Q: How long does it take to protect your assets in a Nevada Asset Protection Trust?
A: At first glance, the Nevada statute appears to require two years to obtain protection from a future creditor and the longer of two years or six months from discovery to obtain protection from a preexisting creditor. And the foregoing is how most planners tend to interpret these rules.
However, NRS Section 166.170.1 merely says that “[a] person may not bring an action” after such statute of limitations. It says nothing about the date the spendthrift trust assets are actually protected from creditors. Certainly, getting past the statute of limitations does increase the probability of the trust assets being protected since the creditor cannot sue the trust after that point assuming that the judge follows these statutes. So these time limits are extremely important in that respect. But they do not dictate the actual rules of protection.
The actual rule under NRS Sec. 166.170.3 is that, “A creditor may not bring an action with respect to transfer of property to a spendthrift trust unless a creditor can prove by clear and convincing evidence that the transfer of property was a fraudulent transfer pursuant t0 Chapter 112 of NRS or that the transfer violates a legal obligation owed to the creditor under a contract or a valid court order that is legally enforceable by that creditor. In the absence of such clear and convincing proof, the property transferred is not subject to the claims of the creditor. ”
In other words, the property is protected starting on the date of the transfer to the trust unless the creditor can prove by clear and convincing evidence that the transfer was fraudulent.
Steve Oshins, Esq., AEP (Distinguished)
Oshins & Associates, LLC