Right now. “An ounce of prevention is better than a pound of cure.” If you wait until you are (or even think you might be) sued, file bankruptcy, get divorced, have partner or family squabbles, get a tax lien, or anything else bad that can happen in life, it’ll be too late. You have to set up a trust and move assets into it well ahead of anything happening or it can be invalidated. This is what asset protection “planning” is all about.
Every person should have insurance. Liability and umbrella policies are must-have items for anyone with assets they care about. But that in no way minimizes or diminishes your need for an asset protection trust.
People who rely solely on insurance to protect their assets take a significant risk. Liability policies have limits, exceptions and carve-outs. While the chance of a loss that exceeds policy limits may seem remote, it can happen -- and the consequences can be devastating. If your insurer decides to rely on a carve-out to deny your claim you could be left directly exposed. Imagine if you got into a car accident, or if someone files a slip & fall case against you, and a massive judgement is issued that your insurance carrier refuses to pay. Or if the judgement is greater than your coverage? The only assets a creditor can seize are those items that you didn’t put into your trust (that’s why bank accounts, brokerage accounts, real estate, private business ownership interests, etc need to be put into your trust)). Anything held in your trust cannot be touched by creditors because it technically isn’t “you”. A trust + insurance = the utmost asset protection.
Whereas a living trust can assist with estate planning, it does not provide asset protection. Only an asset protection trust can provide both estate planning and asset protection. For more information see: https://www.estateplanning.com/which-type-of-trust-protect-against-creditors/.
No, you can put unlimited types and quantities of assets into your trust.
For people with business interests or real estate, regardless of how many properties you own or are invested in, you’ll want to create a series of LLCs so each property will be uniquely protected (your trust will own 99% of your LLCs). With each business or real estate property in its own LLC, they are not considered to be commingled or linked together; thus, creditors (and others) can only take action against whichever one is the subject of the dispute. All the other properties remain unaffected. Since you only own 1% of the LLC, your personal risk is practically nothing. This is called “double asset protection”.
For more information for real estate professionals, click here
For more information for business owners, entrepreneurs, doctors and other people with “high litigation risk”, click here
Yes! It is recommended that you give your trust a name that is completely different than your name or any of your properties (e.g. the “Atlantic Asset Protection Trust”). Thus, a creditor will not be able to easily find your trust, and any eventual discovery would likely be long after the six-month polling window or two-year statute of limitations. See also: https://www.gmdlegal.com/achieving-asset-anonymity/.
Unlike many other states, Nevada allows trustees and beneficiaries to modify irrevocable trusts. First, our template agreement provides you with a 12-day window to make any changes you want (including extending the window). After that? Easy. Nevada law permits trusts to be “decanted”, so you can move your assets over to a new trust with the features you want. For more details on decanting, check out this article from Forbes.
Although Nevada has a two-year statute, the laws protect your trust assets starting on day-one when the transfer is made -- not two years after the transfer. Nevada statutes (NRS §170.170.1) holds that the two-year rule means a person may not bring an action against your trust after two years from when an asset was placed into trust. It does not say it isn’t protected at all for two years.
Nevada is the only state that has no “exception creditor” exemptions. This prevents any and all types of creditors from piercing the asset protection shield. http://ultimateestateplanner.com/2017/03/31/nevada-asset-protection-trust-nevada-leading-jurisdictionperiod/
You can work around the 2-year statute by simply not naming the trust creator (“Grantor”) as a beneficiary. In this case the assets are protected immediately, so long as they weren’t added by means of “fraudulent conveyance” (see next question).
This is why it is important to practice asset protection planning well before you ever anticipate being the subject of any liability. Essentially, the statutes hold that you should not transfer assets to an asset protection trust when you already have existing, or know about upcoming or potentially imminent, legal problems (lawsuit, divorce, bankruptcy, etc.), as the trust may be subject to being unwound. https://www.nvbar.org/wp-content/uploads/NevLawyer_Jan_2015_Self-Settle_Asset_Protection.pdf.
Yes. Trusts that K-1 the income to the owners enable the tax rate to fall to 21%. This may or may not mean that the K-1 income passed through to the trust owner might be subject to your state of residence taxes, so check with your accountant. And more good news, whereas some states impose a special additional tax on trust income or assets even when it’s passed through to owners, Nevada does not have any such taxes.
No. Although some states tax both the trust AND its owners, Nevada does not tax trusts. And the IRS only taxes you, not the trust, as long as the trust has been constructed properly to pass through all income to you on a K-1 (which, of course, Prime Trust does).
It depends on the state you live in, and the amount of equity in your home. For instance, Florida and Texas have 100% homestead protection, regardless of how much your house is worth, so it’s protected from many (but not all) types of lawsuits and other unpleasantries. By comparison, California only covers a maximum of $100,000, which is obviously well below what many homeowners in that state have in equity. Illinois is even less, set at a max $30,000. So, in those instances, yes, it is probably advisable to retitle your personal residence either directly into your asset protection trust or into an LLC that is 99% owned by your asset protection trust. Check with your attorney or your CPA on that, as the rules of every state differ on homestead limitations, exceptions and rules.
Depending on your state, homestead law does not protect you against debts secured by a mortgage or deed of trust, payment of taxes, IRS liens, mechanic's liens, child support or alimony payments. And remember, homestead exemptions are generally not automatic; you need to file the appropriate forms with your state in order to protect yourself.
For more information see: https://en.wikipedia.org/wiki/Homestead_exemption.
|State||Homestead Exemption Amount - single||Married Couples|
|District of Columbia||Unlimited|
|New York||$82,775 - $165,550||$165,500 - $331,100|
|American Samoa||Unlimited for Samoan and certain ethnic Pacific Islanders|
|Northern Mariana Islands||$150,000|
|US Virgin Islands||$30,000|
General Information on Asset Protection Trusts
A ‘trust’ is like a ‘company’ in that it is a standalone entity. So, just as someone starting a new company would need to go to the state of incorporation and file paperwork to set up the entity and stay in compliance with a host of state and federal regulations, creating a trust is pretty much the same process. And just as you can start a company in any state you want, even if you don’t live there, so too you can start a trust in any state you want (though Nevada has, by far, the best trust laws in the country).
This means that in the eyes of the law (and the IRS), a trust is a ‘person’. In other words, it’s not you personally because it is its own entity, with its own (regulated) management team (the Trustee) and can even elect to file its own tax returns.
You have a role in your trust similar to one you’d have in a company. As the ‘Settlor’, you start the trust by having PrimeTrust do all the paperwork and filings, just as an entrepreneur starts a company by having attorney’s do all the paperwork and filings. The “Grantor” contributes assets to the trust. The “Beneficiary” is the person who can receive income and distributions, which can be a Settlor’s children, other family, friends or of course even the Settlor him/herself. In the state of Nevada, you can be the beneficiary of your own trust. The “Trustee” (PrimeTrust) is like the management team you’d hire for a company. The trustee manages the trust and runs the day to day business of the trust according to your directives in the trust agreement, keeping things in compliance and making all the periodic regulatory and tax filings.
Trusts are for everyone! Sure, rich people are smart (or have smart advisers) and so always have trusts to protect their assets. But the rest of us can have one, too, and use them to protect personal savings, real estate, business ownership interests, stocks, bonds, mutual funds, college savings and just about every other type of asset.
This is where the rubber meets the road. A Nevada asset protection trust is built specifically to provide protection to you and your beneficiaries against lawsuits, creditors, bankruptcy, divorce, family disagreements, estate hassles, and even the IRS.. It’s all legal (the rules were created by the government), and it is bulletproof so long as the assets weren’t added to the trust via “fraudulent conveyance” and, in cases where the Grantor is also a Beneficiary, that a 24 months’ post-contribution, no-claims period has settled (two year statute of limitations). No one can get to your Nevada trust assets as they are protected in the trust by law.
It’s the lawful duty of the trustee to protect the assets in the trust for the beneficiaries. In fact, the trustee is prohibited by law from distributing assets (money) to a beneficiary if it knows or believes that the distribution would be seized by creditors.
Historically, and at traditional trust companies, creating an asset protection trust can be really expensive, as attorneys and non-tech trust companies charge tens of thousands of dollars to create a trust for someone. In addition, the annual management fees can be staggering. The good news is that PrimeTrust has brought trust services into the 21st century by using technology to make them available to anyone with savings or assets they want to protect. The price to open and manage an asset protection trust at PrimeTrust is only $1,795 for setup and $395/yr for trust administration fees.
Prime Trust, as the trustee, is required by regulators to take the legal steps to create the trust, file regulatory-required reports, handle tax notifications and keep things in compliance with all applicable laws.
Yes! Under Nevada law a settlor can also be the beneficiary, with the assets fully protected so long as a Nevada-based trustee like Prime Trust is the trustee. This is called a “self-settled trust”. While many trusts are created for others (e.g. college savings), most personal savings trusts are created by and for the person whose money is in it.
Cash. Real estate. Stocks. Bonds. Partnership interests. Royalty agreements. License agreements. Just about anything else of value that you want to protect at Prime Trust.
There is no minimum and no maximum. A trust can have a few hundred dollars or billions of dollars of assets.
Yes, absolutely. Our trust officers work with you to easily handle the details.
The trust agreement, like an operating or shareholders agreement in a regular company, spells out what can be done with the funds. The trustee, as fiduciary for the trust and its beneficiary, manages it in accordance to the plan. This can include distributing funds for college, for healthcare, for living expenses and for just about anything else.
One interesting and massively beneficial aspect to trust law is that the trustee is prohibited from making distributions to a beneficiary when it knows that such funds would be seized by a creditor. The workaround? Easy, the distributions are made directly to the intended source (e.g. college, hospital, landlord, tax authority, etc.).
Once created, the trust agreement and related provisions cannot be changed… Sort of. First, the trust should have enough flexible provisions to cover anything that comes up. Second, if things have really changed then you can “decant” a trust; which means creating a new trust, with revised provisions, to assume the original trust.
As long as you want. Some trusts are for a specific period of time, such as saving for college or for retirement, others are perpetual (up to 365 years for Nevada trusts). You can even set a trust expiration date and incorporate an “evergreen” clause to automatically renew it if you opt to keep it going rather than liquidate.
No. And yes. Although a trust cannot be terminated by a settlor or beneficiary, it can be terminated by the trustee in certain circumstances. It can also have a fixed expiration date. And it can be “decanted” (transferred) to another trust.
No. Although a trust is like a company, it’s not something that can have investors. It can’t issue shares or be acquired. It is an entity that is created for the benefit of the beneficiary. On the other hand, the trust may be holding assets that can be sold, such as stocks or real estate, and if selling those assets is appropriate to maximize the value or fulfill the intent of the trust (and benefit to the beneficiaries) then that can easily be done.
It means non-cancellable. A trust can have an expiration date. It can have a ‘decanting’ provision (so assets can be transferred to a different trust in case changes need to be made). It can have a clause allowing assets to be swapped out (e.g. giving the trust cash and the trust giving you the corresponding real estate or business interests, or vice-versa). But it can’t be revoked (terminated) by the settlor or beneficiaries.
Nevada has the best trust laws in the country and is even a top-ranked domicile on the world stage. Legislators and regulators have done a great job to make sure people who open trusts in Nevada have both the best asset protection laws, as well as incredible privacy. And, of course, Nevada has 0% income, asset, capital gains and estate taxes.
Here's an interesting Bloomberg article on the topic:
Furthermore, for personal savings trusts, Nevada is one of the only states that permits the person who starts the trust to also be the beneficiary, while preserving asset protection, privacy and tax benefits. And of the states that do permit “self-settled” trusts (where the creator is also the beneficiary), Nevada is the only state that has no “exception creditor” exemptions. This protects you against any and all types of creditors who try to pierce the asset protection shield.
Yes! Just as you can start a company in any state you want, even if you don’t live there, you can also start a trust in any state you want, including Nevada. And since Prime Trust is a Nevada chartered financial institution you don’t need a personal address or residence in Nevada for the trust to be effective and enforceable.
Easy, you just send funds (or other assets) to the trust. The trustee will then deposit them into your account. You can do this anytime you want, with no restrictions or limitations.
Of course! It’s totally normal for grandparents to send money into a grandchild’s college savings trust, for a parent to put money into a trust for estate planning, or for friends to contribute to someone’s health care trust. Any person can “grant” money (or other assets) to someone’s trust, which becomes an irrevocable gift. Prime Trust gives you, and others, the ability to easily contribute funds to a trust, either online or with our mobile app.
No, of course not. Prime Trust, as trustee, is the fiduciary for your trust and can only manage and protect assets for the benefit of the beneficiaries, not for itself (other than customary and stated fees).
Your account with Prime Trust is insured up to $5,000,000 against various non-investment related issues; click here for more detailed information. Cash in your account is 100% FDIC insured. Investments and non-cash assets in your trust are not FDIC insured and as such may gain in value or may lose some or all of its value.
The trustee, Prime Trust, is the ‘fiduciary’ for your trust. A fiduciary, as the manager of your trust, owes you the highest legal, good faith and ethical duty to act in the beneficiary’s best interests. To ensure this, the Nevada Financial Institution Division, the regulator for Nevada banks and trust companies, conducts audits and examinations of Prime Trust.
The trust, like a company, can pay its own taxes. It can also, like certain forms of companies such as LLC’s or partnerships, allow taxes to be paid by the owners (the settlors). Whichever is best for you.
This means that if you are in a low tax bracket, then trust income & realized capital gains could be attributed to your tax returns (check with your tax professional adviser to make sure that’s the right strategy for you). And, of course, in this situation the trust can write you a check to reimburse you for any taxes you might have to pay.
Prime Trust's Services
Overview of the Trust Services Provided by Prime Trust, LLC (“Prime Trust” or the “Trustee”)