Building assets can be a tricky game indeed. Not all of us can suddenly inherit wealth or win the Lotto Jackpot (you must buy a ticket first). No, for most of us wealth building requires prudent savings, investing and spending. Right?
Protecting assets is a different game, but it is just as tricky. In fact, protecting assets may depend on where you keep your assets.
Trusts are powerful legal machines and the Domestic Asset Protection Trust (DAPT) is a particularly intriguing machine, indeed.
A recent article in Forbes sheds light on the concept and some of the finer points. The article, titled “How To Use a Nevada Asset Protection Trust To Safeguard Your Assets,” notes that all trusts are not same and not all states treat them the same.
It just so happens that a Nevada DAPT is a particularly well-crafted and well situated machine for its purpose.
DAPTs, in any state where they may be established by state law, are a specific subset of trusts that protect assets by placing them within the safe confines on an irrevocable trust allowing the owner to retain a level of control over the assets. In other words, it is a way of having your cake and eating it too.
It just so happens that trusts like these are also well suited to multiple purposes and may blend well into your overall plan for your assets during life and as part of your estate. In fact, a DAPT is never going to be your sole vehicle, because putting all of your assets into a protection trust is neither practical nor entirely defensible (it might not pass the sniff test for fraud).
On the other hand, a DAPT may be your most precious holding.
So why Nevada?
The article speaks deeper on the specifics, and there is much to be said regarding the state laws surrounding these trusts. In the end, it does come down to favorable laws.
Namely, trusts protect assets from creditors or lawsuits by separating ownership. Nevertheless, many trusts can be ransacked all the same if a creditor can pierce/bust the trust.
To counter such an attack, Nevada has a specific preemptive “seasoning” rule that protects against attempts to pierce or bust the trust once it is properly “seasoned.” The seasoning time is two years. That is a creative concept, if nothing else.
Nevada Asset Protection Trusts are a hot topic. If you are only now starting to look into them, consider digging in and having a look at how you can protect the assets you worked so hard to build.
The DAPT is only one tool, and not without imperfections or vocal detractors. Regardless, the DAPT is still a powerful tool and prime asset protection vehicle for many.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: Forbes (May 21, 2014) “How To Use a Nevada Asset Protection Trust To Safeguard Your Assets”