Craig's Corner - Wealth Planning Insights

Thursday, December 24, 2015

Asset Protection Tips for Business Owners

What are the benefits of Nevada Asset Protection Trusts?

A Nevada Asset Protection Trust (NAPT) is designed to shield a small business owner's personal assets from creditor claims and lawsuits. While other business entities like corporations, limited liability companies or limited partnerships can protect a business owner, his or her assets can still be threatened by lawsuits and spousal claims in a divorce proceeding. Moreover, liability insurance may not offer enough coverage.

Ironically, while the benefits of these trusts are widely known to business people in other states, Nevada residents have not taken full advantage of this asset protection vehicle. In order for a business owner to protect his or her assets, the assets must not be owned directly. An NAPT gives a business owner the benefit of wealth preservation since the trust actually owns the assets.

This protects the assets from creditor claims, lawsuits, and even alimony and child support, provided, the trust is put in place before the claims arise. Attempting to fend off pending or anticipated claims by setting up this type of trust is deemed fraudulent conveyance.

An NAPT offers long-term asset protection. In fact, after a two-year seasoning period, Nevada law protects assets in a properly designed trust for 365 years. While the NAPT owns the assets, the business owner can choose a trustee to manage the assets in accordance with his or her wishes (and replace the trustee for not doing so). The business owner can also be beneficiary, even though he or she does not have an absolute right to income or principal.
With regard to taxes, an NAPT is designed to be neutral since the establishment of a trust is not considered a gift. Moreover, the income earned by the assets in trust can be reported on the return of the business owner who can also exercise full control over the trust investments without adverse tax consequences.

In the final analysis, a NAPT offers superior asset protection to a business owner; putting this trust in place should be part of his or her overall estate plan. A qualified attorney in the state of Nevada should be consulted by business owners seeking asset protection as well as anyone in need of estate planning.

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S. Craig Stone II of Stone Law Offices, Ltd. serves clients throughout Clark County, Southern NV, Las Vegas, Henderson, Boulder City, North Las Vegas, Summerlin, Carson City, Reno, Washoe County, and Nye County. Also serving clients with asset protection nationwide.

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