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Nevada Asset Protection Trusts
I recently had dinner with a well-known and extremely bright asset protection attorney from south Florida. Dinner conversation touched on the topic of domestic asset protection trusts. Domestic asset protection trusts (DAPT) are self-settled trust where the debtor is both settlor/trustmaker and the primary beneficiary. Domestic asset protection trusts set up in states which have enacted statutes to protect self-settled trust from attack by creditors of the settlor. Florida has no DAPT statute, and Florida courts have provided no asset protection to any self-settled trust.
I had never been a fan of DAPT planning because of a concern that Florida courts would not extend protection to a Florida debtor who was the beneficiary of a DAPT in favored states. However, my colleagues persuaded me to reconsider the benefits of a DAPT, especially a Nevada based DAPT. Nevada law provides may unique benefits to its asset protecton trusts. For example, the statute of limitations on fraudulent conveyance suits against transfers to a Nevada DAPT is only two years or six months after the conveyance is discovered. Nevada law specifically allows to debtor/settlor to have limited trustee powers including the retained power to invest trust assets. Powers to distribute trust property to the settlor/beneficiary is best left to an independent co-trustee. A Nevada trust, being domestic, provides greater sense of comfort and control than trust formed and operated in a foreign country.
No Florida court has yet ruled on the asset protection afforded by a Nevada DAPT, but my dinner colleague convinced me that in theory these trusts should be respected by Florida law. In any event, a Nevada DAPT is an asset protection alternative worth considering in complex asset protection situations.
posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida
February 22, 2006 in Effective Planning Strategies | Permalink
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Comments
I would like to know the name of the attorney you were speaking with from South Florida. My father recently was hit with ruinuous judgement from a 19 year old case with a former corporation he owned. After 17 years a contingency fee attorney found the judgement that was owned by the Bank of New York and was never prosecuted for execution. Although the judgement was never scheduled on any bankrupcy forms, and the creditors were left with about $100,000,000 in debts not paid. The attorney on behalf of the original bankrupcy debtor brought suit 5 years after the bankruptcy was closed and was given standing on a technical abandonment of the claim. The case went to trial and a judgement was issued on my father for approximately $8,000,000 (the original judgement on the Corporation was $700,000 in 1985 the increase was due to interest and legal fees) the judge decided to pierce the corporate veil of my father and rendered judgement on him personally and another company he owned with three of his Children which had been in existence since 1983) The judgement far exceeds any ability to pay and after negotiations to give defendent everything but my parents house and enough cash flow to keep our $30,000,000 a year and 300 employee company going, negotiations have broke down and the contingency fee attorney want to force both my father and my company into Chapter 7 liquidation. Bank lending has a priority lien on the assets of the company and the plaintiff know they will be doing nothing more then distroying my father and his family financially. They will receive little if anything after liquidation. This stuff no matter how wasteful happens and I will accept it and try and do what is best for my family and employees going forward yet I think all is lost on the company side. The only thing my father has left is an unencumbered home in South Florida that he owns with my mother in tenancy by the entirety. My dad is 78 years old and dying of cancer, he has medical bills and my mother to think of and he will need some money to live on and the only thing he will have that is not attachable is the house worth around a $1,000,000. What is the best way to barrow on the asset for the remainder of his life without losing his homestead exemption or having the proceeds of a loan attachable to his creditor. The plaintiff's are very upset because they thought that my father was worth a lot more then he is and they now see they will not recoup the kind of money they had hoped to achieve when they took the gamble. This consternation has lead them to threaten to resort to really low and abusive tactics like constantly demanding to depose my mother who is 78 and in the early stages of alzhiemers, they really have no reason except they know it upsets us more then anything else. I am in need of some good consultation on how to take care of my mom and dad going forward. I need a plan and I need to know it will work. Frankly, our counsel has lost heart since the judgement came down. The lawyering done was outstanding and they have been commended, we have spent over $2,000,000 in legal fees over the past 18 months and as we go forward they have basically told me time and time again that they don't know what my father will do...call a mortgage broker and ask them. It has been done, yet I do not have a sense that they fully understand the importance of what needs to happen so that my father and mother can make debt service and pay bills and have enough to live on without having to fear an attack on the funds they hold for there living expenses.
I have gone on too long, more for my own need to put in writing what needs to happen then to ask the question. Could you please refer me to the attorney you were referring to in your post. Recognize my most sincere appreciation for your time in reading this and understand how fully I appreciate any information or suggestions you may have.
Thank You,
MKD, Fort Lauderdale, Florida
Posted by: MKD | Apr 30, 2006 10:38:38 PM
