|February 7, 2014|
Previously published on February 3, 2014
Now that the federal estate tax exemption is at an all-time high ($5.34 million per person in 2014) fewer families are worried about a potential hit from the IRS after death and want to protect their wealth during life. We are fortunate to have some of the strongest asset protection laws in the country right here in Nevada.
Asset protection planning uses lawful planning techniques to protect and preserve your wealth. Our society is becoming increasingly litigious. Business owners, professionals and high net worth individuals need to be mindful of this and consider their legal options to protect themselves. My goal is to help put you in a stronger position to protect your assets than you would have been in had you done no planning.
Here are six things you should know about the Nevada asset protection trust:
Nevada is one of 15 states that now offer the on-shore equivalent of an off-shore asset protection trust. These special types of trusts are sometimes referred to as “on-shore” or “domestic” asset protection trusts.
The Nevada asset protection trust is a self-settled spendthrift trust whereby the creator of the trust can be a beneficiary and the investment trustee during life. The creator of the trust - called the grantor - selects the terms of the trust and how the remaining property will be distributed upon their death.
All states that have these asset protection laws have a “tolling period” which must lapse before the protections of the trust take effect. In Nevada, assets transferred to an asset protection trust are generally protected from creditors two years after assets are transferred to the trust. Nevada’s law is superior to the laws of other states in this regard since the required waiting period in most of the other jurisdictions is three or four years. Because of the mandatory “tolling period,” the best time to create an asset protection plan is early when there are no threats looming on the horizon.
Unlike many states, Nevada does not allow for any “exemption creditors.” Most other states allow these types of trusts to be pierced by a divorcing spouse, child support claims, and/or pre-existing creditors.
Nevada asset protection trusts benefit from the fact that there is no state income tax in Nevada.
Nevada’s law went into effect on October 1, 1999. Despite the fact these trusts have been around for over 14 years many professionals, business owners, corporate executives and other high net worth individuals still have not taken advantage of this opportunity simply because they are not familiar with asset protection planning.