Nevada Asset Protection Trust for Texans
Nevada allows a self-settled spendthrift trust, and its statute is known for a short waiting period, generally two years, after which a future creditor cannot reach assets properly transferred to the trust. To use it, a Texan generally needs a Nevada trustee, some assets held in Nevada, a Nevada governing law clause and a clean solvency record. Exceptions exist for certain claims, and a Texas court may still question whether Nevada law should apply.
How the Nevada statute works
Nevada's statute allows a person to create an irrevocable spendthrift trust for their own benefit and generally bars creditors from reaching the trust assets after a limited period. A creditor must typically bring a claim within about two years after the transfer, or within a short period after discovering it for creditors that existed at the transfer. After that, the trust is generally protected against a future creditor, subject to exceptions.
Requirements to qualify
- An irrevocable trust with Nevada governing law.
- A Nevada resident trustee or a Nevada trust company.
- Some trust assets held in Nevada, such as a Nevada bank or brokerage account.
- Distributions at the independent trustee's discretion.
- A signed declaration that you are solvent and not transferring to defraud anyone.
Strengths
Nevada's short waiting period is attractive for people who want protection to mature quickly. The state has a well-developed trust industry with experienced trustees. Nevada also has no state income tax, though that does not affect a Texan's tax position, since Texas has none either.
Limits and exceptions
- Exception creditors. The statute carves out claims such as child support, and the list can change.
- Existing claims. A creditor you already owe can challenge a transfer, and a transfer made to defraud is not protected.
- Bankruptcy. Federal law lets a trustee reach transfers to a self-settled trust within ten years if made with actual intent to hinder, delay or defraud.
- Divorce. Texas community property and family court powers may reach the trust assets in a divorce.
The Texas court question
A creditor of a Texas resident may sue in Texas and argue Texas law applies. A Texas court could decide it will not honor the Nevada statute. The risk is reduced by real Nevada connections and by good timing. It is not eliminated. See why Texas does not protect self-settled trusts and compare with South Dakota and Delaware.
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Book Free ConsultationFrequently asked questions
How long before a Nevada trust is protected?
The statute generally sets about two years from the transfer, with a shorter or different period for some existing creditors. Confirm the current text with counsel.
Do I need to move to Nevada?
No. You need a Nevada trustee, Nevada governing law and some assets in the state.
Can I be trustee of my own Nevada trust?
No. An independent Nevada trustee is required for the statute to apply.
Is a Nevada trust a guarantee?
No. Fraudulent transfer, bankruptcy rules and Texas court choice of law can all affect the result.