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This is the website for the Asset Protection, Trust and Transactional Departments of Black & LoBello. NEVADA LLC • NEVADA ASSET PROTECTION TRUST HOME | INCORPORATE IN NEVADA FORM A NEVADA LLC | WILLS AND TRUSTS | ASSET PROTECTION | REAL ESTATE | ABOUT THE FIRM | RESOURCES | LAWYER PROFILE | AREAS OF PRACTICE |
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How is the Nevada Onshore Trust Affected by the New Bankruptcy Law? Recently the new Bankruptcy law went into effect. Thus there has been some concern that the new Bankruptcy law might affect some of the protection that otherwise might be afforded through a Nevada Spendthrift Trust (aka: Nevada Onshore Trust, Domestic Asset Protection Trust, Self-Settled Spendthrift Trust). The new Bankruptcy code specifically addresses "self-settled trusts" (the Nevada Spendthrift Trust or "Nevada Onshore Trust", as it is most commonly known, is such a self-settled trust within the meaning of the new bankruptcy law). The new Bankruptcy code issue with regard to self-settled trusts (Nevada Spendthrift Trust or Nevada Onshore Trust) has to do with the "transfer" of property prior to filing a bankruptcy petition. Specifically, under the new bankruptcy code provision [11 U.S.C. 548(e)], the bankruptcy trustee has the power to "avoid" (aka: undo or nullify) a transfer of assets to a self-settled trust (Nevada Onshore Trust or Nevada Spendthrift Trust) that is made within 10 years prior to the date of filing of the bankruptcy petition if: (a) the transfer was made to a self-settled trust or similar device; (b) the transfer was made by the debtor (the debtor is term for the person filing bankruptcy); (c) the debtor is a beneficiary of the trust; and (d) the debtor made the transfer "with actual intend to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date of such transfer was made, indebted." So, in other words, this new provision in the bankruptcy code is basically a "fraudulent transfer" issue with an outside time limit to raise the issue of 10 years (after 10 years no one can even raise the issue, the assets in the Trust will simply not become part of the bankruptcy estate). Hence, the "intent to defraud" would be the key issue if a bankruptcy trustee attempted to utilize this provision. If there were no existing creditor issues at the time of the transfer of the assets to the Nevada Onshore Trust, proving the intent to defraud would be very difficult, at best, for the bankruptcy trustee to do. Also, the issue would be the asset "transferred" to the Trust and not an invalidation of the Trust itself. Other trust assets that are in the trust (such as assets received for another source, pre-existing assets in the trust, etc.) would not be the subject of the bankruptcy "transfer" issue. Property funded to the trust other than from the debtor would, under the plain terms of this law, not be subject to a bankruptcy trustee's control or ability to reach such assets (as long as the property that is funded from the other source did not originate with the debtor). |
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BLACK & LOBELLO HOME | INCORPORATE IN NEVADA FORM A NEVADA LLC | WILLS AND TRUSTS | ASSET PROTECTION | REAL ESTATE | ABOUT THE FIRM | RESOURCES | LAWYER PROFILE | AREAS OF PRACTICE SITE MAP **The information you obtain on this site is not intended as legal advice. You should consult an attorney for individual advice regarding your own specific information. |
