Nevada Onshore Trust
What Is a Nevada Onshore Trust?
A trust is a versatile estate planning and asset protection tool. It can be used for several purposes, including minimizing tax liability, protecting assets from lawsuits and liability, and transferring assets to others seamlessly. However, they are subject to the laws of the land where they are created, and their protection is only as strong as the laws permit them to be. As such, individuals who seek to create trusts for asset protection purposes typically prefer to make them in jurisdictions with favorable laws.
The search for friendly trust laws has led many high-net-worth individuals and people in high-risk professions who engage in frequent high-value credit transactions or are targets for (frivolous) lawsuits to create trusts that shield their assets from creditors and judgment claims in foreign jurisdictions.
These offshore trusts offer many benefits, and because the trust is created in a foreign country, it also makes it difficult for creditors or other third-party claimants to locate the trust assets and use them to discharge a debt or liability, which helps to preserve the settlor’s net worth. But there’s significant expense and uncertainty attached to offshore trusts, which makes them risky as an asset protection strategy.
If asset protection is your primary goal, you’ll be happy to learn that you can get the benefits of offshore trusts without the disadvantages when you create a Nevada onshore trust. A Nevada onshore trust is a domestic asset protection trust that allows you to create a trust for your benefit. Formally known as a spendthrift trust under Nevada law, this asset protection trust can help protect your assets from future creditors, lawsuit liability, and other adverse claims.
This guide explains the benefits of Nevada self-settled spendthrift trusts and how they can help you achieve your asset protection goals. Keep reading to learn more.
Why You Need a Nevada Onshore Asset Protection Trust
Nevada asset protection or spendthrift trusts are regulated by Chapter 166 of the Nevada Revised Statutes. Spendthrift trusts can be created to benefit third parties. But when a settlor (trust creator) creates such a trust primarily for personal benefit, it becomes a “self-settled” spendthrift trust.
As domestic asset protection trusts, self-settled spendthrift trusts in Nevada have many unique features and benefits that outshine the allure of offshore trusts. Here are some reasons for you to consider this onshore trust for your asset protection goals:
You Control Your Assets
Offshore trusts essentially require you to turn your assets to a foreign trust company or trustee to administer on your behalf. But Chapter 166 of the Nevada Revised Statutes allows you to actively participate in your self-settled asset protection trust instead of being a mere bystander. Under the law, you can;
- appoint your trustee or appoint yourself as trustee;
- direct trust investments and decide what your money is invested in or whether it is invested at all;
- prevent distribution or transfer of income from the trust or trust property; and
- execute other management powers and make management decisions regarding the trust.
The law grants settlors of spendthrift trusts vast powers with few limitations. But there’s a condition attached. A settlor cannot exercise powers not specified in the trust document. Therefore, your self-settled spendthrift trust document must be carefully drafted, preferably by a professional estate planning attorney, so that you can validly exercise the full range of rights and powers over your assets.
Your Assets Are Protected From Creditors
People often opt for offshore trusts because it helps them protect their assets from creditors. The Nevada onshore trust also does the same. By law, every spendthrift trust must have a spendthrift clause prohibiting the voluntary and involuntary transfer of the beneficiary’s interest to a third party. This means that the beneficiary’s income from the trust or stake cannot be used to pay off a creditor or any other person to whom the beneficiary owes some payment, even if the beneficiary agrees. But there’s a catch.
In the interest of justice, you cannot set up a self-settled spendthrift trust to avoid paying your existing creditors. If you do so, any such creditor whose right to payment is attached to assets that have become trust property can file a lawsuit against you within two years from when the assets were transferred to the trust or within six months from when they discovered the transfer.
As such, you can only use the trust to avoid losing your assets to future creditors.
You Can Be a Beneficiary
Generally, legal restrictions prevent a settlor from benefitting from their trust. But in this case, you can be a beneficiary of your asset protection trust and benefit from the trust property as long as you make the trust an irrevocable trust.
However, you cannot be the sole trustee. You must appoint at least one trustee who is a Nevada resident, a trust company, or a bank. The trust company and bank must have offices in Nevada to qualify.
An Offshore Trust Is Not Totally Private
If you thought you could create an offshore trust in a foreign country without anyone in the U.S. knowing, then you thought wrong. Persons who create a foreign trust or receive income from such a trust may be required to pay income tax and provide information about the trust to the Internal Revenue Service (IRS), depending on the circumstances. Failure to comply with the law could result in significant penalties for all those involved.
If you are required to report details about your offshore trust to the government, then it means the trust is not private, or at least it is not more private than a domestic trust. There’s, therefore, no need to go through all the trouble and expense of setting up a foreign trust.
You Can Convert Existing Foreign Asset Protection Trusts to Nevada Onshore Trusts
You may already have an offshore asset protection trust which could make you reluctant to create one under Nevada law. But you don’t have to create a new trust.
Nevada law allows you to transfer the domicile of your foreign trust to the state. The transfer process allows you to convert your offshore trust to a Nevada onshore trust governed by domestic law. You can contact an Estate Lawyer in Las Vegas to learn how this works.
How To Create a Nevada Asset Protection Trust
So, instead of trying to handle things on your own, consider getting professional help from a skilled Trust Lawyer in Las Vegas. They can help you create a personalized self-settled spendthrift trust that meets the required legal standards in line with your estate planning objectives.
Get Help With Your Nevada Onshore Asset Protection Trust at the Wood Law Group
If you’d like to create one as part of your asset protection strategies, we at the Wood Law Group can help you actualize your goal. We are a firm of skilled estate planning and probate lawyers. We can help you create a personalized asset protection or Living Trust in Nevada that meets the statutory standards and that gives you the highest level of protection/powers possible.
Contact us today to get started.