Nevada is recognized as a community property state. In the event of divorce or separation, the state recognizes any assets acquired during a marriage to be split and owned equally between partners. 1
A Revocable trust is considered to be a “Living Trust”, meaning that it is a very flexible document as it can be amended and still be a legally bound document. On the counter side, Irrevocable Trust is a type of trust that cannot be revoked and amended. Meaning once the assets are placed into the trust, they no longer have control over those assets. This form of a trust is one of the highest forms of asset protection. A Nevada Asset Protection Trust (NAPT) is a special type of irrevocable trust. Typically, once an owner places their assets in a trust, the owner no longer legally owns the assets. However, one of the reasons Nevada is considered one the best states to form a trust, is because of the flexibility around NAPTs. More specifically, Nevada laws allow some special benefits that make NAPT have unique legal advantages for the owner. For example, Nevada has the shortest “Look Back” period for creditors to challenge any transfer of an asset into a NAPT. Compared to other states, this period can last up to 10 years. But in Nevada, it is only a maximum of 2 years. After this window, you are completely protected from lawsuits and creditors. Additionally, Nevada allows you to still receive the benefits and distributions from your own trust while still keeping assets protected. In comparison to other states, you lose all access to your assets.2
Child Support and alimony have policies that are widespread on a state level. Many states allow for ex-spouses to claim assets from a trust for alimony or child support. Nevada does not allow such a policy, adding to the list of reasons on why Nevada is one of the best when it comes to asset protection. When assets are properly structured and documented in a NAPT, they are untouchable.
In 2017, a groundbreaking case was entered the Nevada Supreme Court.3 This case was seen as a landmark that reinforced the power and strength of NAPTs. Topics regarding divorce, alimony, and child support claims, NAPT regulations will always come out as number one. In the case, the ruling confirmed that because assets were properly structured in a NAPT, the assets were untouchable even when ex-spouses were seeking financial support. In this 2017 case, the divorcing couple, Bruce Klabacka and Dianna Nelson, had both individually created a NAPT to hold their personal assets. When Dianne and Brue separated, Dianna felt she was entitled to claim child support payments from Bruce’s NAPT. The Nevada Supreme Court ruled in the Favor of Bruce Klabacka and stated that because Bruce’s assets were stored in a proper NAPT, his assets were untouchable and therefore he was not responsible for child support payments from his NAPT.
What are the key takeaways from this case?
Assets that are properly structured in a NAPT are fully protected from alimony and child support payments. This case also helps enforce that Nevada law does not provide exceptions for ex spouses or dependents to access trust funds. Additionally, a divorce does not grant special access for the exposure to receive payments from a NAPT. Only assets that are stated outside of the NAPT are a candidate to make distributions from in terms of child support payments and alimony. The 2017 Klabacka v. Nelson confirmed that Nevada is one of the best when it comes to asset protection and estate planning laws.
By becoming knowledgeable and equipped with certain procedures and how to go about topics, it is helping to ensure your legacy is being upheld with the highest intent. To capitalize on the benefits Nevada laws offer for trusts, Nevada allows trusts to last up to 365 years to ensure your family’s dynasty is being pursued and can pass down wealth for generations to come without estate taxes or probate. You can be in control of your legacy and that starts with finding the right estate planning attorney to help plan your future.
1 See e.g., Nevada Community Property Laws- Who Owns What, Las Vegas Family Law, https://www.shouselaw.com/nv/family/divorce/community-property/#:~:text=Nevada%20is%20a%20community%20property,a%20marital%20dissolution%20settlement%20agreementJ, (last visited January 29, 2025).
2See e.g., Nevada Asset Protection Trust, Icon Trust, https://icontrustnv.com/trust-type/nevada-asset-protection-trusts/#:~:text=Two%2Dyear%20limitation%20period%20%E2%80%93%20This%20is%20the,one%20of%20the%20shortest%20in%20the%20nation, (Last visited January 2025).
3 See e.g., Klabacka v. Nelson: Nevada Supreme Court Makes Historically Significant DAPT ruling, Ultimate Estate Planner, https://ultimateestateplanner.com/2017/07/01/klabacka-v-nelson-nevada-supreme-court-makes-historically-significant-dapt-ruling/, (Last visited January 29, 2025); see also Klabacka v. Nelson, 133 Nev. 164, 394 P.3d 940 (2017); see also Lopez v. Lopez, 2023 Nev. App.
LEXIS 10, 541 P.3d 117 (Nev. 2023).
