The Nevada Asset Protection Trust
(a.k.a. The Nevada Irrevocable Spendthrift Trust; the Nevada Chapter 166 Trust)
Nevada is one of only a handful of states that allow a person to create an asset protection trust for oneself (a self-settled asset protection trust).
Assets housed within a Nevada asset protection trust are generally protected from creditor claims. In fact, Nevada law specifically shields trust assets from creditor claims. See NRS 166.170.
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.
Nevada provides the best legal framework for the implementation and maintenance of an effective domestic asset protection trust. In 2010, Forbes Magazine rated the Nevada Asset Protection Trust the best in the nation, making it the only state to receive an A+ rating.
- The key advantages of Nevada include:
- No State Income Tax
- No State Corporate Tax
- Shortest “seasoning period” for assets (only 2 years)
- No creditor exceptions (alimony, child support, judgments, all creditors are barred from accessing trust assets)
- Any creditor challenge, even if made within the seasoning period, must prove the existence of a fraudulent conveyance by clear and convincing evidence (the highest evidentiary standard in civil cases).
The following table provides a comparative overview of just some of the benefits that Nevada’s trust law holds over other states:
|2010 Forbes Grade||State||Income Tax||Corporate Income Tax||Statute of Limitations (Future Creditors)||Statute of Limitations (Preexisting creditors)||Creditor Exceptions|
|A+||Nevada||None||None||2 yrs||2 yrs or 0.5 yrs After discovery||None|
|A||Alaska||None||1%-9%||4 yrs||4 yrs or 1 yr after discovery||Divorcing Spouse|
|A-||South Dakota||None||None||3 yrs||3 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Support; Preexisting Tort Claims|
|A-||Delaware||2% – 6.95%*||8.70%||4 yrs||4 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Support; Preexisting Tort Claims|
|B||Tennessee||6%*||6.50%||4 yrs||4 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Support|
|B||Rhode Island||No||9%||4 yrs||4 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Support; Preexisting Tort Claims|
|B-||New Hampshire||No (except dividends/ interest on residents)||8.50%||4 yrs||4 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Support; Preexisting Tort Claims|
|C||Wyoming||No||None||4 yrs||4 yrs or 1 yr after discovery||Child Support|
|C||Utah||No (except Utah source income)||5%||3 yrs||3 yrs or 1 yr after discovery||Divorcing Spouse; Alimony; Child Suport; Numerous other exempt creditors|
|C-||Missouri||No (except Missouri source income)||6.25%||4 yrs||4 yrs or 1 yr after discovery||Alimony; Child Support|
|C-||Oklahoma||0.5% – 5.5%||6%||4 yrs||4 yrs or 1 yr after discovery||Child Support; Protection limited to $1,000,000|
|N/A||Hawaii||No (except residents)||4.4%-6.4%||2 yrs||2 yrs pers Injury; 6 yrs Contract||Divorcing Spouse; Alimony; Child Support; Preexisting Tort Claims; Certain Lenders; Hawaii Taxes|
|D||Colorado||4.63%||4.63%||4 yrs||4 yrs or 1 yr after discovery||Unclear if there is protection from ANY creditors|
* Tax rates listed only apply to certain forms of income or certain classifications of taxpayers.