Commercial real estate investors, even those with properties in Houston, Texas, may be able to use a Nevada Domestic Asset Protection Trust (DAPT) for advanced asset protection when forming LLCs to hold their commercial real estate properties. (This is not legal advice. Be sure to contact your attorney before implementing anything in this article.)
But what is a Nevada Asset Protection Trust (DAPT)? It is a self-settled trust designed to protect assets from creditors. And it is one of the strongest ways to protect yourself and your assets.
Typically, a DAPT involves Trustees.
Firstly, there is an Investment Trustee. This is you. You are the one who decides how to use the money.
In addition, the trust involves a Distribution Trustee. As the title implies, this person distributes the money. The people who receive money from the DAPT are the Beneficiaries.
So when a commercial real estate investment produces income, the Distribution Trustee can make distributions to anyone they want under the terms of the trust. However, you (the property owner) cannot be both the Investment Trustee and the Distribution Trustee. An attorney or another individual in Nevada will manage the trust. In fact, none of the Beneficiaries can distribute money to themselves.
In a Nevada DPAT, someone else besides you must control the money.
A Potential Major Benefit
The main benefit of a Nevada Domestic Asset Protection Trust, if you own Texas commercial properties (like office buildings, rv parks or warehouses), may be that it may provide tremendous asset protection for your money. For example, if someone sues you for some reason, you don’t have access to the money. Neither you nor any of the other Beneficiaries have direct access to the LLC’s funds.
Because the LLC is you, it gives you major protection by keeping most of the assets in the LLC.
Let’s say that you decide to create an LLC and give yourself 10% controlling interest. In turn, 90% goes to the DAPT. Yet you don’t need a controlling interest to actually control the trust. Although the LLC owns all the property, you can control the LLC, even with only a 10% controlling interest.
When it comes to distribution, you can give assets to any of the Beneficiaries. And you can distribute these assets once a month, once a year, or however often you choose.
Own Real Estate in a Trust
As a property owner, it may be in your best interests to consider a real estate trust like the DAPT for your LLCS. A Nevada domestic asset protection trust lets you be a direct beneficiary while also protecting your assets from creditors. Not only that, but these trusts may allow for financial flexibility.
If you’re interested in a DAPT for your Texas commercial real estate assets, there are some things that you should know.
Firstly, in order to set up a Nevada trust, the state law generally requires at least one trustee to be either a Nevada bank or trust company or a Nevada resident. Also, be aware that a Nevada asset protection trust has a two-year seasoning period. According to the state of Nevada statute which covers trust, two years after establishing the trust, your assets are totally protected.
What’s more, Nevada is ranked first for asset protection trusts. One of the main reasons is that Nevada has one of the shortest statutes of limitation periods. On top of that, Nevada is one of only two states with ‘no exception creditors.’
Nevada also has no state fiduciary income tax.
Lastly, if an owner of a Nevada LLC or LP is sued personally, a creditor cannot take over or gain control of either the incorporated entity or its assets.
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