Nevada Asset Protection Trust Guide

A Nevada Asset Protection Trust is an irrevocable, self-settled spendthrift trust under NRS Chapter 166 that can protect properly funded assets from most future creditors while allowing the settlor to be a discretionary beneficiary. The trust cannot require distributions to the settlor.

Nevada Law Requirements

The statute requires at least one Nevada trustee and that part of the trust’s administration occur in Nevada, such as record-keeping or tax return preparation. These Nevada connections anchor the trust to Nevada law.

In our experience, clients use Nevada trusts to hold brokerage accounts, cash, and LLC interests that own real estate or operating companies. Day-to-day investment control can be separated from distribution control to keep the settlor at arm’s length.

Time Limits for Creditor Challenges

Nevada’s limitations period for challenging a transfer to a spendthrift trust is short. A pre-existing creditor must sue within two years of transfer or within six months of when the transfer was or should have been discovered; later creditors have two years. Publicly recording a transfer can start the discovery clock. The creditor must prove its case by clear and convincing evidence.

No Exception Creditors in Nevada

Nevada is notable for having no statutory “exception creditors.” The Nevada Supreme Court has confirmed that, if the obligation was not known when the trust was created, even child or spousal support claims cannot be satisfied from a properly structured Nevada self-settled spendthrift trust.

Bankruptcy and Federal Law Considerations

Bankruptcy is different. Federal law allows a bankruptcy trustee to unwind transfers to a self-settled trust for up to ten years if the transfer was made with actual intent to hinder, delay, or defraud.

This federal lookback applies regardless of state law.

Out-of-State Enforcement Risks

Courts outside Nevada may apply their own law to local disputes, especially where assets or parties are tied to another state. Cases like Toni 1 Trust and Huber show that out-of-state courts can disregard another state’s DAPT protections or find transfers fraudulent under local law.

Proper planning anticipates this choice-of-law risk.

Requirements for a Valid Nevada Trust

A Nevada trust must be irrevocable and drafted so that distributions to the settlor are purely discretionary by an independent fiduciary. The instrument should include a spendthrift clause and avoid any mandatory right of the settlor to income or principal.

We have seen Nevada trusts work best when established well before any claim arises, funded methodically, and coordinated with titling, entity structures, and accurate records. Transfers made after trouble starts risk being set aside as fraudulent regardless of jurisdiction.

Key Features of a Nevada Asset Protection Trust

• Irrevocable, self-settled spendthrift trust under NRS Chapter 166.
• Settlor may be a discretionary beneficiary; no required distributions to settlor.
• At least one Nevada trustee and some Nevada administration are required.
• Short challenge window: two years from transfer, plus a six-month discovery rule for existing creditors; clear-and-convincing burden.
• No statutory exception creditors; Nevada Supreme Court has upheld protection against unknown support obligations at creation.
• Federal bankruptcy has a separate ten-year lookback for intentional fraudulent transfers to self-settled trusts.
• Out-of-state courts may apply their own law; asset location and forum can matter.

Trustee and Administration Requirements

A Nevada trustee may be a Nevada individual, bank, or trust company, and many designs add a distribution trustee or committee to approve any payout to the settlor. Those roles maintain separation and help demonstrate independence in practice.

Funding typically involves liquid portfolios, cash, and membership interests in closely held LLCs; direct placement of operating assets is less common because businesses need working capital and predictable access. In our experience, clients often pair the trust with a Nevada-administered investment LLC to centralize management.

Tax and Compliance

A Nevada trust is not a tax shelter and does not excuse compliance with federal or state tax law. Income taxation, reporting, and gift-tax issues must be handled the same as with any irrevocable trust.

Practical Use and Effectiveness

If the settlor resides outside Nevada or assets sit in another state, the trust should be drafted and administered to strengthen Nevada contacts, avoid badges of fraud, and anticipate cross-border enforcement. Thoughtful trustee selection, real Nevada administration, and conservative distribution practices matter in court.

Nevada’s framework is among the most protective when used early, funded prudently, and operated as a real, discretionary trust. That is what we have seen in practice with clients who implement these trusts well before any creditor issue emerges.