More and more clients are seeking asset protection as jury awards and the number of frivolous lawsuits continues to increase, in order to preserve their hard-earned assets to pass on to future generations. Such asset protection is available in various forms, including limited liability companies, corporations, homesteads, qualified retirement plans, offshore trusts, and domestic asset protection trusts. As of the date of this article, 18 states have adopted some form of Domestic Asset Protection Trust (“DAPT”) statute¹. Such statutes are not solely for the benefit of the residents of those 18 DAPT states. California has not yet passed a DAPT statute, however, many residents of California can still enjoy many of the protections DAPT states afford as long as certain conditions are met. This article discusses and explores the requirements of implementing a successful asset protection plan in such a situation, in which a California resident (a non-DAPT jurisdiction) sets up a Nevada DAPT. This article will show that a Nevada DAPT, structured as outlined below for a California resident, should provide a real benefit to the settlor by either (1) being upheld in its entirety if challenged, or (2), if a dispute arises, lead to an attractive settlement.²
First, the California resident must be a good candidate for a Nevada DAPT. To be a ‘good candidate’ the California resident should not have any impending litigation or creditor issues, and have other reasons for setting up the trust, which may include tax reasons – using up a lifetime exemption, taking advantage of Nevada’s income tax laws, gifting assets to reduce an estate for estate tax purposes; or other reasons such as pre-marital planning, protecting beneficiaries (other than him or herself) against potential ex-spouses, their creditors, etc. It is important for the drafting attorney to perform due diligence on the client to ensure that they are a qualified applicant and are not engaging in this type of planning to hinder, delay, or defraud known creditors.
In our example, we will assume that the California resident’s DAPT is in compliance with the Nevada DAPT statute and possesses the circumstantial factors described in the complete article.
¹ See Steven J. Oshins, “8th Annual Domestic Asset Protection Trust State Rankings Chart” (April 2017) (States with some form of DAPT Statute: Alaska, Colorado, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia and Wyoming).
² Thomas E. Greene III, “Structuring Self-Settled Trusts for Non-Resident Settlors,” Trusts & Estates, 29-35 (November 2016).
Concern over the coronavirus (COVID-19) is rampant. Many extreme measures are being taken and we are being urged to try to limit our activities to those that are more essential. In these uncertain times, we often reflect on our estate planning and end of life decisions. Because of the major impact these have on us and our families, we consider these activities essential and worthy of our immediate attention.
However, for many, the thought of traveling or meeting in a public place seems unhealthy or risky. For those who are concerned about going out in public, we offer to meet with you either over the telephone or via video conferencing through Facetime, Skype Business, or Zoom.
We have all been taught that a valid Will must be executed in the presence of two witnesses who are not related to the creator of the Will AND who are not listed as heirs of the Will. Also, to create a valid Trust, the Grantor (or creator) of the Trust should have his or her signature witnessed by a Notary. However, Nevada law now allows a Will and Trust to be signed, witnessed, and notarized electronically, or virtually, and still be legally valid. See NRS 163.0095 and NRS 13.085). Keep in mind that you still must be over the age of eighteen (18) and be of sound mind.
We have several alternative means for helping you complete your vital estate plan. For an Electronic Will to meet the requirements of the statute, it must be:
a. An authentication form of the testator or a characteristic of a certain person that is unique to that person and that is capable of measurement and recognition in an electronic record as a biological aspect of or physical act performed by that person such as:
ii. Retinal scan
iii. Voice recognition
iv. Video recording
v. Digitized signature
vi. Facial recognition
b. The electronic signature and electronic seal of an electronic notary public, placed thereon in the presence of the testator and in whose presence the testator placed his or her electronic signature thereon; or
c. The electronic signature of two or more attesting witnesses placed thereon in the presence of the testator and in whose presence the testator placed his or her electronic signature thereon.
If you would like to have your Will or Trust prepared, please contact us or give our office a call to schedule a telephone or video conference. Our attorneys and paralegals are here to assist you.