Asset Protection typically refers to the process of legally protecting your property/estate from potential creditors, including lawsuits and divorce actions.
We typically meet with prospective clients to learn about their specific situation – their goals, their family, and their estate – and then apply our legal knowledge to identify the best ways to legally protect those holdings from a variety of creditors.
Depending on the client’s goals, their potential for future exposure, the nature/type of assets, as well as their tax situation, we then outline the asset protection options that are best for their unique situation.
Our team also assists with implementation of the recommended strategy, to ensure it’s being used and maintained in the proper manner. Our primary goal is to help design a comprehensive plan that’s legal, ethical, and effective.
Read more about our unique approach to the Planning Process here.
Asset Protection FAQ’s
Q: How can you legally protect your estate / assets from lawsuits or other creditors?
This is accomplished through the process of asset protection planning and structuring. Simply put, Asset Protection planning is the process of taking assets that could be subject to creditors’ claims, (sometimes referred to as “non-exempt” assets) and re-characterizing them as “exempt” assets (those that are likely to be out of the reach of creditors).
Q: What’s the best state for asset protection planning?
Nevada is frequently considered as one of the best, if not the best state for asset protection. This in large part to Nevada’s favorable trust statutes, asset protection laws, and low-tax environment.
Forbes: Comparing Domestic Asset Protection Trust States
Here are some of the reasons why you should consider Nevada if you’re looking to create an asset protection trust:
- Self-Settled Spendthrift Trusts: Nevada was one of the pioneers in allowing Self-Settled Spendthrift Trusts (also called DAPTs), which let people create trusts where they are both the creator and a beneficiary, while still protecting the assets from creditors.
- Control Over Investments and Distributions: Although the person who creates the trust (the grantor) can’t act as the Distribution Trustee (the trustee whose role is limited to authorizing a distribution of assets to the beneficiary), Nevada law gives them a lot of control by letting them manage trust investments and have veto power over distribution decisions.
- Tax Benefits: Nevada is tax-friendly, with no state income, estate, or inheritance taxes, which is a big perk for trusts and their beneficiaries.
- No Exception Creditors: One of the unique benefits of Nevada is that it doesn’t recognize “exception creditors.” This means that if assets are placed in a trust, it won’t honor claims from a divorcing spouse, or for alimony and child support, even if those assets were transferred into the trust. This sets Nevada apart from other states, which might still allow such claims in similar situations.
- Short Statute of Limitations: Nevada offers a major advantage with one of the shortest time frames for creditors to challenge asset transfers into a trust – just two years from the date of transfer, or six months after a creditor discovers the transfer. Many other states give creditors a much longer window.
- Virtual Representation: Nevada allows “virtual representation,” meaning that living beneficiaries with similar interests can represent unborn or unknown beneficiaries. This makes managing a trust much easier and more streamlined.
- Decanting Provisions: Nevada’s decanting rules allow for the modification of irrevocable trusts under certain conditions, providing more flexibility when adjustments are needed.
Kiplinger: Murdochs’ Dispute Highlights Benefits of Trusts in Nevada | Kiplinger
Q: What’s involved in asset protection planning – how does the process work?
Top-rated Nevada asset protection attorney, Tiffany Ballenger Floyd, has been helping clients with the structure + design of comprehensive asset protection, business, and estate plans for over 15 years.
She works closely with clients to create innovative + effective structures for various asset types (real estate, private investments, business interests, investment accounts, etc.), with the ultimate goal of minimizing their exposure to potential creditors and other threats, and to provide peace of mind.
We’ll first help our clients maximize their state + federal exempt assets, and analyze their insurance coverage.
Then, our planning team often uses a multi-layered approach that includes various types of entities like irrevocable trusts, Nevada Spendthrift Trusts (also known as “Nevada Asset Protection Trusts (“NAPTs”), “Domestic Asset Protection Trusts” (“DAPTs”), or “Self-Settled Spendthrift Trusts”), other types of trusts, and/or business entities, like Nevada LLCs, to ensure the best protection possible.
When a creditor sues a person whose estate was properly structured + maintained through a comprehensive asset protection plan, they may find there are very few assets they could theoretically reach, even if they were to win the suit.
Asset protection planning also helps to quash frivolous or nuisance lawsuits, and helps to minimize you being seen as a lawsuit target altogether.
Finally, asset protection planning seeks to limit out-of-pocket attorney fees you’d have to fork over in defending a lawsuit (or even the threat of a suit).
Q: When should I start to think about asset protection, and what’s the deal with fraudulent transfers?
If protection is a concern, assuming you don’t have a reliable crystal ball, the time is now. We recommend beginning planning long before there is any hint of any potential conflict or lawsuit.
Why? It’s too late to start asset protection planning when a threat is on the horizon, as each state has laws that protect creditors against people transferring assets out of their names with the intent to “hinder, delay, or defraud a creditor” – AKA: “Fraudulent Transfer” or “Fraudulent Conveyance”.
If you begin after a creditor is known or suspected, asset protection planning, including creating a Nevada Asset Protection Trust is strictly off-limits. If a Court or Plaintiff suspects a fraudulent transfer has taken place, the Court can simply order that the transfer be reversed and the assets turned over to satisfy the judgement. Additionally, some states, including Nevada, may apply additional civil and/or criminal penalties for running afoul of fraudulent transfer laws.
Generally, assets transferred to a Nevada Asset Protection Trust are protected from creditors two years after the date of transfer. Nevada’s laws provide a more favorable timeline, as the waiting period most other asset protection jurisdictions is four yrs.
Q: Why should I consider asset protection? (I don’t think I’ll be sued!)
Because – it’s scary out there! In Nevada, and throughout the country, people are increasingly using the legal system to unjustly deprive others of their life’s work. Millions of new lawsuits are filed in the United States every year, many of which are frivolous or settled for sums greater than the actual liability.
Awareness of potential threats to your estate is an essential first step. Business owners, professionals (such as doctors, dentists, lawyers, accountants), and property owners are all greater targets for suits, simply due to the nature of their work and the types of assets they own. Without a massive overhaul of our legal system, the risk and potential liability is not going to decline… in fact, the number of lawsuits filed has steadily increased over the past few decades.
Assets can be at risk due to various threats, including:
- Tort claims
- Personal injury lawsuits
- Contract claims
- Claims arising out of a business context (employment law, contract disputes)
- Auto accidents
- Landlord/tenant issues
Q: Do I still need to consider asset protection planning if I have lots of insurance?
Probably. While insurance is an important protective barrier against some of these threats discussed previously, it does not always suffice to protect entirely (i.e. exceptions to coverage outlined in the insurance policy, policy coverage limits). Asset Protection Planning adds an additional barrier to protecting your assets & estate to ensure the safest approach to protecting what is truly yours.
The highly-rated asset protection attorneys at Phillips Ballenger assist professionals, small business owners, property owners, entrepreneurs & others in designing and implementing proven, legally-sound asset protection strategies. Our goal is to safeguard your estate & assets against potential litigation, judgements, liens, and fraud.
Attorney Tiffany Ballenger Floyd and her team assist clients throughout the US + internationally with their asset protection planning matters- feel free to call us with your questions at 702-997-5701. To get started with your Asset Protection planning, the first step is typically setting up a private, confidential consultation where we can talk about your goals and start designing your ideal plan….