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Domestic US Trusts

Nevada Self Settled Trust

Nevada made a decision along with ten other states to challenge conventional English law outlawing self-settled trusts to enact the Spendthrift Trust Act of Nevada.  Nevada faces the same dilemma as the other jurisdictions in the United States regarding the Full Faith and Credit Clause of the Bill of Rights.

 The Full Faith and Credit Clause restricts any state from making laws that are contrary to federal law and maintains that all states shall honor in faith the debts of debtors in other states.  In essence, this means that a debtor cannot run from state to state to avoid creditors.

This affects the Spendthrift Trust Act as well as other methods of asset protection.  Creditors must litigate or apply for the repayment of debt within a jurisdiction.  This brings many questions to the table about the transferring of assets, bankruptcy and as to what rights creditors have to attachment.  This is to heed warning since many trusts have not been challenged and whereas they have, it has put the self-settled trust on rocky ground for protection.

Nevada law provides creditors the ability to challenge the transfer of assets to a trust within two years of the formation of the trust or within six months after the transfer is discovered.  In Alaska and Delaware, a creditor has four years to challenge the transfer for a fraudulent claim.

Nevada Trust Law

Nevada Trust Law allows a trust to exist for 365 years.

The methods permitted by law for creating a Nevada trust are relatively wide-ranging.  All of the following must be met.

      1)  A declaration by the owner of property that he holds the property as trustee.

      2)  A transfer of property by the owner during his lifetime to another person as trustee.

      3)  A testamentary transfer of property by the owner to another person as trustee.

      4)  An exercise of a power of appointment to another person as trustee.

      5) An enforceable promise to create a trust.

The trust must be created for a beneficiary (unless it is a charitable trust).  All of the below criteria must be met.  

      1)  A beneficiary or class of beneficiaries that is ascertainable with reasonable certainty or that is sufficiently described so that it can be determined whether a person meets the description or is within the class; or

      2)  A grant of power to the trustee or some other person to select the beneficiary based on a standard or in the discretion of the trustee or other person.

Nevada Spendthrift Trust Law

Important Highlights of the Statutes (not all inclusive)

NRS 166.020  “Spendthrift trust” defined.  For the purposes of this chapter, a spendthrift trust is defined to be a trust in which by the terms thereof a valid restraint on the voluntary and involuntary transfer of the interest of the beneficiary is imposed. It is an active trust not governed or executed by any use or rule of law of uses.

Laws Regarding the Settlor

     NRS 166.040  Competency of settlor; writing required.

      1.  Any person competent by law to execute a will or deed may, by writing only, duly executed, by will, conveyance or other writing, create a spendthrift trust in real, personal or mixed property for the benefit of:

      (a) A person other than the settlor;

      (b) The settlor if the writing is irrevocable, does not require that any part of the income or principal of the trust be distributed to the settlor, and was not intended to hinder, delay or defraud known creditors; or

      (c) Both the settlor and another person if the writing meets the requirements of paragraph (b).

      2.  For the purposes of this section, a writing:

      (a) Is “irrevocable” even if the settlor may prevent a distribution from the trust or holds a testamentary special power of appointment or similar power.

      (b) Does not “require” a distribution to the settlor if the trust instrument provides that he may receive it only in the discretion of another person.

      NRS 166.050  No specific language necessary for creation of trust.  No specific language is necessary for the creation of a spendthrift trust. It is sufficient if by the terms of the writing (construed in the light of this chapter if necessary) the creator manifests an intention to create such a trust.

Requirement of Trustee if Settlor is Beneficiary

      NRS 166.015  Applicability of chapter; requirement of trustee if settlor is beneficiary of trust.

      1.  Unless the writing declares to the contrary, expressly, this chapter governs the construction, operation and enforcement, in this State, of all spendthrift trusts created in or outside this State if:

      (a) All or part of the land, rents, issues or profits affected are in this State;

      (b) All or part of the personal property, interest of money, dividends upon stock and other produce thereof, affected, are in this State;

      (c) The declared domicile of the creator of a spendthrift trust affecting personal property is in this State; or

      (d) At least one trustee qualified under subsection 2 has powers that include maintaining records and preparing income tax returns for the trust, and all or part of the administration of the trust is performed in this State.

      2.  If the settlor is a beneficiary of the trust, at least one trustee of a spendthrift trust must be:

      (a) A natural person who resides and has his domicile in this State;

      (b) A trust company that:

             (1) Is organized under federal law or under the laws of this State or another state; and

             (2) Maintains an office in this State for the transaction of business; or

      (c) A bank that:

             (1) Is organized under federal law or under the laws of this State or another state;

             (2) Maintains an office in this State for the transaction of business; and

             (3) Possesses and exercises trust powers.

      3.  Except as otherwise provided in subsection 1, this chapter also governs the construction, operation and enforcement, outside of this State, of all spendthrift trusts created in this State, except so far as prohibited by valid laws of other states. Unless the writing declares to the contrary, expressly, it shall be deemed to be made in the light of this chapter and all other acts relating to spendthrift trusts enacted in this State.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nevada Statutory Creditor Exemptions

For additional detailed information on the use of life insurance, annuities, pension plans, and employee benefit plans for wealth preservation and asset protection, see advanced life insurance

Nevada Homestead

• The homestead exemption limit is $200,000 in Nevada. Debtors must record the homestead declaration prior to filing for bankruptcy .

Homestead Statute

Nevada Life Insurance

·         A life insurance policy, or the proceeds thereof, are exempt, so long as the annual premiums do not exceed $1,000.

Statute

·         Group life insurance or group health policy proceeds are exempt.

Statute

Nevada Annuities

• Annuity contract proceeds are exempt, so long as the premiums do not exceed $350 per month.

Statute

Nevada IRAs & Pension Plans

·         ERISA qualified benefits, up to $500,000, are exempt.

Statute

·         Public employee pension plans are exempt.

Statute

Nevada Fraudulent Transfers

For additional detailed information relating to fraudulent transfers, including the text of the Uniform Fraudulent Transfers Act, see fraudulent transfers

Nevada Fraudulent Transfer Act

• Nevada Fraudulent Transfers Act

Nevada Fraudulent Transfer Cases

State Appellate Court

·         David M. Hogle, M.D., IN v. Bryce Michael Hall,
1996.NV.95 (Nev. 05/30/1996)

·         Sportsco Enterprises, v. William W. Morris
1996.NV.77 (Nev. 05/30/1996)

·         Casentini v. District Court,
877 P.2d 535 (Nev. 07/07/1994)

·         Sanguinetti v. Strecker,
577 P.2d 404 (Nev. 04/18/1978)

 

Nevada Trust Act (Spendthrift)

• Spendthrift Trust Act

NRS 166.010  Short title.  This chapter may be referred to by the short title of Spendthrift Trust Act of Nevada, and such reference will be sufficient for all purposes.

      [7:86:1939; 1931 NCL § 6880.06]

      NRS 166.015  Applicability of chapter; requirement of trustee if settlor is beneficiary of trust.

      1.  Unless the writing declares to the contrary, expressly, this chapter governs the construction, operation and enforcement, in this State, of all spendthrift trusts created in or outside this State if:

      (a) All or part of the land, rents, issues or profits affected are in this State;

      (b) All or part of the personal property, interest of money, dividends upon stock and other produce thereof, affected, are in this State;

      (c) The declared domicile of the creator of a spendthrift trust affecting personal property is in this State; or

      (d) At least one trustee qualified under subsection 2 has powers that include maintaining records and preparing income tax returns for the trust, and all or part of the administration of the trust is performed in this State.

      2.  If the settlor is a beneficiary of the trust, at least one trustee of a spendthrift trust must be:

      (a) A natural person who resides and has his domicile in this State;

      (b) A trust company that:

             (1) Is organized under federal law or under the laws of this State or another state; and

             (2) Maintains an office in this State for the transaction of business; or

      (c) A bank that:

             (1) Is organized under federal law or under the laws of this State or another state;

             (2) Maintains an office in this State for the transaction of business; and

             (3) Possesses and exercises trust powers.

      3.  Except as otherwise provided in subsection 1, this chapter also governs the construction, operation and enforcement, outside of this State, of all spendthrift trusts created in this State, except so far as prohibited by valid laws of other states. Unless the writing declares to the contrary, expressly, it shall be deemed to be made in the light of this chapter and all other acts relating to spendthrift trusts enacted in this State.

 

 

 

CREATION OF SPENDTHRIFT TRUSTS

      NRS 166.040  Competency of settlor; writing required.

      1.  Any person competent by law to execute a will or deed may, by writing only, duly executed, by will, conveyance or other writing, create a spendthrift trust in real, personal or mixed property for the benefit of:

      (a) A person other than the settlor;

      (b) The settlor if the writing is irrevocable, does not require that any part of the income or principal of the trust be distributed to the settlor, and was not intended to hinder, delay or defraud known creditors; or

      (c) Both the settlor and another person if the writing meets the requirements of paragraph (b).

      2.  For the purposes of this section, a writing:

      (a) Is “irrevocable” even if the settlor may prevent a distribution from the trust or holds a testamentary special power of appointment or similar power.

      (b) Does not “require” a distribution to the settlor if the trust instrument provides that he may receive it only in the discretion of another person.

      [2:86:1939; 1931 NCL § 6880.01]—(NRS A 1999, 1236; 2007, 894)

      NRS 166.050  No specific language necessary for creation of trust.  No specific language is necessary for the creation of a spendthrift trust. It is sufficient if by the terms of the writing (construed in the light of this chapter if necessary) the creator manifests an intention to create such a trust.

      [3:86:1939; 1931 NCL § 6880.02]

PRINCIPLES GOVERNING CONSTRUCTION

      NRS 166.070  Principles enumerated in NRS 166.080 to 166.150, inclusive.  Unless the writing shall declare to the contrary, expressly, the construction, operation and enforcement of all spendthrift trusts, heretofore or hereafter created in this state, shall be governed by the principles stated in NRS 166.080 to 166.150, inclusive, to the same effect as if they were written therein.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.080  Beneficiaries to be named.  The beneficiary or beneficiaries of such trust shall be named or clearly referred to in the writing. No spouse, former spouse, child or dependent shall be a beneficiary unless named or clearly referred to as a beneficiary in the writing.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.090  Provision for support.

      1.  Provision for the beneficiary will be for the support, education, maintenance and benefit of the beneficiary alone, and without reference to or limitation by his needs, station in life, or mode of life, or the needs of any other person, whether dependent upon him or not.

      2.  The existence of a spendthrift trust does not depend on the character, capacity, incapacity, competency or incompetency of the beneficiary.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.100  Income.  Provision for the beneficiary will extend to all of the income from the trust estate, devoted for that purpose by the creator of the trust, without exception or deduction, other than for:

      1.  Costs or fees regularly earned, paid or incurred by the trustee for administration of or protection of the trust estate;

      2.  Taxes on the same; or

      3.  Taxes on the interest of the beneficiary thereof.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.110  Discretion of trustee.

      1.  In all cases where the creator of a spendthrift trust shall indicate the sum to be applied for or paid to the beneficiary or shall make the application or payment of sums or further sums for or to the beneficiary discretionary with the trustee, or shall make the amount thereof discretionary with the trustee, or shall give the trustee discretion to pay all or any part of the income to any one or more of the beneficiaries, such discretionary power shall be absolute, whether any valid provision for the accumulation of income is made or not and whether it relates to the income from real or personal property.

      2.  Such discretion shall never be interfered with for any consideration of the needs, station in life or mode of life of the beneficiary, or for uncertainty, or on any pretext whatever.

      3.  The giving of any such discretion does not invalidate any spendthrift trust.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.120  Restraints on alienation.

      1.  A spendthrift trust as defined in this chapter restrains and prohibits generally the assignment, alienation, acceleration and anticipation of any interest of the beneficiary under the trust by the voluntary or involuntary act of the beneficiary, or by operation of law or any process or at all. An exception is declared, however, when the trust does not provide for the application for or the payment to any beneficiary of sums out of capital or corpus or out of rents, profits, income, earnings, or produce of property, lands or personalty. In such cases, the corpus or capital of the trust estate, or the interest of the beneficiary therein, may be anticipated, assigned or aliened by the beneficiary voluntarily, but not involuntarily or by operation of law or by any process or involuntarily at all. The trust estate, or corpus or capital thereof, shall never be assigned, aliened, diminished or impaired by any alienation, transfer or seizure so as to cut off or diminish the payments, or the rents, profits, earnings or income of the trust estate that would otherwise be currently available for the benefit of the beneficiary.

      2.  Payments by the trustee to the beneficiary shall be made only to and into the proper hands of the beneficiary and not by way of acceleration or anticipation, nor to any assignee of the beneficiary, nor to or upon any order, written or oral, given by the beneficiary, whether such assignment or order be the voluntary contractual act of the beneficiary or be made pursuant to or by virtue of any legal process in judgment, execution, attachment, garnishment, bankruptcy or otherwise, or whether it be in connection with any contract, tort or duty.

      3.  The beneficiary shall have no power or capacity to make any disposition whatever of any of the income by his order, voluntary or involuntary, and whether made upon the order or direction of any court or courts, whether of bankruptcy or otherwise; nor shall the interest of the beneficiary be subject to any process of attachment issued against the beneficiary, or to be taken in execution under any form of legal process directed against the beneficiary or against the trustee, or the trust estate, or any part of the income thereof, but the whole of the trust estate and the income of the trust estate shall go to and be applied by the trustee solely for the benefit of the beneficiary, free, clear, and discharged of and from any and all obligations of the beneficiary whatsoever and of all responsibility therefor.

      4.  The trustee of a spendthrift trust is required to disregard and defeat every assignment or other act, voluntary or involuntary, that is attempted contrary to the provisions of this chapter.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.130  Legal estate of beneficiary in corpus.  A beneficiary of a spendthrift trust has no legal estate in the capital, principal or corpus of the trust estate unless under the terms of the trust he or one deriving title from him is entitled to have it conveyed or transferred to him immediately or after a term of years or after a life, and in the meantime the income from the corpus is not to be paid to him or any other beneficiary.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.140  Perpetuities.  A spendthrift trust may not continue for a period longer than that allowed under NRS 111.103 to 111.1039, inclusive. The free alienation of the legal estate by the trustee may not be suspended for a period exceeding the limit prescribed in any constitutional or statutory prohibition against perpetuities existing in this State or in the state where the lands affected by the trust are situate, but a contingent remainder in fee may be created on a prior remainder in fee, to take effect if the persons to whom the first remainder is limited die under the age of 21 years, or upon any other contingency by which the estate of those persons may be determined before they attain that age.

      [Part 5:86:1939; 1931 NCL § 6880.04]—(NRS A 1999, 1237)

      NRS 166.150  Accumulation of income.  An accumulation of the income of trust property may be directed in the will or other writing creating a spendthrift trust, for the benefit of one or more beneficiaries, to commence within the time permitted for the vesting of future interests and not to extend beyond the period limiting the time within which the absolute power of alienation of property may be suspended. If the direction is for a longer term than is permitted by law, it is void only as to the excess time, whether the direction be separable from the other clauses in the trust or not, and in such cases of invalidity the income may be paid and distributed to the next succeeding beneficiary in interest.

      [Part 5:86:1939; 1931 NCL § 6880.04]

      NRS 166.160  Settlor may make different provisions.  The principles stated in NRS 166.080 to 166.150, inclusive, shall not prevent the creator of any spendthrift trust, by will or other writing, from making other or different provisions provided he uses express, specific language to that end.

      [Part 5:86:1939; 1931 NCL § 6880.04]

MISCELLANEOUS PROVISIONS

      NRS 166.170  Limitation of actions with respect to transfer of property to trust.

      1.  A person may not bring an action with respect to a transfer of property to a spendthrift trust:

      (a) If he is a creditor when the transfer is made, unless the action is commenced within:

             (1) Two years after the transfer is made; or

             (2) Six months after he discovers or reasonably should have discovered the transfer,

Ê whichever is later.

      (b) If he becomes a creditor after the transfer is made, unless the action is commenced within 2 years after the transfer is made.

      2.  A person shall be deemed to have discovered a transfer at the time a public record is made of the transfer, including, without limitation, the conveyance of real property that is recorded in the office of the county recorder of the county in which the property is located or the filing of a financing statement pursuant to chapter 104 of NRS.

      3.  As used in this section, “creditor” has the meaning ascribed to it in subsection 4 of NRS 112.150.

      (Added to NRS by 1999, 1236; A 2007, 894)

 

 

 

   NRS 115.005  Definitions.  As used in this chapter, unless the context otherwise requires:

      1.  “Equity” means the amount that is determined by subtracting from the fair market value of the property the value of any liens excepted from the homestead exemption pursuant to subsection 3 of NRS 115.010 or NRS 115.090.

      2.  “Homestead” means the property consisting of:

      (a) A quantity of land, together with the dwelling house thereon and its appurtenances;

      (b) A mobile home whether or not the underlying land is owned by the claimant; or

      (c) A unit, whether real or personal property, existing pursuant to chapter 116 or 117 of NRS, with any appurtenant limited common elements and its interest in the common elements of the common-interest community,

Ê to be selected by the husband and wife, or either of them, or a single person claiming the homestead.

      (Added to NRS by 1989, 646; A 1991, 579; 2003, 879)

      NRS 115.010  Exemption from sale on execution and from process of court; amount of exemption; exceptions; extension of exemption.

      1.  The homestead is not subject to forced sale on execution or any final process from any court, except as otherwise provided by subsections 2, 3 and 5, and NRS 115.090 and except as otherwise required by federal law.

      2.  The exemption provided in subsection 1 extends only to that amount of equity in the property held by the claimant which does not exceed $550,000 in value, unless allodial title has been established and not relinquished, in which case the exemption provided in subsection 1 extends to all equity in the dwelling, its appurtenances and the land on which it is located.

      3.  Except as otherwise provided in subsection 4, the exemption provided in subsection 1 does not extend to process to enforce the payment of obligations contracted for the purchase of the property, or for improvements made thereon, including any mechanic’s lien lawfully obtained, or for legal taxes, or for:

      (a) Any mortgage or deed of trust thereon executed and given, including, without limitation, any second or subsequent mortgage, mortgage obtained through refinancing, line of credit taken against the property and a home equity loan; or

      (b) Any lien to which prior consent has been given through the acceptance of property subject to any recorded declaration of restrictions, deed restriction, restrictive covenant or equitable servitude, specifically including any lien in favor of an association pursuant to NRS 116.3116 or 117.070,

Ê by both husband and wife, when that relation exists.

      4.  If allodial title has been established and not relinquished, the exemption provided in subsection 1 extends to process to enforce the payment of obligations contracted for the purchase of the property, and for improvements made thereon, including any mechanic’s lien lawfully obtained, and for legal taxes levied by a state or local government, and for:

      (a) Any mortgage or deed of trust thereon; and

      (b) Any lien even if prior consent has been given through the acceptance of property subject to any recorded declaration of restrictions, deed restriction, restrictive covenant or equitable servitude, specifically including any lien in favor of an association pursuant to NRS 116.3116 or 117.070,

Ê unless a waiver for the specific obligation to which the judgment relates has been executed by all allodial titleholders of the property.

      5.  Establishment of allodial title does not exempt the property from forfeiture pursuant to NRS 179.1156 to 179.121, inclusive, 179.1211 to 179.1235, inclusive, or 207.350 to 207.520, inclusive.

      6.  Any declaration of homestead which has been filed before July 1, 2007, shall be deemed to have been amended on that date by extending the homestead exemption commensurate with any increase in the amount of equity held by the claimant in the property selected and claimed for the exemption up to the amount permitted by law on that date, but the increase does not impair the right of any creditor to execute upon the property when that right existed before July 1, 2007.

      [Part 1:72:1865; A 1879, 140; 1949, 51; 1943 NCL § 3315]—(NRS A 1965, 28; 1971, 575; 1975, 215, 981; 1977, 933, 1492; 1979, 984; 1981, 625; 1983, 104, 662; 1985, 13; 1989, 3, 646; 1991, 579; 1995, 225; 1997, 3419; 2003, 879, 1008; 2005, 1010, 2226; 2007, 205, 3026)

      NRS 115.020  Declaration of homestead: Contents; recording; notice required of person who charges fee for recording declaration; rights not extinguished by certain conveyances; rights of trustee; penalty.

      1.  The selection must be made by either the husband or wife, or both of them, or the single person, declaring an intention in writing to claim the property as a homestead.

      2.  The declaration must state:

      (a) When made by a married person or persons, that they or either of them are married, or if not married, that he or she is a householder.

      (b) When made by a married person or persons, that they or either of them, as the case may be, are, at the time of making the declaration, residing with their family, or with the person or persons under their care and maintenance, on the premises, particularly describing the premises.

      (c) When made by any claimant under this section, that it is their or his intention to use and claim the property as a homestead.

      3.  The declaration must be signed by the person or persons making it, and acknowledged and recorded as conveyances affecting real property are required to be acknowledged and recorded. If the property declared upon as a homestead is the separate property of either spouse, both must join in the execution and acknowledgment of the declaration.

      4.  If a person solicits another person to allow the soliciting person to file a declaration of homestead on behalf of the other person and charges or accepts a fee or other valuable consideration for recording the declaration of homestead for the other person, the soliciting person shall, before the declaration is recorded or before the fee or other valuable consideration is charged to or accepted from the other person, provide that person with a notice written in bold type which states that:

      (a) Except for the fee which may be charged by the county recorder for recording a declaration of homestead, a declaration of homestead may be recorded in the county in which the property is located without the payment of a fee; and

      (b) The person may record the declaration of homestead on his own behalf.

Ê The notice must clearly indicate the amount of the fee which may be charged by the county recorder for recording a declaration of homestead.

      5.  The rights acquired by declaring a homestead are not extinguished by the conveyance of the underlying property in trust for the benefit of the person or persons who declared it. A trustee may by similar declaration claim property, held by him, as a homestead for the settlor or for one or more beneficiaries of the trust, or both, if the person or persons for whom the claim is made reside on or in the property.

      6.  A person who violates the provisions of subsection 4 is guilty of a misdemeanor.

      [Part 1:72:1865; A 1879, 140; 1949, 51; 1943 NCL § 3315]—(NRS A 1971, 575; 1983, 662; 1985, 13; 1995, 226)

      NRS 115.030  Tenants in common: Declaration of homestead.  Tenants in common may declare for homestead rights upon their respective estates in lands, and the improvements thereon; and hold and enjoy homestead rights and privileges therein, subject to the rights of their cotenants, to enforce partition of such common property as in other cases of tenants in common.

      [Part 1:72:1865; A 1879, 140; 1949, 51; 1943 NCL § 3315]

      NRS 115.040  Mortgage or alienation of homestead property; abandonment of homestead.

      1.  A mortgage or alienation of any kind, made for the purpose of securing a loan or indebtedness upon the homestead property, is not valid for any purpose, unless the signature of the husband and wife, when that relationship exists, is obtained to the mortgage or alienation and their signatures are properly acknowledged.

      2.  The homestead property shall not be deemed to be abandoned without a declaration thereof in writing, signed and acknowledged by both husband and wife, or the single person claiming the homestead, and recorded in the same office and in the same manner as the declaration of claim to the homestead is required to be recorded.

      3.  If either spouse is not a resident of this State, his signature and the acknowledgment thereof is not necessary to the validity of any mortgage or alienation of the homestead before it becomes the homestead of the debtor.

      [2:72:1865; B § 187; BH § 540; C § 551; RL § 2143; NCL § 3316]—(NRS A 1963, 28; 1971, 576; 1979, 281; 1983, 105; 1985, 14)

      NRS 115.050  Execution against homestead.

      1.  Whenever execution has been issued against the property of a party claiming the property as a homestead, and the creditor in the judgment makes an oath before the judge of the district court of the county in which the property is situated that the amount of equity held by the claimant in the property exceeds, to the best of the creditor’s information and belief, the sum of $550,000, the judge shall, upon notice to the debtor, appoint three disinterested and competen