Imagine that, through no fault of your own, you find yourself in a difficult lawsuit. It’s clear they are coming after your assets, your business, everything you have worked a lifetime to build. But you are not worried. You sleep well because years ago you set up a Nevada Offshore Trust, and your assets are protected. A Nevada Offshore Trust, also known as an Asset Protection Trust, is the single most effective way to protect your assets. Once such a Trust is set up and funded, creditors will NOT be able to seize those assets; the IRS will NOT have access to those assets; those assets will NOT have to be expended for nursing home or medical care when you are old and feeble; and even a complete asset search will NOT reveal those assets. At the same time, however, you will not be relinquishing control. To take advantage of the Nevada Offshore Trust, you need not be rich and you need not be a Nevada resident.
Before discussing the unique features of a Nevada Offshore Trust, it is important to understand that the normal Living Trust (aka Family Trust) does not protect assets. A Living Trust is utilized to bypass probate, keep family matters confidential and, at times, to save on estate taxes. The assets placed in a Living Trust are considered your assets.
If you place assets into a trust, you are considered the Grantor. In 1999, the Nevada Legislature passed a set of laws, at the urging of a number of wealthy people, that created a framework for the Nevada Offshore Trust. While 14 states presently have a version of asset protection trusts, Nevada’s laws are the most favorably to the Grantor−and therefore the least favorable to creditors.
A Nevada Offshore Trust protects whatever assets are transferred into that Trust. The Grantor (you) retains an attorney to draft a Nevada Offshore Trust specifically tailored to your wishes and desires. With the assistance of an Institutional Trustee such as Nevada Trust Company, particular assets are designated and transferred into the Trust. The independent Trustee will care for the assets and make distributions to specified individuals as called for in the Trust. Here is a key point: The Trustee has the discretion to make distributions to you if you make such a request. (The Grantor retains the right to remove the Trustee if the Trustee does not comply with the Grantor’s wishes.) But unless and until such distributions are made, your creditors cannot touch the assets within the Nevada Offshore Trust.
The Nevada Offshore Trust acts as a litigation firewall. It is completely private. Usually the attorney and the Institutional Trustee are the only parties who have a copy of the trust document. Once two years has passed after setting up the Trust, you can truthfully answer in litigation, or under an IRS audit, that the only assets you own are those still in your name; the assets in the Nevada Offshore Trust are no longer considered your assets.
No one knows what the future holds. Prior to the 2008 recession, many wealthy individuals had the opportunity to establish a Nevada Offshore Trust but failed to do so; now all of their assets are gone. On the other hand, those who had already established a Nevada Offshore Trust ended up retaining most of their wealth. What a difference.
A Nevada Offshore Trust is better than banking money in Switzerland where bankers have recently disclosed the identity of U.S. depositors. A Nevada Offshore Trust is better than an actual offshore trust in the Cook Islands or Belize where laws can change and considerable difficulties are encountered when attempts are made to bring funds back to the U.S. A Nevada Offshore Trust is also better than asset protection trusts in other states where laws are less favorable to the Grantor.
It is important to realize that if an individual sets up an asset protection trust at a time when he knows of potential claims by creditors, the assets transferred into the Trust will not be protected from such creditors. The Nevada Offshore Trust must be established at a time when the Grantor has no reason to believe that such creditors exist. Therefore, the sooner the Trust is established, the better. Don’t delay. Protect your assets today.
Al Marquis, Partner of Marquis Aurbach Coffing & David Thorson, Vice President of Nevada Trust Company