Nevada Asset Protection Trust

What is a Nevada Asset Protection Trust (NAPT)?

A Nevada Asset Protection Trust (NAPT), legally termed a Self-Settled Spendthrift Trust, is an irrevocable trust designed to protect your assets from predators and creditors during your lifetime.

Traditionally, an irrevocable trust is established for the benefit of third parties, and not the person establishing the trust. An Asset Protection Trust is unique because you, as the grantor, set up the irrevocable trust for your own benefit. It is a self-settled trust with you as a permissible beneficiary. Once you transfer assets to the trust, a statute of limitations period must expire before those assets may be protected from your creditors. In Nevada, that limitation period is two years - one of the shortest in the nation.

An Asset Protection Trust is an irrevocable trust. If the trust were revocable, you as the grantor could easily access the money, and so could your potential creditors. The asset protection comes from the fact that the trust is irrevocable, and to access the trust assets, you must request a distribution from an independent trustee. Although the trust is irrevocable, you, as the grantor, may be given certain powers to modify the enjoyment of the trust assets.

Asset Protection Theory

The goal of asset protection is to put a barrier between your assets and any potential creditor(s). You are creating an uphill climb for a potential creditor where they must consider the cost-benefit of pursuing a lawsuit or agreeing to a settlement. Having an Asset Protection Trust is not going to stop someone from suing you, but it may swing the settlement needle in your favor.

An Asset Protection Trust is a preemptive strategy and should be set up when there are no known, threatening, or pending creditors. If you know of a potential lawsuit, have been threatened, or have pending creditors the strategy is not recommended. The trust should be treated as a rainy-day fund and therefore, distributions from the trust should be occasional and limited.

Roles of the Trustees in a Nevada Asset Protection Trust

A typical Nevada Asset Protection Trust has three trustees: An investment trustee, a distribution trustee, and an administrative trustee. Per Nevada’s statute, at least one of the trustees must be a resident of Nevada, or a trust company or a bank that maintains an office in Nevada. Each trustee has distinct roles and responsibilities in the trust document:

Investment Trustee – Determines what the trust buys, sells, and holds.

Distribution Trustee – Determines when an asset leaves the trust and is distributed to a beneficiary.

Administrative Trustee – Maintains the books and records of the trust and signs tax returns.

Nevada law allows you as the grantor to serve as your own investment trustee and make all investment decisions for the trust, however, you cannot serve as the distribution trustee. A corporate trustee or individual in Nevada will typically serve as the distribution and administrative trustee.

Which Assets Should go in an Asset Protection Trust?

The most ideal assets to place into an Asset Protection Trust are the assets most desirable to a creditor: cash, bank accounts, and brokerage accounts. A client should be cautious in the amount that is placed into an Asset Protection Trust and should leave enough assets outside of the Asset Protection Trust so that the client remains solvent.

Who Would Benefit from an Asset Protection Trust?

An Asset Protection Trust is ideal for any person who works in a profession that increases their likelihood of being sued. In our experience, physicians, business owners, real estate investors and developers, dentists, athletes, etc., are the most common professions to have an Asset Protection Trust.

A Nevada Asset Protection Trust makes the most sense for Nevada residents with at least $500k in assets or non-Nevada residents with $1M or more in assets. You do not have to live in Nevada to take advantage of a Nevada Asset Protection Trust. Per Nevada’s statute, at least one co-trustee must be a Nevada resident or financial institution. IconTrust can fill that requirement for you.

How is an Asset Protection Trust Taxed?

A traditional Nevada Asset Protection Trust is considered a disregarded entity for income tax purposes. Most NAPTs are considered grantor trusts, which means the grantor is treated as the owner of the trust property for income tax purposes. You as the grantor of the trust can use your own social security number and are not required to obtain a separate tax ID number for the trust. Many attorneys recommend obtaining an EIN for the trust and filing a separate tax return anyway to show that you and the trust are distinct and separate entities. The separate tax return would be an “information only” return.

Advantages of Setting up an Asset Protection Trust in Nevada?

Nevada passed its law for Self-Settled Spendthrift Trusts in 1999 and has consistently passed legislation since to ensure it is the top trust jurisdiction for asset protection. Only 19 states have a Domestic Asset Protection Trust statute. To see a state-by-state rankings chart, please visit

Some of the key benefits of Nevada’s laws that make it the most advantageous jurisdiction for asset protection trusts are among the following:

  • Two-year limitation period – This is the time that must elapse between the transfer of assets to the trust and the time when those assets should be protected from creditors. Nevada’s two-year statute of limitations on transfers to the NAPT is one of the shortest in the nation.
  • Nevada has no exception creditors – Some state statutes allow for exception creditors that can pierce the trust when a regular creditor cannot. The most common exception creditors include a divorcing spouse for child support and alimony and government claims. Certain Domestic Asset Protection Trust jurisdictions also carve out tort creditors (for example, medical malpractice) as exception creditors. Nevada does not recognize exception creditors.
  • The grantor of the trust may also act as the investment trustee of the trust. This allows the grantor to manage the investments inside the trust.
  • Charging order protection for partnerships and LLCs – A creditor of a member of an LLC or limited partner of a partnership is statutorily forbidden from attaching assets inside the partnership or LLC. The most the creditor can obtain is a charging order (similar to a lien), which entitles the creditor only to distributions made from the partnership or LLC to the debtor member.

Choose ICON for Asset Protection

We live in a highly litigious society, and unfortunately, many have not adequately protected their assets from potential predators and creditors. A Nevada Asset Protection Trust can give you peace of mind knowing if you were ever sued, you have set up the correct vehicle to protect yourself and your family for the future.

If you have any questions, please email or call 702-998-3700

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