Nevada has become one of the top jurisdictions in the nation for asset protection planning. If you have significant wealth, potential professional liability, or simply want to shield your assets from potential creditors, Nevada's self-settled spendthrift trust is a game-changer. Let's explore why Nevada is a premier choice and how these trusts work.
What Makes Nevada Special?
For decades, only a handful of states allowed people to create trusts for themselves that protected assets from creditors. Nevada changed the game in 1997 when it adopted a statute permitting self-settled spendthrift trusts. Under Nevada Revised Statutes Chapter 166, you can create a trust for your own benefit, fund it with your own assets, and shield those assets from potential creditors.
In most states, if you try to put your own money in a trust to avoid creditors, the creditor can still reach it. Nevada says no—if you follow the rules of formality, the assets are protected and shielded from your personal liability.
The 2-Year Lookback
Nevada's statute includes a lookback period. Assets transferred to a self-settled spendthrift trust are protected from creditors, except for those with claims arising before the transfer and discovered within 2 years. After 2 years, the creditor cannot attach the trust assets even if the claim existed before.
This 2-year window is far shorter than the Bankruptcy Code's 4-year lookback or the fraudulent transfer statutes of other states. Nevada's approach is creditor protection focused and provides meaningful protection quicker than other states that recognize asset protection trusts.
How Asset Protection Trusts Work
You create a trust and name yourself as a beneficiary. A Nevada trustee holds the assets. The trustee has discretion to distribute income and principal to you (and other beneficiaries if applicable). If a creditor sues, the trustee can refuse to distribute funds to you, leaving creditors with nothing to reach.
Importantly, you don't have to give up all control. You can retain investment control and management of the assets, you can be the trust protector with the ability to remove and replace trustees, you can name yourself as a co-trustee (excluding the ability to authorize distributions from the trust), and you can structure the trust to benefit you and your family.
Who Benefits Most?
Doctors, contractors, business owners, and other professionals face creditor risk daily. If you are sued and a judgment is entered, a creditor can attach your personal assets. Asset protection trusts are ideal if you're in a liability-heavy profession or have significant wealth that you would like to protect from unforeseen accidents or circumstances.
Requirements and Restrictions
To qualify for protection under NRS 166, the trust must be irrevocable (once created, you cannot change it). The trustee must be a Nevada bank or licensed trust company. And you must have a legitimate non-tax purpose for the trust—asset protection alone doesn't qualify, but combined with estate planning, family wealth management, or business succession, the trust is valid.
Also, the trust must be created and funded before a creditor's claim arises. You cannot create a trust to escape a lawsuit already filed; that's fraudulent conveyance.
Nevada vs. Other States
When it comes to estate planning, Nevada stands alone paving the way for other states. Nevada’s statutory and case law have set Nevada apart from other states with beneficial trust laws, allowing Nevada to emerge with the most iron-clad generational wealth protection available in the U.S. Several benefits why Nevada should be a contender when considering generational estate planning and wealth preservation include:
No Exception Creditors. Many states carve out special creditors — like ex-spouses, child support claimants, or tort victims — who can pierce a DAPT regardless. Nevada has very few such exceptions, giving the trust stronger protection across a wider range of creditor types.
Short Statute of Limitations. Nevada has one of the shortest "fraudulent transfer" look-back periods — just 2 years from the date of transfer (or 6 months from when a creditor discovered the transfer, whichever is later). Many other states have 4-year windows, so assets in a Nevada DAPT become protected much faster.
Generational Planning. Nevada trusts can last up to 365 years to provide long term wealth preservation and planning for numerous generations.
Gift, Estate, and Generation-Skipping Transfer Tax Benefits. Nevada trusts allow generation-skipping-transfer tax exemption to help limit estate tax liabilities, sometimes eliminating them. With a Nevada Dynasty Trust, your assets are subject to federal gift taxation (or application of the federal estate tax lifetime exemption) initially upon transfer and then not again at the estate level allowing many generations to enjoy gifted assets. Further, Nevada does not currently impose state gift or estate taxes.
Income Tax Benefits. Nevada is one of only a few states with no income tax on trusts. Accordingly, a trust domiciled and administered entirely in Nevada may avoid state income taxes altogether.
Flexible Laws. With respect to an irrevocable trust, Nevada’s flexible trust law allows for heirs to be able to modify the administrative terms of a Nevada trust as needed to allow for unforeseen changes in the law, including but not limited to, changes in taxation. While the term “irrevocable trust” sounds rigid and unchangeable, the process of decanting provided for under Nevada law is a popular way to modify the terms of the trust and increase flexibility.
Generational Asset Protection. Establishing a trust in Nevada can reduce the risk of your heir’s creditors gaining access to assets and wealth. Nevada has strong case law precedent in favor of upholding trusts for creditor protection, allowing for added wealth preservation to ensure your wealth is retained for the benefit of your heirs.
Conclusion
If you have meaningful assets and face creditor risk, a Nevada self-settled spendthrift trust should be part of your estate plan. Combined with a revocable living trust for day-to-day management and a Pour-Over Will, asset protection trusts provide comprehensive planning. Nevada law is cutting-edge, and it is available to you.
About the Author
Ronnie T. Goodwin leads the estate planning department with Leavitt Law Firm in Las Vegas, Nevada. To schedule a consultation or find out more information, visit www.leavittlawfirm.com.