In conjunction with the exercise of putting in place a prenuptial, postnuptial, or cohabitation agreement, (collectively “personal relationship contracts”) an additional measure that would be recommended by savvy legal advisors would be the use of asset protection strategies to shore up the contract. In most, if not all cases, the personal relationship contract is put in place for the main purpose of preserving certain assets of one or both parties as items of “separate property.” This intent as provided in the contract should generally be honored and would withstand the scrutiny of a court or judge so long as the contract was not unconscionable, provided for adequate disclosure of both parties’ assets, and each party had an opportunity for separate legal counsel to review the agreement.
However, what better way to shore up such an agreement than to definitively segregate items of separate property into a trust? And what better trust is available for residents of Nevada (and others) than a Nevada On-Shore Trust ? (Self settled spendthrift trust or domestic asset protection trust - NRS 166).
A spouse, partner, ex-spouse or ex-partner has the ability to become a creditor when a disagreement arises regarding a personal relationship contract. If, however, the separate property assets in question have been properly funded into a Nevada On-Shore Trust, and the statutory period of two years time has elapsed (and such funding is not deemed to be a fraudulent transfer), the assets in the trust should be adequately protected from the spouse or partner creditor. At the very least, this additional step would give the spouse- or partner-creditor a reason to second-guess any dispute or lawsuit attempting to collect against the assets intended to be held as the sole and separate property of the party that established and funded the trust.
- Attorney Jason C. Walker