1. Written by Nevada attorney Layne T. Rushforth. Although this memo provides information that may apply throughout the United States, the primary focus is on Nevada law. This memo is intended to provide general information and is not given as legal advice for any particular person’s situation.
  2. In this memo, “property” and “assets” are used interchangeably.
  3. If you have current problems with creditors, call an attorney who specializes in bankruptcy and debtor protection to discuss your situation.
  4. For questions relating to Medicaid qualification and other “elder law” issues, please consult an elder law attorney. You can find an elder law attorney on the web pages of the American Academy of Elder Law Attorneys. Point your web browser to http://www.naela.org/ and click on the button labeled “Locate an Elder Law Attorney”
  5. A “spendthrift trust” is a trust whose assets cannot be reached by the creditors of a beneficiary under the laws that apply to that trust. A “self-settled spendthrift trust” is a spendthrift trust for the benefit of the trust’s settlor (creator).
  6. In this memo, “property” and “assets” are used interchangeably.
  7. ERISA-based plans have been ruled to be exempt from creditors’ claims and excluded from a bankruptcy estate. [See Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992).] The exemption does not usually apply to IRA accounts, but there can be some protection if the IRA is a rollover from an ERISA-based plan. “ERISA” is the Employee Retirement Income Security Act of 1974.
  8. NRS 21.095.
  9. NRS Chapter 115.
  10. NRS 21.090. “NRS” refers to the “Nevada Revised Statutes”.
  11. The unlimited exemption of annuities and life insurance became effective October 1, 2011, but there are exceptions for premiums payments that are determined to be fraudulent transfers.
  12. 1NRS 21.090(1)(q).
  13. In the discussion of limited-liability companies, below, a “series LLC” is mentioned. This is a single entity that can hold different assets without exposing the liabilities attributable to one asset to any other.
  14. Nevada adopted its law on LLC’s in 1991 [NRS Chapter 86].
  15. Nevada adopted its law on LLC’s in 1991 [NRS Chapter 86].
  16. NRS 78.746.
  17. IRS Reg. 301.7701-3, which is part of what is commonly referred to as the “check-the-box regulations”.
  18. Assets in a self-settled spendthrift trust can be accessed in a bankruptcy except in limited circumstances where the assets have been in the trust for over 10 years. See subsection 548(e) of the Bankruptcy Code.
  19. Fraudulent Transfers are discussed in section 5 of this memo.
  20. Fraudulent Transfers are discussed in section 5 of this memo.
  21. NRS 166.040(2)(f).
  22. For a general discussion of a SPAT, see McCullough, Lee S. III, “Use ‘Powers’ to Build a Better Asset Protection Trust”, Estate Planning Journal, Jan 2011. For a more detailed discussion, see Bove, Alexander Jr., “Using the Power of Appointment to Protect Assets – More Power Than You Ever Imagined”, ACTEC Law Journal (Fall 2010), pp. 333 et seq.
  23. Mr. Shaftel’s chart can be downloaded from https://www.actec.org/assets/1/6/Shaftel-Comparison-of-the-Domestic-Asset-Protection-Trust-Statutes.pdf.
  24. See NING.
  25. See subsection 4.3 on page 10 for additional discussion regarding a special power of appointment trust.
  26. See DiMaria v. Bank of California, 237 Cal.App.2d 254 (1965).
  27. NRS 163.417.
  28. In parts of this memo, the term “distribution trustee” refers to the person or persons who must approve distributions to the settlor. In some cases, this may be a trustee, a committee, a power of appointment holder, or some other designated person
  29. Nevada’s constitution only permits perpetual trusts for eleemosynary (i.e., philanthropic or charitable) purposes. [Nev. Const., Art. 15, § 4.] Nevada’s Uniform Statutory Rule against Perpetuities permits 365-year trusts. See NRS 111.103 et seq.
  30. For a more detailed discussion of this choice, see Asset Protection Trusts and Public Records.
  31. The potential challenges against domestic asset protection trusts are well outlined in an article entitled “Domestic Asset Protection Trusts: The Risks and Roadblocks Which May Hinder Their Effectiveness” by attorney Michael A. Passananti.
  32. NRS 166.170.
  33. NRS 166.040(3).
  34. NRS 166.170.
  35. Having SSST assets pour into a revocable trust may expose SSST assets to the creditors of the revocable trust, and so that approach is not recommended.
  36. See 6.5(c)
  37. NRS 123.125.
  38. There might be exceptions where the ruling is made by a court without proper jurisdiction.
  39. NRS 166.170.
  40. See U.S.C. 1701j-3 from the Garn St. Germain Depository Institutions Act of 1982. See also 12 C.F.R. §591.5(b)(1)(vi).
  41. Because assets received as gifts are separate property under NRS 123.130(2), it is probably better to do actual asset transfers as a gift rather than a mere agreement so that the statute of limitations under the Fraudulent Transfer Act can limit the time during which a transfer can be challenged as a fraudulent transfer.
  42. FTC v. Affordable Media, No. 98-16378, 9th Circuit. It is referred to as the “Anderson case” because the case involved a family named Anderson.