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THE
NEVADA "SELF-SETTLED" SPENDTHRIFT TRUST
The
policy against recognizing the validity of a
"self-settled" spendthrift trust stems from the notion
that a person should not be allowed to create, for his
or her own benefit, an interest in property that cannot
be reached by his or her creditors. However, Nevada law
recognizes the validity and enforceability of
"self-settled" spendthrift trust, under certain
circumstances.
At
least one of the trustees of a Nevada "self-settled"
spendthrift trust must be a qualified Nevada trustee
(which can be either an individual resident, or a bank
or trust company with offices in Nevada). The trust
must: (1) be in writing; (2) be irrevocable; (3) not
require that any part of the trust's income or principal
be distributed to the settlor; and (4) not be intended
to hinder delay or defraud known creditors of the
settler (i.e. the grantor).
Although
a Nevada "self-settled" spendthrift trust cannot require
that distributions be made to the settlor, a trustee
other than the settlor may have discretion to distribute
trust income or principal to the settlor. Thus, as long
as the trust meets the general requirements described
above, the settlor may still be the primary beneficiary
of the trust while the assets he or she transfers into
the trust are shielded from his or her creditors.
As
to creditor's claims, Nevada law specifies exactly who
can bring an action against property transferred into a
Nevada self-settled spendthrift trust. Creditors
existing at the time the settlor transfers property into
the trust must commence action within two years after
the property transfer or six months after they discover
or reasonably should have discovered the transfer,
whichever is later. For those who become creditors after
the settlor transfers property into the trust, they must
commence action within two years after the transfer.
Thus, anyone becoming a creditor at least two years
after property is transferred into a Nevada self-settled
spendthrift trust would be forever barred from bringing
an action to recover such property.
Who
Should Consider a Nevada On-Shore Trust?
Independent contractors and providers of professional
services, such as doctors, dentists, lawyers,
accountants, engineers, architects, and insurance
brokers, who are exposed to certain risks and
liabilities in the business world, should consider
implementing a Nevada On-Shore Trust. Also, anyone who
is concerned about losing hard-earned assets due to
accidents and misfortune should consider such a trust.
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