With the flurry of ridiculous lawsuits today, many people are looking for ways to protect their hard-earned assets.  The good news is that there are many viable options available under Nevada law to secure what you have for yourself and your loved ones.  Anyone who owns a home, owns rentals, owns a business, drives a car or has children who drive cars, should seriously consider taking steps to protect himself or herself from the unknown and unexpected.  It’s really quite easy.

When Do You Win?  In my opinion, the only truly “winners” at asset protection are those who never get sued.  Even if you prevail on the merits of your case, you have still lost a great deal of time, energy, expense and sleep.  One only really “wins” if the complaint is never filed.  How can you help ensure that you don’t get sued?  Make sure that you have no assets that a creditor could attach.

I remember when a client came to see me to put the final touches on his asset protection plan.  He had recently moved to Nevada from another state, where on two occasions, he confided to me, he actually did commit some actions for which he could have been sued.  He wasn’t.  Why?  The plaintiffs’ attorneys had done asset searches and discovered that he had no large insurance policy and no assets to attach.  Justice was not served.  The aggrieved parties never got their day in court.  This individual managed to beat the system.

What do I think about that?  If someone who deserved to be sued wasn’t, why can’t the “good guys” who are simply trying to protect themselves from frivolous claims do the same?  Why shouldn’t everyone with foresight take steps to protect his or her assets from some truly unanticipated future claim?

Is Asset Protection Achievable?  Absolutely.  Fortunately, Nevada has very favorable laws to protect those that have taken steps ahead of time, namely before a claim arises.  An excellent yet underused method is to set up a Nevada Asset Protection Trust (“NAPT”).

Do the Nevada Asset Protection Trusts (NAPTs) Really Work?  Absolutely.  We are most fortunate to live in one of only a handful of states that permit you to create a trust for your benefit that you control and which the “bad guys” have no access.  (“Bad guys” are defined as anyone who is trying to separate you from your assets.)

So what’s the catch?  It takes two years before the asset protection becomes effective.  That’s two years from the time the assets are transferred to the trust, not two years from the time the trust was created (NRS 166.170).

Most people underestimate the power of this.  It means that you can create a trust today, put your valuable assets into the trust (and leave your less valuable assets out), and in two short years your assets are 100% protected.

The requirements for setting up a NAPT are really very simple.  It must be an irrevocable trust, in writing.  The trustee cannot be required to make any distribution to a beneficiary.  (All distributions are purely discretionary with the trustee.)  Otherwise, the bad guys could attach or force a distribution.  All or part of the assets must be held in Nevada.  If you are the trustee and the beneficiary (which is the beauty of the Nevada law), you or another trustee must be a Nevada resident.

We often create these trusts for out-of-staters wanting to take advantage of our very favorable asset protection laws.  We meet the requirements of having Nevada assets by creating a Nevada family limited partnership (FLP) or Nevada limited-liability company (LLC) which holds the client’s assets, even if the physical assets are located in another state.  All they then need is a friend, relative, bank or other trusted person living in Nevada and, presto, they can use our laws to protect their assets regardless of where they live or where their assets are located!

Is this Protection Stronger than FLPs and LLCs?  Yes.  As with FLPs and LLCs, you are free to buy, sell, trade and deal with your assets as you choose.  The advantage of a NAPT over FLPs and LLCs is that you are not subject to charging orders (where a creditor essentially liens your interest in a FLP or LLC and prevents you from taking money or assets out).  In a NAPT, you are free to make distributions as often as you like without any interference or attachment by creditors or claimants.

Furthermore, a NAPT can be created as a grantor trust (making it tax-neutral) and as a qualified subchapter S trust, meaning that it can hold S corporation stock (or LLC interests taxed as S corporations).  Holding S stock in a NAPT can protect your S corporation from being attached and its assets grabbed by the bad guys.  It can also own your home which still qualifies for the IRS $250,000 per person capital gain exclusion for primary residences.

In summary, Nevada law offers many options for protecting your assets and your future from the unknown and unexpected.  The only requirement is that you take steps now to legally and safely protect yourself.  Generally, doing something, even it not 100% perfect, is far better than doing nothing.