How the Self-Settled Spendthrift Trust Works in Nevada

Do you want to protect your assets by creating a self settled spendthrift trust? Wood Law Group can offer you the counsel you need. Contact us today.

What Is a Self-Settled Spendthrift Trust?

If you’ve acquired a significant amount of assets and wish to protect them from the actions of future creditors or other future liabilities, consider creating a self-settled spendthrift trust.

A self-settled spendthrift trust allows you to permanently transfer your assets, such as real estate or valuable items, to a trust for your benefit. In regular trusts, the settlor, that is, the trust maker, usually creates the trust for the benefit of others, such as their children or loved ones. But in a self-settled trust, the settlor is the primary/only beneficiary hence the title.

This trust allows you to retain significant control and use of your assets. It also prohibits the transfer of the trust property by you or any other beneficiary. Because you have transferred legal ownership to the trust, the assets are safe from any third-party action to enforce a debt or any other liability which you may incur personally.

Creating a self-settled spendthrift trust could be complex because there are many legal requirements a settlor must comply with for the trust to be valid. This guide explains some of these requirements and provides more details on how this trust works to help you decide if it is right for you.

Who Can Benefit From a Self-Settled Spendthrift Trust?

Self-settled spendthrift trusts are also known as domestic asset protection trusts. They are generally suitable for anyone who wishes to protect their properties from third-party actions and losses while retaining significant control over the property. You can also consider creating this type of trust if any of the following applies to you:

  • Your social status makes you a target for lawsuits.
  • You work in an industry where personal injury and liability issues are common.
  • You frequently get into debt.
  • You have a history of making poor financial decisions.


Elements of a Valid Self-Settled Spendthrift Trust Under Nevada Law


Self-settled spendthrift trusts in Nevada must meet several statutory requirements, including the following:

The Trust Must Be in Writing

Every self-settled spendthrift trust created in Nevada must be in written form. Otherwise, it would be invalid.

The Settlor Must Have the Legal and Mental Capacity To Create the Trust

The settlor of a self-settled spendthrift trust must be legally and mentally competent to create a valid trust. Generally, a person is deemed competent if they possess the following qualities:

  • The person is an adult.
  • They understand the implication of creating the trust.
  • They decided to make the trust of their own free will without any element of fraud or coercion from third parties.

The Trust Must Be Irrevocable

Irrevocable trusts are trusts that are meant to be permanent. The settlor typically cannot end such trusts after they have been created. Most of the time, a settlor can decide whether their trust should be irrevocable or revocable, but that liberty does not exist with self-settled spendthrift trusts.

Because the settlor is a beneficiary of the trust, the law demands that a self-settled spendthrift trust be irrevocable; otherwise, it would be invalid.

The Trust Must Contain a Spendthrift Provision

Every spendthrift trust in Nevada must contain a clause or clauses whose purpose is to restrain the trust beneficiary from transferring or selling trust assets voluntarily or involuntarily.

The legal implication of such clauses is that any payment from the trust to which a beneficiary is entitled must be made directly to the beneficiary or used for their direct benefit. Such funds cannot be diverted to pay off the beneficiaries’ creditors or to offset their liability under any judgment or court order.

If the beneficiary unlawfully makes such a transfer or diversion, the law allows the trustee to challenge and defeat such actions in court.

The Settlor Cannot Be the Sole Trustee

A settlor cannot be the sole trustee of a self-settled spendthrift trust. This is because they are already a beneficiary of the trust. Allowing them to occupy all the critical roles in the trust makes abuse and non-compliance with the law more likely. With this requirement, the law sets up a system of checks and balances to dilute the settlor’s powers.

As such, the settlor must appoint at least one other trustee who could be

  • An individual resident in the state
  • A registered trust company that operates in the state
  • A licensed bank that operates in the state and possesses/exercises trust powers.

The Trust Must Not Frustrate Existing Creditor Claims

Self-settled spendthrift trusts can only protect your assets against future creditors. If you have existing creditors, you must refrain from using this trust to avoid paying them by keeping your assets from them. Any spendthrift trust created to obstruct, delay, or deceive known creditors may be invalidated. In such cases, the law gives each creditor two years to oppose any property transfer into such a trust. The trust may remain valid if there are no claims from existing creditors within that time.

The Beneficiaries Must Be Named in the Trust Instrument

The names of the trust beneficiaries must be clearly stated in the trust instrument. Anyone whose name is not contained there cannot benefit from the trust directly.

Any self-settled spendthrift trust that fails to comply with these or any other statutory requirements is invalid and would amount to an exercise in futility. If you want to create one, you may need to seek professional help from an estate planning lawyer who understands the legal requirements. They can ensure that your trust instrument meets the required standards.

Your Powers and Entitlements as Settlor of a Self-Settled Spendthrift Trust

As the creator of a spendthrift trust, you can exercise some control over the trust and how it is administered. But you must ensure that the trust instrument captures the powers you desire to exercise. Any act or step you take outside the powers conferred by the trust instrument would be invalid.

Here are some of the ways you can control your trust:

  • You can prevent a distribution from the trust to any beneficiary or for any purpose.

  • You have the power to appoint trustees.

  • You are entitled to receive a percentage of the value of the trust assets each year.

  • You have the right to use any real property assigned to the trust.

  • You can receive a regular income from the trust subject to the trustee’s discretion.

There’s so much you can do with a self-settled spendthrift trust. All you need to do is ensure that the language of the trust is broad enough to cover the scope of your intended actions as long as they are legal.

This would require some serious legal drafting skills, which you might not possess. Consider getting a competent Asset Protection Attorney to draft the trust instrument and ensure that your powers are not unduly restricted.

Do You Have Further Questions About Self-Settled Spendthrift Trusts in Nevada? The Lawyers at the Wood Law Group Can Help You Find Answers

If you have further questions about self-settled spendthrift trusts in Nevada or you’d like to create one feel free to reach out to us at Wood Law Group.

We are a firm of skilled estate planning and probate attorneys. We can answer your questions and help you create a suitable trust that meets the statutory standards.

A spendthrift trust may only be appropriate in some cases. If we assess your circumstances and find that an alternative Nevada Asset Protection Trust would serve your needs better, you can trust us to bring the issue to your attention and prepare the necessary documents for your protection.

Contact us immediately to get started.