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By Frank Spees
Special to the Bonanza
Recently a piece appeared in the Bonanza about Protecting Your Assets. It was written in a generic way to cover the law of all of these United States, while the law of Nevada is a little different. Here is the law of Asset Protection as I see it:
First, if you can't sleep at night for fear of someone suing you, identify exactly what you are worried about and consider buying some insurance to cover it. This will be the most painless way of dealing with your asset protection fears.
Second, if you have a particularly dangerous activity you are engaged in, put it inside a "metal box." Imagine a firecracker blowing up in a metal box. It does not effect anything outside of the box. Your other assets are protected. Incorporate or put the activity inside of a limited Liability Company (LLC). However, outside of Nevada, LLCs may be taxed heavily and you may choose another type of entity.
Third, take your cherished assets, the ones you could not stand to lose, and "circle the wagons" around them as you would see in a John Wayne western movie. Put these assets in an entity so that the most a creditor could get is a "charging order." This means the creditor could not get at the assets, although they could get at income paid to you, but there would of course be none of that.
The problem with these entities is they mean yearly Secretary of State fees, Business license fees, and accountant's fees for that tax return. The Nevada Legislature has tackled this problem by setting up the "Serial LLC" which may allow for a whole hierarchy of entities with one Secretary of State fee, business license and tax return. This is untested and I question whether asset protection would be sacrificed by using one entity; It would be far easier, in my opinion, to "Pierce the corporate veil".
If these traditional forms of asset protection are not sufficient to allow you to sleep at night, you might want to set up the "Holy Grail" of trusts, the Nevada Self-Settled Spendthrift Trust (NSSST). For the first time in American jurisprudence, the government (the Nevada Legislature in this case) has permitted us to set up a trust which cannot be reached by creditors even though the person who sets it up is the income beneficiary. The catch is you need a "distribution trustee" to approve any distributions to you. Also, this is untested, and may not work for assets located outside of Nevada. You may also want to combine this NSSST with traditional asset protection. This new form of trust makes Nevada the best offshore jurisdiction, even though it is not offshore!
In Nevada the equity in your residence is protected in bankruptcy up to $350,000. Beyond that you may wish to have a nice tax-deductible mortgage. You are also allowed a great deal in your retirement plans and the "gun of your choice." After all, we are in Nevada, that bastion of the wild west.
Again, do whatever it takes to sleep easy at night, which might just be purchasing a little more insurance.
Don't confuse this asset protection with estate planning. You need four documents to avoid probate (going to court when someone dies and some estate taxes) the highest tax in America: the death tax: 1) A living trust, 2) a pour-over will, 3) health care documents, and 3) a power of attorney for assets. Make sure these documents include the 'HIPAA" language. Congress in its infinite wisdom passed a privacy statute effective Jan. 1, 2004 so that husbands and wives cannot get medical information about each other, let alone children, without the "HIPAA waivers."
This is Nevada Asset Protection in a nutshell, and I hope you find it helpful!
Frank Spees is 16 year resident of Incline Village, and is a graduate of UCLA Law School and Business School with 24 years of experience as a practicing attorney, limiting his practice to estate planning for the last 17 years.
Special to the Bonanza
Recently a piece appeared in the Bonanza about Protecting Your Assets. It was written in a generic way to cover the law of all of these United States, while the law of Nevada is a little different. Here is the law of Asset Protection as I see it:
First, if you can't sleep at night for fear of someone suing you, identify exactly what you are worried about and consider buying some insurance to cover it. This will be the most painless way of dealing with your asset protection fears.
Second, if you have a particularly dangerous activity you are engaged in, put it inside a "metal box." Imagine a firecracker blowing up in a metal box. It does not effect anything outside of the box. Your other assets are protected. Incorporate or put the activity inside of a limited Liability Company (LLC). However, outside of Nevada, LLCs may be taxed heavily and you may choose another type of entity.
Third, take your cherished assets, the ones you could not stand to lose, and "circle the wagons" around them as you would see in a John Wayne western movie. Put these assets in an entity so that the most a creditor could get is a "charging order." This means the creditor could not get at the assets, although they could get at income paid to you, but there would of course be none of that.
The problem with these entities is they mean yearly Secretary of State fees, Business license fees, and accountant's fees for that tax return. The Nevada Legislature has tackled this problem by setting up the "Serial LLC" which may allow for a whole hierarchy of entities with one Secretary of State fee, business license and tax return. This is untested and I question whether asset protection would be sacrificed by using one entity; It would be far easier, in my opinion, to "Pierce the corporate veil".
If these traditional forms of asset protection are not sufficient to allow you to sleep at night, you might want to set up the "Holy Grail" of trusts, the Nevada Self-Settled Spendthrift Trust (NSSST). For the first time in American jurisprudence, the government (the Nevada Legislature in this case) has permitted us to set up a trust which cannot be reached by creditors even though the person who sets it up is the income beneficiary. The catch is you need a "distribution trustee" to approve any distributions to you. Also, this is untested, and may not work for assets located outside of Nevada. You may also want to combine this NSSST with traditional asset protection. This new form of trust makes Nevada the best offshore jurisdiction, even though it is not offshore!
In Nevada the equity in your residence is protected in bankruptcy up to $350,000. Beyond that you may wish to have a nice tax-deductible mortgage. You are also allowed a great deal in your retirement plans and the "gun of your choice." After all, we are in Nevada, that bastion of the wild west.
Again, do whatever it takes to sleep easy at night, which might just be purchasing a little more insurance.
Don't confuse this asset protection with estate planning. You need four documents to avoid probate (going to court when someone dies and some estate taxes) the highest tax in America: the death tax: 1) A living trust, 2) a pour-over will, 3) health care documents, and 3) a power of attorney for assets. Make sure these documents include the 'HIPAA" language. Congress in its infinite wisdom passed a privacy statute effective Jan. 1, 2004 so that husbands and wives cannot get medical information about each other, let alone children, without the "HIPAA waivers."
This is Nevada Asset Protection in a nutshell, and I hope you find it helpful!
Frank Spees is 16 year resident of Incline Village, and is a graduate of UCLA Law School and Business School with 24 years of experience as a practicing attorney, limiting his practice to estate planning for the last 17 years.
