If something unexpected happened tomorrow, would your assets be safe?

Last year, we covered why asset protection is crucial to protecting your wealth from external risks so you can continue to grow it and pass it on to future generations. We pointed out that Nevada is the premier state for establishing asset protection trusts because it offers a unique combination of strong legal protections, tax benefits, and privacy. Read the article here.

This time, we're addressing common procrastination reasons and diving deeper into additional trust strategies.

Why People Procrastinate:

• They don't have a person they can rely on and/or they are out of state
  Choosing a trustworthy trustee is a major decision that shouldn't be taken lightly. If you've been hesitating to take asset protection steps because you do not have someone you can count on here in Nevada, you can utilize a professional trustee to manage your trust. Hiring a professional trustee removes any worry about picking a family member who might not have your best interests in mind.

• They don't feel the urgency or think they don't need it
  Asset protection is not only for the ultra-wealthy or those in high-risk professions. In reality, bad situations can happen to anyone, and you might not realize how easy it can be for creditors, lawsuits, or divorce settlements to take away everything you've worked hard for. All it might take is a bad car accident, a business dispute, or an unexpected liability, and your life will be permanently changed. Going through the steps to protect your assets might feel like something to handle "later," but these situations can happen at any time, and it's best to be proactive before it's too late.

• There is an overwhelm of information and potential strategies
  The number of options and strategies for estate planning and asset protection are vast and complex, which can lead to inaction altogether if you don't know where to start and are worried about possibly making a mistake. Luckily, we are here for you and can answer any questions, address concerns, and provide the clarity you need. We have decades of experience, and together, we can find the best strategy for your unique situation. 

Why You Should Act Now:

The best time to set up asset protection is before you need it. Waiting until a lawsuit, creditor issue, or divorce can significantly limit your options. By taking proactive steps, you can:

• Protect your wealth for yourself and your family.
• Avoid unnecessary stress and financial loss.
• Gain peace of mind knowing your assets are safe.

Motivation and Real-Life Scenarios:

• You want to avoid any unnecessary estate tax, but you also want control over your assets
  Transferring money into an irrevocable trust ensures your assets are held outside your taxable estate. This means when you pass away, those assets aren't subject to federal estate taxes, potentially reducing the tax burden for your heirs. In the meantime, your wealth can continue to appreciate, and you will have control of your assets.
  
  Example strategy: You're a high-net-worth couple looking to reduce estate taxes while preserving access to your wealth. You can lock in the currently high lifetime gift/estate tax exemption set at $13.99M per individual ($27.98M per couple) by creating a SLAT for one or both of you. A SLAT is an irrevocable trust where one spouse transfers assets into a trust for the other spouse's benefit. The trust's assets and future appreciation are excluded from the donor spouse's taxable estate. The beneficiary spouse can then request distributions to support their lifestyle, and they can control how the trust's assets are distributed after death. This can be an effective strategy to reduce taxable estates while preserving asset access. Click here to learn more about SLATs.
  
  Important note: The lifetime gift/estate tax exemption is projected to be $7M in 2026 if no new laws go into effect. New laws are anticipated to extend the 2017 Tax Relief Act, but this could change with different laws being passed in the future. High-net-worth individuals may want to take advantage of the high exemption in 2025 or at least start the discussion of optimizing their estates and, therefore, their legacies.

• Your life has had a significant change
  Asset protection planning becomes crucial during major lifestyle changes that increase financial risk or liability. Some common triggers include:

- Marriage or Divorce – To protect assets in case of divorce, prenuptial or postnuptial agreements and trusts can be beneficial.
- Birth of a Child or Child Reaches Adulthood – Proper planning avoids accidental disinheritance and guardianship court.
- Starting or Expanding a Business – Entrepreneurs and business owners face potential lawsuits, making asset protection strategies like LLCs, corporations, and liability insurance essential.
- Receiving a Large Inheritance or Windfall – A sudden increase in wealth may require restructuring ownership of assets to safeguard them from creditors or legal disputes.
- Real Estate Investment – Owning rental or commercial properties increases liability exposure, making LLCs, trusts, or umbrella insurance useful protections.
- Aging and Long-Term Care Planning – Seniors planning for Medicaid eligibility or protecting assets from nursing home costs may benefit from irrevocable trusts.
- Significant Debt or Financial Trouble – If facing lawsuits, bankruptcy, or creditor claims, restructuring ownership of assets may help preserve wealth.
- Marriage of Children or Heirs – Parents may want to establish trusts to protect family wealth from their children's divorce or financial missteps.
- International Relocation or Tax Planning – Moving to another country can affect asset protection due to different tax and legal systems, requiring offshore trusts or other planning.

• You want to protect your home from creditors and lawsuits
  There are several ways to safeguard your home from potential financial risks, lawsuits, and creditors. Usually, a combination of strategies is best to ensure it's completely protected. Transferring your home into an irrevocable trust can remove it from your personal estate, making it harder for creditors to claim it. In addition, utilizing the homestead declaration and insurance can limit exposure.

  If you primarily rely on the Nevada homestead declaration to protect your home, did you know it only protects the equity in your primary residence up to $605,000?

  Example 1: You own an $800,000 home with $500,000 in equity and do not have any additional asset protection outside of your homestead declaration. A creditor wins a lawsuit against you and goes to seize your house. Your homestead protection covers your $500,000 equity.

  Example 2: You own an $800,000 home with $700,000 in equity and do not have any additional asset protection outside of your homestead declaration. A creditor wins a lawsuit against you and goes to seize your house. You receive the first $605,000 of your equity and your creditor receives up to $95,000 of your equity. 

Additional Asset Protection Strategies:

In addition to the strategies mentioned in last year's blog post, here are some additional trust options to consider.

• Domestic Asset Protection Trust (DAPT)
  A DAPT is an irrevocable trust that allows the settlor (the person creating the trust) to be a discretionary beneficiary while still protecting the trust's assets from creditors. While 17 states allow DAPTs, Nevada is the strongest jurisdiction due to:

- Shorter statute of limitations – Creditors have only two years from the transfer date (or six months from when they became aware) to bring a claim. Other states typically require four years.
- No exception creditors – In most states, certain creditors (such as divorcing spouses or child support claims) can still access DAPT assets. Nevada does not allow any exception creditors, making it one of the safest choices.

• Nevada Asset Protection Trust (NAPT)
  A NAPT is a type of DAPT established in Nevada that offers strong legal protections while allowing flexibility. It provides the benefits above and although assets are placed in an irrevocable trust, the settlor can retain certain controls, including:

- Investment control – The settlor can manage trust investments as the investment trustee.
- Veto power – The settlor can block distributions made by the distribution trustee.
- Power of appointment – The settlor can modify beneficiaries or trust terms.
- Ability to replace trustees – The settlor can remove and replace trustees if needed.
- Use of trust assets – The settlor can use trust-held property without needing to pay rent.

• Hybrid NAPT (For Non-Nevada Residents)
  A Hybrid NAPT may be the solution if you don't live in Nevada but want its asset protection benefits. Instead of being an immediate beneficiary, the settlor sets up the trust for their spouse and descendants, allowing for more protection. A trust protector can later add the settlor as a beneficiary if needed.

Final Thoughts:

Every day you wait is a day your assets are vulnerable. The best time to protect them is now. Taking steps to protect your assets can secure your financial future, prevent legal complications, and ensure your wealth benefits your family for generations. If you have questions or need guidance, reach out to discuss your options today.

^{Sources:
https://www.nevadatrust.com/nevada-asset-protection-trust/
"Nevada Asset Protection Trust: The Go-To Estate Planning Tool in the Post-2017 Tax Act Era" by Courtney McCandless, Esq.}