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Advantages of Using a Nevada Asset Protection Trust for your Asset Protection Trust

The Ultra Trust® irrevocable trust asset protection plan is the best way to protect your assets without going offshore and without risking trouble with the IRS and government.

Over the last decade, asset protection has become a topic of interest among many individuals and families across the United States. Asset protection strategies have been around for centuries, and one of the most commonly discussed today, since the Nevada self-settled trusts statutes changed in 1999 and subsequent changes to their statute of limitations for gifting into these trusts in 2010, is the Nevada asset protection trust type of family trust.
Nevada asset protection: map of United States with Nevada state highlighted.
Nevada asset protection: map of United States with Nevada state highlighted.
Of all asset protection strategies, the Nevada asset protection trust, on the surface, stands out as being one of the most secure methods of securing personal and family fortunes since the change in statutes.
Many asset protection attorneys have recommended the Nevada asset protection trust to their clients for these very reasons. A Nevada domestic asset protection trust (DAPT) is essentially an irrevocable trust instrument that has special features enabled by the statutes of the Silver State. To understand why asset protection attorneys are turning their attention to Nevada DAPTs, it helps to learn about the history of trusts and recent trends in how society perceives wealth.

The Need for an Asset Protection Trust

The 21st century has become one of the most paradoxical times in terms of how global economies are shaping the way demographic societies develop. The vanishing middle class and the change in the mechanisms that rule the redistribution of assets have become major issues of contention.
The concept of asset protection dates back to the 12th century, when the legal instruments we know as trusts today were created in England. The original purpose of trust was to protect the assets of English knights who served the Crown during the Crusades.
History shows that trusts were created for the purpose of asset protection, and the family trust was perfected over the centuries for this purpose as well as for estate planning, gifting to charities, and keeping family fortunes away from the reach of outsiders and third parties; after all, what is a family trust but an effective way of preserving wealth? A modern real estate family trust, for example, is essentially an updated version of the early trusts used by knights.
United States is the most litigious nations in the world. Map of the United States displaying state ranking of number of torts in each state.
United States is the most litigious nations in the world. Map of the United States displaying state ranking of number of torts in each state. (Click on image to see larger map)
Now that we know that about the historic need for asset protection, understanding the current need becomes easier. The United States has become one of the most litigious societies in the world, and this is something that has been exacerbated with the redistribution of wealth in the 21st century.
To a certain extent, the expression "the rich get richer while the poor get poorer" has become axiomatic in modern times. The so-called "one percent" who make up the wealthiest and most powerful individuals and families in the world have indeed become wealthier over the last few decades. The United States middle class is becoming smaller every day. These changes are caused by ineffective redistribution of wealth schemes.
Individuals and families who make up the American upper middle class and above are in serious need of strong asset protection strategies for business owners such as the Nevada version of the asset protection trust. Basically, families who enjoy unencumbered assets worth $100,000, or whose annual incomes are greater than $100,000 per year, face problems that have been created by the uneven redistribution of wealth in the 21st century.
Whereas early family trusts offered protection from feudal lords, usurious creditors and zealous Crown revenue collectors, family fortunes these days are in danger of being decimated by excessive taxation, irresponsible heirs, zealous creditors, frivolous plaintiffs, gold diggers, and other unpleasant characters.
It is generally accepted that the "one percent" have become so powerful as to be considered untouchable, and thus not many people bother with trying to tap their fortunes. The truth is that those within the "one percent" make extensive use of strategies similar to the Nevada asset protection trust, which happens to enjoy many irrevocable trust advantages.
With a diminished American middle class, revenue collectors and creditors are focusing their money-grabbing efforts on the upper middle class and above because they know that they cannot penetrate the asset protection fortresses of the "one percent." A similar philosophy is practiced by frivolous plaintiffs and gold diggers who want to make an easy score from those who are not protected by a Nevada asset protection trust.
There is no question that there is a strong need for asset protection these days, and the pesky trend of uneven wealth redistribution will continue to make the Nevada DAPT an important financial strategy.

Understanding the Nevada Asset Protection Trust

Financial planners and asset protection attorneys have been closely following the legislative action in Nevada since 1999, which is when Chapter 166 of the Revised Statutes was amended to pave the way for the creation of an irrevocable grantor trust that would become the strongest form of asset protection in the United States.
Chapter 166 of the Nevada Revised Statutes is known as the Spendthrift Trust Act, and was originally created to place restraints on voluntary and involuntary transfers from trusts to benefits. Asset protection lawyers saw that their clients could certainly benefit from an irrevocable grantor trust created under Nevada state law.
A Nevada DAPT has numerous advantages and can serve many purposes, but its most efficient use is for wealth preservation. As mentioned earlier, a Nevada asset protection trust is also known as a domestic asset protection trust (DAPT), a term that helps to differentiate these instruments from offshore trusts.
To understand the basics of a Nevada DAPT, it helps to learn how an irrevocable grantor trust works. When an asset protection attorney recommends an irrevocable grantor trust to his or her clients, it is because of the way irrevocable trust advantages can help in relation to wealth management and preservation.
An irrevocable grantor trust can be a family trust, a small business trust, or even a real estate family trust. It can also be a DAPT in the sense that it assures the protection of assets for the discretionary benefit of the grantor. As its name suggests, an irrevocable grantor trust does not normally allow for revocation or amendments once it is settled, which is why many asset protection attorneys recommend them to their clients.
As opposed to revocable trusts, which have been used as family trusts as well as real estate family trusts, irrevocable grantor trusts offer real asset protection features relative to an irrevocable grantor trust from a different state by virtue of the Nevada statutes and favorable case law. Although revocable trusts allow grantors to serve as their own trustees and beneficiaries, the revocable nature of these instruments make it too easy for creditors, plaintiffs and others seeking to tap into trust assets to convince a court to issue an order to enact revocation in their favor. Such is not the case with Nevada asset protection trusts since they enjoy the irrevocable trust advantages that create legal barriers against those who wish to claw at the trust assets.
There are two special advantages related to the creation of an irrevocable grantor trust in Nevada: First of all, this is an instrument that is designed to be completely self-settled, which means that the grantor can serve as one of the trustees for the purpose of retaining control of the assets.
The distributions and disbursements from a Nevada asset protection trust can be set up in a discretionary manner instead of being mandatory. Another powerful feature of an irrevocable grantor trust is the trust protector. This is advantage similar to the offshore trusts offered in certain Caribbean jurisdictions. When the grantor of a Nevada asset protection trust appoints a trust protector, he or she is essentially assigning a guardian angel with broad powers such as the legal right to remove trustees and to settle conflicts between beneficiaries.
If an irrevocable grantor trust is to be used as a family trust, an asset protection attorney may recommend that the grantor's spouse and children be the initial beneficiaries so that they can share distributions. In this fashion, the trust assets enjoy greater protection.

What is a Family Trust?

One of the many irrevocable trust advantages of a Nevada asset protection trust is that it can be used to keep wealth in the family. If we pose the question "what is a family trust" to a seasoned asset protection lawyer, the answer will likely be: a legal instrument that provides an ideal ownership situation for all beneficiaries. In a family trust, relatives are usually designated as the beneficiaries of the assets, which means that they get to enjoy them without actually owning them.
Asset protection attorneys often mention the legal and financial burden of ownership when they discus family trusts. Ownership is the basis of legal claims by creditors, frivolous plaintiffs, gold diggers, freeloaders, and others who may want to claw at the family fortune. One of these claimants, for example, may want to file a lawsuit to place a lien on the apartment occupied by a grantor's daughter who is attending college. Let's say the claimant performed maintenance work on the apartment and thinks that he was underpaid. If this prospective plaintiff consults an attorney about this matter, chances are that he will be informed that the young lady does not really own the apartment, and that he is basically barking up the wrong tree.
Eliminating the burden of ownership is one of the greatest benefits of irrevocable trusts, but the traditional reasons for establishing a family trust can certainly be satisfied with a Nevada asset protection trust. An asset protection attorney explaining family trusts may mention that they are one of the best estate planning tools for all families, particularly for those whose members will potentially not get along in probate court.
Legendary musician Prince George Nelson's legal estate of the Prince of Paisley Park engaged in probate court.
Legendary musician Prince George Nelson's legal estate of the Prince of Paisley Park engaged in probate court.
There is a famous someone who may have needed an asset protection attorney to review how irrevocable trust advantages could have benefited him in life. The estate of Prince George Nelson, one of the most brilliant musicians to hail from Minneapolis, is a legal mess.
Months after his tragic passing, the surviving relatives of the Prince of Paisley Park are engaged in an unpleasant probate court drama that could have been avoided with a Nevada asset protection trust. Asset protection attorneys are known to mention this irrevocable trust advantage to families who may already be in the public eye due to their success, stature and profession: irrevocable trusts not only provide estate and financial planning; they also serve as privacy tools that can keep private detectives, gossip journalists, and nosy individuals from learning the assets held in trust and the distributions to beneficiaries. Should the grantor or a beneficiary end up in court, all that he or she needs to explain is that there an irrevocable trust exists; the judge may look into it just to ensure that there are no fraudulent transfers or foul play taking place, but the court will never reveal any details about the trust itself.

The Ultimate Safeguard of a Nevada Asset Protection Trust?

As previously mentioned, Nevada’s version of the Domestic Asset Protection Trust fully came to be one of the strongest financial safeguards with a 1999 amendment to the Nevada Revised Statutes.
We have already explained that an irrevocable trust allows the grantor to create a legal instrument that he or she can retain control of as co-trustee, and with the help of a trust protector, the grantor can be also be a discretionary beneficiary. Asset protection means keeping third parties away from property, investments, valuable artwork, and generally anything else that may be of value.
Asset protection attorneys will always recommend creating a Nevada irrevocable trust when the skies are clear, which means before issues such as a divorce, lawsuits or a crash of the financial markets may come about. The reason for this recommendation can be found in the 1999 amendment to Chapter 166, the Spendthrift Trust Act of Nevada.
One section of Chapter 166 states that once a Nevada DAPT has been active for two years, the trust veil cannot be pierced. In a way, this is similar to what the state of Delaware offers to partners of limited liability companies, and it is also similar to the way some offshore trusts operate. After assets have been transferred into a Nevada asset protection trust, creditors have virtually no chance of establishing a legal claim against the assets after two years have passed.
It is important to note that the Nevada provision that locks down assets after two years applies to future creditors, which is why a Nevada DAPT can greatly help individuals or families who come into sudden wealth due to inheritances or sales of assets.
Creditors and plaintiffs who believe they are entitled to file claims against the assets in trust can only challenge the transfer of assets into the irrevocable trust, and they have two limitations in this regard. First, they must file their legal challenges within two years from the date of the trust being funded; second, they have six months to file after they discover or suspect a dubious transfer being made.
After the two aforementioned limitations, creditors and prospective plaintiffs also have the burden of presenting discovery in a timely manner. The Nevada Revised Statutes consider discovery to be on the date it appears on public records; so, if a creditor and claimant fails to perform due diligence, he or she may be late to the party with regard to filing legal claims.
Ever since the statute of limitations on fraudulent transfers for Nevada trusts was enacted, case law does not reflect a single instance of the trust veil being pierced or trust assets being clawed by creditors or claimants as long as they are within these time limitations, but there is even a better way to avoid the claims of fraudulent conveyance. This is what makes the Nevada asset protection trusts so advantageous, but prospective grantors should be thoroughly advised on how to enact the transfers in a way that makes this provision more effective – The Ultra Trust combined with the Derivative Financial Instrument™.
State From Asset Transfer Date From Date of Reasonable Discovery
Alaska 4 years 1 year
Delaware 4 years 1 year
Nevada 2 years 6 months
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Finally, the recent "Panama Papers" scandal that revealed how the offshore trust industry is used by the rich and powerful is making many Americans think twice about placing their assets in the Caribbean or other jurisdictions abroad.
Although offshore trusts are highly recommended for asset protection purposes, the Panama Papers case brings up valid concerns about activists and journalists working with insiders at these offshore law firms, waiting for the right moment to leak confidential information to the press.
The last thing a grantor wants is to see his or her name listed alongside those of corrupt politicians, drug cartel financiers and disgraced athletes. The Nevada asset protection trust industry has not fallen victim to a Panama Papers-style attack, and this has a lot to do with the fact that it enjoys the support of U.S.-based law firms. Moreover, a Nevada asset protection trust is less expensive to create and maintain than its offshore counterpart.

The Nevada Asset Protection Trust and Daily Life

Asset protection trusts should not be used as checking or savings accounts; however, they can be structured in a way that allows grantors and beneficiaries to access assets in a discretionary manner.
In general, the grantor cannot be the recipient of mandatory distributions; this is a resolution that allows for maximum asset protection. Still, the grantor can be a beneficiary along with his or her spouse, children and relatives, who can enjoy discretionary distributions.
When a Nevada asset protection trust is being managed by a fiduciary trustee, the grantor and beneficiaries can agree on a discretionary distribution and make a formal request. Let's the family agrees on a $250,000 distribution; the trustee will ensure that the request complies with the law and with the trust agreement. It may take a few days to complete the distribution in a manner that does not pierce the trust veil; for this reason, a Nevada DAPT cannot be considered to have the same flexibility as a money market account with a Visa debit card.
With regard to the minimum assets level at which asset protection trusts can be recommended, the situations will vary. In general, families with net worth of at least $1 million are good candidates for irrevocable trusts based in Nevada. Nonetheless, asset protection attorneys also see young families with annual incomes of $100,000 interested in asset protection; these are usually families who are holding on to investments projected to drastically increase in value. In other words, they may not be the target of money grabbers yet, but they see their situation changing in the near future.
As previously mentioned, asset protection lawyers set up irrevocable trusts in ways that will not arise suspicion among third parties and officials. To this effect, a law firm or trust protector may not recommend depositing every single asset item in trust if doing so may seem as a fraudulent action. This type of advice may extend to distributions, which should not be made in a manner that makes an irrevocable trust look like an ATM.
While it is true that Nevada created some great statutes making the Nevada Asset Protection Trust extremely good, making a Nevada Ultra Trust and combining it with the Derivative Financial InstrumentTM is even better.
The Ultra Trust® has been around for thirty years; being challenged by some of the most powerful groups in the country: the Attorney General of New York, the Attorney General of California, the IRS, and the US Attorney in Washington D.C., among others, without a single detrimental client outcome. Why not put the odds in your corner?
Rocco Beatrice, CPA, MST, MBA, Managing Director, Estate Street Partners, LLC.
Mr. Beatrice is an asset protection award winning trust and estate planning expert.

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