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Nevada Domestic Asset Protection Trusts explained

On Behalf of | Feb 25, 2022 | Asset Protection |

Most people in Nevada and elsewhere want to preserve as many of their assets as possible. This is especially true when seeking to protect one’s assets from creditors. Like several other states, Nevada allows for the creation of Domestic Asset Protection Trusts (DAPTs), which are designed to safeguard a settlor’s (trust creator’s) assets. Nevada’s form of this self-settled spendthrift trust is the NAPT. Here are some things people should understand about NAPTs. 

The Nevada Legislature allowed for the creation of NAPTs in 1999 by amending NRS Chapter 166. Although at least 20 other states offer these types of trusts, the following lists five areas specific to the Nevada Domestic Asset Protection Trust (NAPT): 

  • The trust has to be irrevocable — This means that the settlor cannot make changes to the trust once created.  
  • Income or principal in the trust cannot be distributed to settlor — The creator of the trust cannot mandate that he or she receive distributed income or principal from the NAPT. The settlor may still receive distributions from the trust at the discretion of a third-party trustee. However, the settlor has many other powers related to the appointment of trustees, such as assigning executive and management powers, preventing trust distributions and more. 
  • Protection against creditors — DAPTs and NAPTs provide protection of assets against creditors. However, creditors must submit a challenge to the transfer of assets within two years following the transfer or within six months of having discovered the transfer. 
  • Exception creditors — The NAPT does not allow for exception creditors to make claims on assets within the trust for public policy reasons, once the statute of limitations has expired. Nevada is one of the few states that does not recognize statutory exception creditors. 
  • Assets outside the state — Since not every state recognized DAPTs, or NAPTs specifically, a settlor will want to avoid placing property and assets, especially real property, that is located in another state within the trust. 

Nevada’s NAPT offers a range of benefits for settlors to protect their assets. Like any other form of estate planning, creating a NAPT is an involved process. As such, those interested in protecting their assets using an NAPT will want to work with an experienced estate planning attorney for assistance.