Dear Friends, Colleagues, and Clients,
Our neighbor to the east, Nevada, has some of the best trust law in the United States. Nevada is also well known for the asset protection trust (APT) law. What folks may not know is how quickly the “firewall” protections of the APT may attach once the assets are placed in the APT. Nevada Revised Statute (NRS) Sec. 166.170 requires a creditor to bring an action to challenge a transfer to a NV APT within two years or six months from discovery of the transfer(s).
Under NRS Sec. 166.170 (3), “a creditor may not bring an action with respect to transfer of property to a spendthrift trust (APT) unless a creditor can prove by clear and convincing evidence that the transfer of property was a fraudulent transfer pursuant to chapter 112 of NRS or that the transfer violates a legal obligation owed to the creditor under a contract or a valid court order that is legally enforceable by that creditor. In the absence of such clear and convincing proof, the property transferred is not subject to the claims of the creditor. Proof by one creditor that a transfer of property was fraudulent or wrongful does not constitute proof as to any other creditor and proof of a fraudulent or wrongful transfer of property as to one creditor shall not invalidate any other transfer of property.”
So, unless the creditor can establish by clear and convincing evidence the transfer was a fraudulent transfer under their statute, the protection of the NV APT begins on “day one” of the funding.
So, if you live in a state that doesn’t have asset protection trust law, consider establishing a Nevada APT as the statutory trust law could present some significant hurdles for a future potential unforeseeable creditor discouraging the challenge to begin with.
For more information about APT’s or other issues pertaining to this subject, contact Jeffery M. Verdon Law Group, LLP, Jeff@jmvlaw.com, (949) 333- 8150.
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Jeffrey M. Verdon, Esq.
For more information about any of the information discussed in this Client Alert, or any other income or estate tax planning or asset protection planning assistance, please contact the: Jeffrey M. Verdon Law Group, LLP at jeff@jmvlaw.com or 949-333-8152.