If you own significant assets and are looking for a way to shield them from creditors, a domestic asset protection trust (DAPT) could be the solution. Nevada’s version of this trust is one of the most debtor-friendly in the country.
Also known as a self-settled spendthrift trust, a DAPT allows you, as the settlor, to be the beneficiary of the assets placed into the trust while significantly limiting the ability of creditors to claim those assets. Nevada’s version of the DAPT, called the Nevada Asset Protection Trust or NAPT, is especially useful for two reasons:
- While every state that allows DAPTs imposes a statute of limitations before creditors cannot go after the assets inside the trust, Nevada’s is one of the shortest. The law gives creditors two years from the date an asset was transferred into the NAPT or six months from the date the creditor learned about the NAPT or reasonably should have found out about it, whichever is later. Also, in Nevada, you can start the six-month discovery period by making a public record about it. If you issue such a record the day you create the NAPT and place your assets into it, the tolling period is essentially eliminated. Other states give creditors significantly more time to pursue items placed in a NAPT.
- Of the 17 states with DAPTs, Nevada is one of just two without statutory exceptions for certain creditors. Other states make exceptions for family law-related debts, such as alimony and child support, and lawsuit judgments issued before the creation of the trust. Nevada has no such exceptions.
The DAPT is an irrevocable trust, which means you cannot change or cancel it once you establish it. But state law gives you a lot of flexibility in how you structure it. For example, you can be the settlor and investment trustee, letting you keep control over investment decisions regarding trust assets as long as you cannot make distributions to yourself without another trustee’s approval. You also have the power to replace and remove trustees whenever you want.
Setting up a NAPT requires extensive knowledge of the law and attention to detail. An asset protection attorney can help you use this tool to its greatest advantage.
