Historically, Nevada has been seen as a favorable jurisdiction for establishing and maintaining trusts. In fact, Nevada was one of the first states in the country to permit self-settled spendthrift trusts, or domestic asset protection trusts (DAPTs), as they are sometimes referred to. These progressive laws combined with the fact that there is no income tax and generous execution exemptions, Nevada leads the way in asset protection trusts.
Legislation Against Perpetuities
It was in 2005 that Nevada legislators passed a law all but revoking the rule against perpetuities. The rule limited the duration of property interest, including those funded within a trust. It was meant to prevent individuals from controlling how their property is used after they pass away using different mechanisms. In Nevada, the rule against perpetuities is 365 years, meaning the rule does not apply to the vast majority of property left within a trust.
Virtual Representation
There are times when a trust may provide for uncertain beneficiaries, such as an unborn child. The virtual representation statute in Nevada allows a court to recognize the rights of these individuals without first appointing a guardian ad litem or attorney. Instead, other beneficiaries who have similar interests and no substantial conflict of interest can represent uncertain beneficiaries. While Nevada has recognized virtual representation in probate for many years, it was not until a new law was added in 2009 that allowed for virtual representation in trust administration.
Trust Protectors
Trust protectors, or trust consultants as they are sometimes referred to, are parties appointed by the settlor, or creator of the trust, to oversee the trustee’s actions and ensure they are aligned with the provisions of the trust. Trust protectors often have the authority to remove trustees and replace them, but the amount of authority they have is strictly governed by the trust agreement. Trust protectors may also have limited powers to amend the terms of a trust. Although the law does recognize the position of trust protectors, it leaves the authority given to them entirely to the settlor.
The Decanting Statute
Currently, only eight states in the country have decanting provisions and Nevada is one of them. Under this law, trustees can appoint property from one trust to another trust. The new trust into which property is placed cannot include beneficiaries who are not beneficiaries of the original trust and their rights and interests in the property cannot be reduced.
Self-Settled Spendthrift Trusts
Over a decade ago, Nevada was one of the first states to pass laws that allow for the formation of self-settled spendthrift trusts. The law allows individuals to protect property from their personal creditors while still deriving benefits from the property by transferring it into a trust. To do this, at least one trustee of the trust must be a resident of Nevada, a Nevada trust company, or a Nevada bank.
Settlors are not allowed to make distributions back to themselves. There are many laws regarding self-settled spendthrift trusts and so, it is important to always work with a Nevada estate planning lawyer when establishing one. Some of these laws are as follows:
- Nevada has a two-year vesting period, which is one of the shortest of any jurisdiction.
- A settlor can serve as trustees for a self-settled spendthrift trust and exercise other powers under the trust.
- Creditors can only bring an action against the trust if they can prove it was a fraudulent transfer or otherwise hurtful towards the creditor.
No Taxes
Nevada does not impose state income, estate, or inheritance taxes. While this is not a new development, it is one of the most appealing components of establishing a trust in the state. Nevada is in the minority of jurisdictions that do not levy these types of taxes. Without these taxes, there is more left in the trust for beneficiaries.
Our Nevada Trust Administration Lawyer Can Draft Your Trust
In Nevada, the overall framework of trust law has garnered a great deal of attention in the country’s estate planning community. Nevada is often touted as one of the best places to draft trusts to protect assets within an estate and to enjoy superior protection and flexibility.
At Boyer Law Group, our Nevada trust administration attorney can explain the laws as they apply to your situation and draft your trust to ensure that it will be enforced by the courts and provide the protection for you and your family that you intended. Call us today at 702-255-2000 or contact us online to schedule a consultation and to learn more about how we can help.