Domestic Asset Protection
Nevada Asset Protection Trusts
Nevada is one of a small number of states that permits a settlor to transfer assets to a self-settled spendthrift trust and retain a beneficial interest. Whether that structure provides meaningful protection in your situation depends on facts that require careful analysis.
What Nevada Permits
A self-settled trust with a retained beneficial interest.
In most states, a person cannot transfer assets to a trust for their own benefit and claim those assets are protected from their creditors. The traditional rule — still the law in most jurisdictions — is that a self-settled trust provides no protection against the settlor's creditors. Nevada is one of approximately twenty states that have modified this rule by statute.
Under Nevada Revised Statutes Chapter 166, a settlor may transfer assets to a spendthrift trust, retain a beneficial interest in those assets, and — if the statutory requirements are met — assert that the assets are protected from most creditor claims after a two-year seasoning period. The trust must be irrevocable, must have a qualified Nevada trustee, and must comply with specific administrative requirements.
The Nevada statute is among the most favorable of the domestic asset protection trust statutes. Nevada has a two-year statute of limitations for fraudulent transfer claims (shorter than most states), no exception creditors for tort claimants (unlike some states), and a well-developed body of trust law. These features make Nevada a frequently cited jurisdiction for domestic APTs.
Whether a Nevada trust actually protects assets in a contested case — particularly when the settlor lives outside Nevada and the creditor pursues the claim in a different state — is a more complicated question. The answer depends on conflict-of-laws principles, the Full Faith and Credit Clause, and the specific facts of the claim.
Statutory Requirements
What Nevada law requires for a valid DAPT.
Irrevocability
The trust must be irrevocable. A revocable trust — one the settlor can amend or revoke — provides no creditor protection under Nevada law or any other jurisdiction. The settlor gives up the right to revoke the trust as a condition of the protection the statute offers.
Qualified Nevada Trustee
At least one trustee must be a qualified Nevada trustee — a Nevada resident individual or a Nevada-chartered trust company. The trustee must maintain Nevada situs for the trust, which requires that trust assets or trust records be physically maintained in Nevada. This is not merely a formality; courts have scrutinized whether the Nevada nexus is genuine.
Spendthrift Provision
The trust must contain a spendthrift provision — a clause that restricts the beneficiary's ability to transfer their interest and restricts creditors' ability to reach it. The spendthrift provision is the statutory hook that triggers Nevada's self-settled trust protections.
Solvency at Transfer
The settlor must be solvent at the time of the transfer and must not be transferring assets with the intent to hinder, delay, or defraud any existing creditor. A transfer made while insolvent, or in anticipation of a known claim, is subject to fraudulent transfer challenge regardless of the Nevada statute.
Seasoning Period
Nevada's statute of limitations for fraudulent transfer claims is two years from the date of transfer (or six months from when the creditor discovered or should have discovered the transfer, if later). Claims that arise after the seasoning period has run face a higher bar — but claims that existed before the transfer, or that arise from transfers made with fraudulent intent, are not time-barred by the seasoning period alone.
Affidavit of Solvency
The settlor must sign an affidavit at the time of transfer stating that the transfer does not render them insolvent, that they are not contemplating bankruptcy, that there are no pending or threatened court actions against them (with limited exceptions), and that the transfer is not intended to hinder any creditor. This affidavit is a sworn statement — signing it falsely creates its own legal exposure.
Significant Limitations
What Nevada law does not — and cannot — guarantee.
The Nevada statute governs what Nevada courts will do. It does not govern what courts in other states will do — and those courts are not bound by Nevada law.
The Nevada statute governs what Nevada courts will do with a claim against a Nevada trust. It does not govern what courts in other states will do. A creditor who obtains a judgment in Georgia, California, or New York may attempt to enforce that judgment against trust assets through proceedings in those states — and those states are not bound by Nevada's self-settled trust statute.
The Full Faith and Credit Clause of the U.S. Constitution requires states to give effect to judgments from other states. Whether a Nevada trust's spendthrift protection constitutes a defense to enforcement of a foreign judgment — or whether the foreign court will apply its own law to determine what assets are reachable — is a question that has not been definitively resolved by the U.S. Supreme Court. Courts in different states have reached different conclusions.
Federal bankruptcy law presents a separate and significant limitation. Under 11 U.S.C. § 548(e), a bankruptcy trustee may avoid a transfer to a self-settled trust made within ten years of the bankruptcy filing if the debtor made the transfer with the intent to hinder, delay, or defraud creditors. The ten-year lookback period is substantially longer than Nevada's two-year statute of limitations — meaning a transfer that is protected under Nevada law may still be vulnerable in a federal bankruptcy proceeding.
Nevada law also preserves certain creditor exceptions regardless of the trust's terms. Child support and alimony obligations, claims arising from the settlor's intentional torts, and claims by the state of Nevada itself are not subject to the self-settled trust protection. Some of these exceptions are broader than they appear in the statute.
Finally, the practical protection a Nevada trust provides depends heavily on whether the trust is properly administered. A trust that is nominally Nevada-sited but actually administered by the settlor from their home state, with assets held in accounts the settlor controls, may not receive the protection the statute contemplates. Courts have pierced the structure in cases where the Nevada nexus was superficial.
Nevada vs. Offshore
How Nevada trusts compare with offshore structures.
The most common question clients ask about Nevada trusts is how they compare with offshore asset protection trusts in Cook Islands or Nevis. The answer involves tradeoffs across several dimensions.
| Nevada DAPT | Offshore Trust (Cook Islands / Nevis) | |
|---|---|---|
| Jurisdiction | U.S. federal and state courts retain jurisdiction over the trust and the trustee | Foreign court; U.S. court orders are not automatically enforceable |
| Fraudulent Transfer Lookback | 2 years under Nevada statute; 10 years under federal bankruptcy law (§ 548(e)) | Cook Islands: 1 year (2 years for existing creditors); Nevis: 2 years |
| Burden of Proof | Creditor must prove fraudulent intent by clear and convincing evidence in Nevada court | Creditor must prove beyond a reasonable doubt in foreign court, under foreign law |
| Bankruptcy Exposure | Significant — 10-year federal lookback under § 548(e) | Same federal lookback applies, but foreign trustee is not subject to U.S. court orders |
| Conflict of Laws | Other states may not apply Nevada law; outcome depends on forum | Foreign law governs; U.S. creditor must litigate in foreign jurisdiction |
| Reporting Requirements | No special IRS reporting beyond normal trust returns | FBAR, Form 3520, Form 3520-A required annually; fully compliant |
| Cost | Moderate — legal fees plus ongoing Nevada trustee fees | Higher — legal fees plus foreign trustee fees plus annual reporting |
| Practical Deterrence | Moderate — adds cost and complexity for creditors pursuing claims | High — foreign jurisdiction, foreign law, and foreign trustee create substantial practical barriers |
Role in a Broader Plan
Where a Nevada trust may fit — and where it may not.
A Nevada trust is not the right tool for every situation, and we do not recommend it as a default. For clients who are Georgia residents with significant exposure to Georgia-based creditors, the conflict-of-laws limitations and the federal bankruptcy exposure are real concerns that affect the structure's practical value.
That said, a Nevada trust may play a useful role in certain plans — particularly as one layer in a broader structure that includes adequate insurance, properly maintained LLCs, retirement account maximization, and estate planning coordination. For clients who are not candidates for offshore structures but want more protection than a domestic LLC alone provides, a Nevada trust is worth discussing.
The clients for whom a Nevada trust is most likely to provide meaningful protection are those who: establish the trust during a period of stability with no existing or anticipated creditors; fund it with assets that are not subject to existing liens or claims; maintain genuine Nevada situs through a qualified trustee; and do not subsequently file for bankruptcy. When all of those conditions are met, the Nevada statute provides a real — if not absolute — layer of protection.
We discuss Nevada trusts honestly with every client who asks about them. We explain what the statute provides, what it does not provide, and how it compares with the alternatives. We do not recommend a structure we do not believe is appropriate for the client's situation — and we do not oversell the protection any domestic trust provides.
Frequently Asked Questions
What clients ask about Nevada trusts.
Nevada trusts are one tool.
Whether they fit your plan requires a conversation.
Jim Fletcher will review your situation, explain the Nevada trust option honestly — including its limitations — and help you understand whether it belongs in your asset protection plan. The consultation is confidential and without obligation.