significantly undermine the protection your trust offers. You must work with an experienced attorney well-versed in Nevada’s asset protection laws to avoid breaking any laws or regulations.
You Must Choose the Right Trustee
The trustee of your DAPT plays a pivotal role in the success of your asset protection strategy. The trustee is the individual or entity responsible for managing the trust and ensuring that it operates in accordance with the law and your specific wishes. The trustee’s actions and decisions can significantly impact the effectiveness of your trust, making it a critical position that deserves careful consideration.
A typical Domestic Nevada Asset Protection Trust might have two or three trustees serving different functions.
- Investment Trustee. In charge of buying, selling, and holding investments
- Distribution Trustee. In charge of distributing assets to the beneficiaries
- Administrative Trustee. Maintains the records and affairs of the trust, such as tax filings
One of these trustees must be a resident of Nevada or a bank or trust company in Nevada (usually the Distribution Trustee). The other two can be a trusted family member, friend, financial advisor, or trust company.
Watch Out For Fraudulent Activity
Transferring assets to a DAPT shortly before facing creditor claims or legal disputes may be viewed as a fraudulent conveyance, potentially leading to the trust’s assets being included in the settlement of such claims.
Nevada has a two-year statute of limitations for fraudulent transfers to a DAPT. Any transfers made to the trust within this period can be challenged as fraudulent. It’s essential to be aware of this time constraint when establishing a DAPT.
Limitations and challenges of DAPTs
While Domestic Asset Protection Trusts (DAPTs) offer valuable asset protection benefits, it’s essential to be aware of their limitations and the potential challenges they can present. DAPTs are subject to a statutory waiting period, typically two years. During this period, any assets transferred to the trust may still be vulnerable to creditors’ claims. This waiting period can limit the immediate protection offered by the trust.
Creditors may challenge the validity of transfers to a DAPT, especially if they believe the transfers were fraudulent or made with the intent to hinder, delay, or defraud them. Successfully challenging the trust could result in its assets being used to satisfy debts.
Thus, establishing a DAPT and transferring assets to the DAPT in order to satisfy the two-year seasoning period as soon as possible is critical in protecting your assets, prior to any potential claims arising.
Contact Our Nevada Asset Protection Lawyers Today
Navigating the complexities of estate planning and asset protection in Nevada requires the guidance of a qualified estate planning attorney. At John Park Law, our experienced Nevada asset protection lawyers will help you tailor your estate plan to meet your specific needs and goals. We know how to address potential legal challenges and will maximize the protection provided by your DAPT.
Call us at 702-857-7879 to speak with an experienced Nevada estate planning attorney today. You can also fill out our confidential contact form, and we will call you back.
John Park is a highly experienced attorney in estate planning, probate, business law and guardianship to help people organize the elements of their lives through careful estate planning and asset protection measures.