Estate Planning & Asset Protection


A Will, properly drafted, allows you to control the transfer of your assets to desired individuals or organizations upon your death. You must be over the age of eighteen (18) and must be of sound mind to create a Will.

Important features of a Will include being able to appoint a personal representative for your estate, designate beneficiaries, and attach conditions to a bequest. If you have minor children, a Will is an important document for naming guardians for those children. You may also nominate a guardian for you in the event of your incapacity. A Will may also be used to create a Testamentary Trust for minors or others in the Will. You may amend or revoke a Will at anytime while you are competent to do so.

A common misconception about Wills is that a Will does not require probate. Probate is a court process precisely for proving the Will, appointing the personal representative, and giving the personal representative the authority to act on behalf of the estate. In other words, a Will must be probated if your assets meet the statutory limits.

To avoid probate, you should use a Revocable Living Trust for your primary estate planning vehicle. However, even if you have a Revocable Living Trust, you still need a Will. A short, simple “Pourover Will” is used to transfer any remaining property to the Revocable Living Trust, which was not transferred to the Trust during your lifetime.

In the event you die without a Will, you die “intestate.” Your assets will pass through probate and be distributed according to the State “succession” statutes. The distribution depends upon factors such as whether you are married, have children, etc.

To avoid dying intestate and to know which estate planning vehicle is right for you, call our office for an initial consultation.



For many years now, the revocable living trust has been the primary estate planning tool to avoid probate. Although the living trust has been around for over a century, recent publicity about such trusts has brought them into prominence.


A living trust is based upon a simple concept. You, as the trustor or grantor, transfer assets to a trustee to hold for the benefit of another person, the beneficiary. There should be a written trust document prepared by a knowledgable estate planning attorney which spells out the details of your wishes.

The living trust avoids probate on an equally simple principle: Under our legal system, probate is required only when a person’s assets are titled in his or her name at death. Following an individual’s death, only the court appointed executor or administrator of the estate, acting under court authorization, may transfer title to assets. So if assets are not in the individual’s name at the time of death, but rather are owned by a trust, no probate is needed.

Moreover, the successor trustee named in the trust instrument carries out your instructions to hold or distribute trust assets following your death. This is very similar to how an executor would handle an estate administered under the terms of a last will and testament, except the delay and expense of probate is avoided.

And in Nevada, as with most states, your are permitted to serve as trustee of your own trust, thus, preserving management and control of trust assets during your lifetime. Living trusts may also be drafted so they are revocable and amendable. Therefore, as circumstances or relationships change, your trust can be modified to reflect these changes.


Joint tenancy is the method most commonly employed to “avoid” probate. While it is true that assets held in joint tenancy pass to the surviving joint tenant without probate, joint tenancy has significant limitations and is not recommended for most individuals. First, you are not really avoiding probate, but rather merely delaying it until the surviving joint tentant’s death. Second, holding property as joint tenants may eliminate significant estate and income tax saving opportunities. Third, the asset may be subject to the creditors of the noncontributing joint tenant, who obtains an interest in the property. And forth, it is impossible to implement complex estate plans (for example, estate plans calling for trusts where there are children from prior marriages) through the use of joint tenancy.

The limitations of joint tenancy are solved by placing ownership of assets in trust.

In sum, the living trust allows an individual to avoid probate without the complications of joint tenancy while at the same time reserving management and control of trust assets. In addition, a skilled living trust attorney may use the living trust, like other types of trusts, to save hundreds of thousands of dollars in estate tax.


One of the most widely encountered misconceptions in estate planning is the notion that using a living trust somehow saves income taxes. This is simply not true. As the grantor, you may revoke, amend, or even terminate the living trust at any time, and take back the trust property. Therefore, the trust is a “grantor” trust. So, the trust assets will be treated as being owned by you at death for estate tax purposes. And the trust income will be reportable by you during your lifetime. Accordingly, the savings to be realized from a living trust are strictly probate expenses, expenses associated with incompetency proceedings, and possibly federal estate taxes.

For a single person with an estate below $11,580,000 (for 2020) there will be no federal estate tax. If the estate exceeds $11,580,000, there will be an estate tax, and other planning techniques should be implemented to reduce, or even eliminate, this tax.

For married individuals, both spouses may not be entitled to the exemption equivalent of $11,580,000 unless a trust is implemented. In other words, a married couple’s combined gross estate without a trust, in most cases, cannot exceed $11,580,000 without incurring Federal estate taxes. A properly drafted living trust can increase the exemption equivalent to $23,160,000 for married couples, thereby saving their heirs as much as $4,632,000 in estate taxes.

It is important to understand that life insurance proceeds are included in calculating the value of a gross estate and are subject to estate tax, unless additional planning is used.



One of the principal advantages of the living trust is avoiding probate costs and delays. The significance of this factor varies greatly from one state to another. In Nevada, probate procedures are quite cumbersome and expensive, and living trusts are used widely by individuals with moderate and large estates.


Some people are particularly concerned about the privacy of their business and family affairs and choose living trusts for this reason. Whereas a will is filed with the probate court and becomes a public document, subject to inspection by any curious individual, a living trust represents a contractual arrangement between the grantor and the trustee and ordinarily never becomes open to public inspection. The privacy available through a living trust is undoubtedly one reason why many prominent individuals choose this vehicle.


A sometimes overlooked advantage of the living trust is the avoidance of incompetency proceedings. As an individual grows older, the possibility of incapacity because of a stroke or other disability which would render the person unable to manage his or her affairs becomes a real danger. Moreover, there exists the further possibility of an elderly person’s falling under the domination of an unscrupulous individual who may seek to take financial advantage the situation.

The conventional legal remedy is for the court to appoint a fiduciary to take charge of the person’s assets. This fiduciary is usually called a “guardian” or “conservator.” Although the practice varies from state to state, the establishment and operation of a guardianship ordinarily is both expensive and cumbersome. In addition, the family is subjected to the unpleasant prospect of having an elderly member declared incompetent.

A funded living trust may avoid the necessity for a guardianship if a person becomes incompetent. If that happens, the trustee for the living trust, or the successor trustee if the grantor was acting as sole trustee, assumes management of the trust assets. Typically, the trust provides liberal guidelines calling for the support and maintenance of the grantor during lifetime, thereby enabling the trustee or successor trustee to step in and carry out these provisions without the expense and delay of a court-supervised guardianship or conservatorship.


Another potential advantage of a living trust is sometimes overlooked: A trust can be extremely useful in heading off a will contest where one is anticipated. Ordinarily, the will of a person who has died is filed for probate, and notice is sent to the heirs and beneficiaries named in the will, all of whom are afforded an opportunity to contest the will. In most states, grounds for contest include defects in the execution of the will, unsoundness of mind of the person executing the will, duress, undue influence, and fraud.

If an individual dies with all of her assets in a living trust, a contest becomes much more difficult. If the trust has been operating during the individual’s lifetime—particularly with a bank, or even another individual as a co-trustee or sole trustee—it is difficult for a contestant to assert that the deceased person executed the trust without knowing what he or she was doing. The contestant must overcome not only the fact that the trust was executed but also the fact that numerous assets were voluntarily transferred to the trust and that the decedent acquiesced in the operation of the trust over what was perhaps a long period of time. Consequently, a living trust, though not invulnerable, is much more difficult to challenge than a will.


Another situation where particular facts may dictate using a living trust is the case of an individual who has significant real property holdings. In many states the procedure for real property sales by an executor is cumbersome.

In probate, the typical procedure is for the executor to enter into a sales agreement which is presented to the probate court for approval. In Nevada, potential buyers may come into court and make bids which are higher than the one accepted by the executor. This procedure is intended to protect the estate beneficiaries against an executor who fails to obtain the highest bid. It can, however, have the effect of deterring a purchaser who would be unwilling to spend the time and effort to negotiate a purchase agreement only to have it disapproved by the court or superseded by a higher bid.

Moreover, certain types of real property, such as unimproved land, are often sold commercially with low down payments and subject to relatively complicated arrangements involving options or to release property which has been sold from liens, and so forth. In general, the trustee of a living trust has much wider latitude in entering into unconventional transactions than a court-supervised executor. The importance of this latitude depends upon the probate law of the state involved.


If you own real estate in more than one state, a separate probate proceeding must be commenced in each state where the land is located. Multiple probates can be avoided by placing all out-of-state real property into a living trust. This factor alone, when it applies, justifies creating a living trust.


One principal disadvantage of the living trust is that its drafting and funding is more expensive than merely executing a will. After the provisions of a will have been worked out and made final, the will is executed and filed away. In contrast, after a living trust has been executed, it is necessary to transfer to the trust all of your investments and property.

For real estate, this requires executing deeds conveying the property to the trust. Similar documentation is required for promissory notes secured by deeds of trust or mortgages. Bank accounts and certificates of deposit should also be transferred, as well as stocks, bonds, and partnership interests. For an individual with extensive holdings, this process can be lengthy and expensive—in terms of legal time, filing fees, and transfer charges.

However, the costs are often minimized where the grantor is willing to do some of the work. A grantor can usually handle most of the transfers either by himself or with the assistance of his stockbroker or insurance agent. Brokers and insurance agents will typically transfer stocks, bonds and insurance free of charge. This usually leaves only real estate transfers that must be prepared by third parties. Deeds can typically be prepared for a cost of $100-$250 plus filing fees.

Although a living trust can be more expensive initially, the savings and peace of mind realized in avoiding probate and/or the possible estate tax savings realized by implementing a trust, make the living trust a good investment.


If you have a living trust, you do not need a lengthy will. Indeed, if all goes well, all of your assets will be in the trust so that no will need be offered for probate, thereby eliminating probate proceedings entirely.

However, you still need what is called a “pour-over” will. The will typically contains certain outright bequests (furniture, furnishings, and other tangible property which may not be transferred to the living trust), appoints an executor, and transfers all remaining property to the living trust.

The reason the living trust attorney will include a pourover will is to provide a safety net where all of a decedent’s property has not been transferred to the living trust during life. Sometimes someone will simply forget about a particular asset, or he may acquire a new asset and forget to put it in the trust. With a pour-over will, while probate may not be avoided, the asset would be transferred to the trust at the Testator’s death by virtue of the language in the will.


A living trust has several meaningful advantages over a will. Eliminating the expense of probate and the potential estate tax savings generally far outweigh the cost of designing and implementing a living trust. An experienced estate planning attorney is an important part of realizing all of the benefits a living trust has to offer.

Call our office to schedule an estate planning consultation.
Learn more about a Irrevocable Life Insurance Trusts.

Tax Planning with Charity

Imagine realizing income, gift and estate tax savings through the use of a single planning strategy. The Charitable Remainder Trust (“CRT”), also known as a Wealth Accumulation Trust, provides just such an opportunity. If you have a desire to participate in a charitable giving program, you should seriously consider implementing a CRT.


A CRT is a trust established to provide one or more beneficiaries with a present income interest, and remainder interest to a specified charity. After a set term, the income interest ends and the trust property passes to the charity. Under the Federal tax laws, all assets transferred to charity are exempt from gift and estate tax. You will also be able to claim an income tax charitable deduction when you create the CRT.


A CRT may be established as a Charitable Remainder Annuity Trust or a Charitable Remainder Unitrust. Both types require income payouts at least annually to the income beneficiaries for a term of years, no more than 20, or for the life of you, your spouse, or other persons you might so designate. Both trusts also require a rate of return of no less than 5%, and not more than 50% annually. Both trusts additionally must have a minimum 10% remainder interest value, which the charity will receive. However, the similarities end there and the differences begin.

It may be helpful to think of the annuity trust as one that provides a fixed annuity to its income beneficiaries while the unitrust provides a form of variable annuity. With an annuity trust, the return is a fixed amount of not less than a 5% return, calculated on the initial net fair market value of the assets transferred to the trust. The annuitant must be paid out of principal if the trust income is insufficient to meet the payout requirements.

In contrast, the unitrust percentage return is fixed at not less than 5%, but the annual payout is calculated on the basis of the value of the trust assets as determined annually. In other words, the beneficiary has what amounts to a variable annuity. If the trust assets are in stocks or bonds, for example, the annuitant’s payments may fluctuate with portfolio values. And payouts from a unitrust are limited to income only. Consequently, any shortfall between the required payout and the actual payments must be made up in later years in which there is more than enough income to meet the payout requirements.

An additional difference concerns subsequent contributions. With the annuity trust, subsequent contributions of assets to the trust are not permitted after the initial contributions. Conversely, subsequent contributions are permitted to unitrusts on specified terms and contributions.


Significant income tax advantages are available with a CRT. First, you are allowed a current income tax deduction for the present value of the interest that will ultimately pass to the charity if the gift into the CRT is made during your lifetime. Second, since the trust qualifies as a charitable trust, generally income flows into the trust tax free. However, as you probably can guess, income distributed out of the trust to a noncharitable beneficiary will be taxed at the beneficiary’s normal tax rates. And finally, capital gains realized on the sale of appreciated assets during the trust term are deferred as long as they continue to be held in the trust.

The CRT also furnishes substantial gift tax savings. All gifts made to qualified charities are exempt from gift tax. Likewise, a lifetime gift of a charitable remainder interest in a CRT is exempt from gift tax, regardless of the value of the gift.

Estate tax savings are also enjoyed where assets are placed into a qualified CRT. The value the trust property as of the date of your death is fully deductible from your estate. The result of this is to reduce the taxable portion of your estate and, therefore, the overall estate tax bill.


CRT + ILIT: Depending upon the people involved and the size of the estate, it has been our experience that children often are not too fond of their parents’ charitable aspirations. For obvious reasons, there is a conflict of interest between gifts to charity by a parent and a child’s interest in receiving as large of an inheritance as possible. In order to overcome the family stress created by such charitable gifts, another estate planning tool is used in combination with the Charitable Trust to provide for the children’s lost inheritance. That estate planning tool is the Irrevocable Life Insurance Trust (“ILIT”). Once the charitable remainder trust has been set up and the annuity or unitrust payment is being received by you, as the trust beneficiaries, you can use a portion of the income to make gifts to an ILIT which in turn purchases life insurance on your lives for the benefit and use of their children. Therefore, it is possible to purchase enough life insurance (generally equal to the fair market value of the property contributed to the Charitable Remainder Trust) to replace the children’s inheritance with proceeds from life insurance.

CRT + FLP = CRRIT: The Charitable Remainder Unitrust may be combined with a Family Limited Partnership to form a highly attractive and effective wealth planning tool we refer to as a Charitable Remainder Retirement Income Trust, or CRRIT. The CRRIT’s purpose is to act as a vehicle for accumulating taxdeferred retirement income. If the CRRIT is properly implemented, you may avoid the contribution and sponsorship limitations imposed on traditional plans such as the IRA, 401(k), Keogh, and other qualified retirement plans.

A CRT is an extremely versatile and effective tool which may form an integral part of an overall wealth accumulation and preservation plan; helping you to achieve substantial tax savings and charitable giving goals, and enhance your ability to accumulate taxdeferred retirement income. At Gerrard Cox Larsen, we would be pleased to explain how a CRT, properly structured, can be implemented to meet your goals.

Planning with your Residence

An increasingly popular estate planning tool, the Qualified Personal Residence Trust (“QPRT”), sometimes referred to as a Grantor Retained Income Trust (“GRIT”), is an effective planning technique to reduce the size of your taxable estate. Establishing a QPRT allows you to transfer one or more personal residences out of your estate at a drastically reduced gift tax cost. In addition, you freeze the value of the residence, resulting in dramatic estate tax savings as well.


Essentially, a QPRT (pronounced “kupert”) is a trust designated to hold title to your residence for a specified term that you select, generally five years to twenty years. When the trust terminates, the residence is transferred to the remainder beneficiaries, usually family members or a charity. During the trust term, you enjoy the rent-free use of the residence without any unfavorable tax consequences to you.


When you transfer a personal residence into a QPRT, the tax code treats you as having made a gift to the beneficiaries who will receive the home once your retained right to live in the home ends. The value of the gift is not the current fair market value of the transferred residence. Rather, the value of the gift is the current fair market value of the home less the present value of your right to live in the home for the term of years you selected. Consequently, for gift tax purposes, the value of the gift will be much less than the current value of the home, resulting in substantial gift tax savings to you.

For example, if a personal residence currently valued at $1 million were gifted into a QPRT, the value of that gift would only be $213,857, based on certain factors. This represents the current fair market value of the home minus the value of your right to live in the home for 15 years. Thus, you would exclude $786,143 ($1,000,000 – $213,857) from the value of the gift made, and thereby reap gift tax savings of up to $353,764 ($786,143 * 45% tax rate).

Not only do you save gift taxes by using a QPRT, if drafted properly, you may elect to pay all income and/or capital gains taxes on the trust property. If the home were sold following the initial term of the trust, you may choose to pay all capital gains taxes from your estate. By so doing, you would effectively be making another tax-free gift to your beneficiaries. Following such a sale, if the proceeds were invested and held in the QPRT, all interest, dividends and capital gains arising from such investments would be taxable to you. While it is true that you may have the trust drafted to cause income taxes to flow through to your beneficiaries, the maximum estate planning benefits come from shifting the tax burden to you.


Yes. You may realize a generous estate tax reduction in addition to the gift tax savings you enjoyed. This happens because all future appreciation in the home is removed from your estate. To illustrate, in the example above involving the transfer of the $1 million home into a QPRT, assume that, during the 15-year QPRT term, the home appreciated to $2,079,000 (using an annual growth rate of 5%). If you were to die at the end of the trust term, the value included in your estate, for death tax purposes, would only be $213,857, not the full appreciated amount. Consequently, you will have succeeded in not only removing the initially excluded value from your estate, but also in removing all subsequent appreciation. This translates into an estate tax savings of up to $1,143,450, if Congress fails to make the elimination of the estate tax permanent and the tax rate returns to 55%.


Particular attention must be paid when creating the QPRT, in order that the retained interest be a “qualified” interest. Otherwise, a substantial part of the tax savings will be lost. As presently enacted, the law allows a married couple to transfer up to three residences via the QPRT. Transfer of three residences can be accomplished in a series of steps. First, each spouse must own one residence as separate property. Next, each of those residences is transferred into separately established QPRTs. Then a jointly-owned third residence is transferred into a third QPRT. As discussed above, the dramatic estate tax savings may even warrant the purchase of a third residence to take maximum advantage of this unique planning tool.

To qualify for a QPRT, you must use the residence for personal purposes for a number of days which exceeds the greater of (1) 14 days, or (2) ten percent of the number of days during the year for which the unit is rented at fair rental value. Such a residence may include a house, apartment, condominium, mobile home, or boat, as well as all structures appurtenant to the dwelling. Thus, if you were to purchase a resort area condominium unit, and rent it out for 150 days of the year, you could still qualify it as a personal residence if you used it for 16 days during the year.


A QPRT terminates at the end of the specified term. Thereafter, you may continue to reside in the home. However, if you choose to do so, you must pay a fair rental value to the remainder beneficiaries for the use of the home. If the home has experienced significant appreciation, an excellent option for you to consider would be to repurchase the home either during the trust term or following its termination. When the trust agreement is properly drafted, repurchasing an appreciated home would yield even further tax benefits.

As discussed above, the QPRT is an outstanding estate planning tool when used under the right circumstance. It allows you to optimize the value of your home from both a gift tax and estate tax standpoint, while you retain the use and enjoyment of your home for many years.

Asset Protection

Asset Protection Planning

Litigation has become a major concern for clients today. Insurance, when available, has often proven to be an inadequate degree of protection.

Asset protection planning involves the lawful application of a series of techniques to shield assets from future creditors. By making it difficult, or even impossible, to seize your assets, these techniques deter potential creditors from going after you. And if they do go after you, they will be frustrated.

There is a sharp dividing line that you do not want to cross when planning for asset protection. On the one hand, there are various legal methods with strict requirements. On the other hand, there are actions that defraud creditors and are simply illegal, if not criminal.

Unfortunately, with the increased concern about protecting one’s assets, comes an increase in the numbers of questionable operators. They range from outright scams designed to steal your assets, to fast buck artists who sell you the expensive package but leave you unprotected. And if you are not careful, they will leave you open to criminal charges.

However, with proper planning and assistance from the law offices of Gerrard Cox Larsen, your business or estate can be shielded from the threat of litigation and the risk of loss to your assets. We accomplish this security through the proper use of Irrevocable Trusts, Family Limited Partnerships, Limited Liability Companies, Corporations, and Asset Protection Trusts.

Two trusts specifically designed for asset protection are the Offshore Trust and the Nevada Asset Protection Trust.  Review them to see if either would be of benefit, then call Gerrard Cox Larsen for a consultation.

Nevada Asset Protection Trusts

Nevada Asset Protection Trusts: Protecting your Assets “On-Shore”

Would you like to place assets in Trust and have them protected from creditors? Now you may do so with a special Nevada Trust.

Most trusts have a common provision referred to as a “Spendthrift” clause. The Spendthrift clause essentially prevents a beneficiary’s creditor from reaching the beneficiary’s interest in a particular Trust. However, historically state law prevented the Spendthrift clause from applying to the grantor’s creditors. Consequently, the grantor of the Trust could not be a beneficiary of the Trust and have his or her trust assets protected from creditors.

Thus, the rise and popularity of Offshore Trusts has resulted. A couple of years ago, Alaska became the first state to allow a self-settled Spendthrift Trust. If a grantor met the requirements of the Alaska statute, he or she could set up a Trust of which the grantor was also a beneficiary, and also have the trust assets protected from his or her creditors.

In joining with Alaska, the 1999 Nevada Legislature passed revisions to Nevada’s Trust laws. Effective October, 1999, Nevada law allows for a self-settled Spendthrift Trust. In order for a grantor to receive the asset protection desired from one of these new Trusts, certain requirements must be met. If the requirements are met, assets transferred to the Spendthrift Trust will be protected from creditors. If someone becomes a creditor of the grantor after the transfer is made, an action must be filed within two years of the transfer. And if someone is a creditor at the time a transfer to the Trust is made, they have two years after the transfer to bring an action, or six months after the creditor discovered or should have discovered the transfer, whichever is later. Once the two year statute of limitations has run, all assets transferred to the Trust are protected.

The requirements for setting up a self- settled Spendthrift Trust essentially include the following:
(1) The Trust must be in writing and irrevocable;
(2) The Trust is a discretionary trust;
(3) The Trust was not intended to hinder, delay or defraud known creditors.
A discretionary trust is one in which the Trustee has discretion in distributing income and/or principle to the beneficiaries, and in particular to the grantor. Even though the grantor may be a Trustee, a Trustee other than the grantor must be the one who makes discretionary distribution decisions regarding distributions to the grantor.

Having another Trustee make discretionary distribution decisions may make the grantor uncomfortable. However, the statute allows the grantor the veto power over any distributions. The grantor may also have a testamentary special power of appointment, thereby directing to whom the Trust assets will ultimately be distributed at the grantor’s death.

At least one of the Trustees of the Spendthrift Trust must be either (1) a natural person who is a resident of Nevada, (2) a Trust company which maintains an office in Nevada, or (3) a bank that maintains an office in Nevada and possesses and exercises Trust powers. Consequently, the grantor may act as one of the Trustees along with a Co-Trustee. This would help give the grantor control over certain distributions and investment decisions. However, distribution decisions relating to the grantor must be made by the Co-Trustee.

There are a couple concerns regarding the new Spendthrift Trust which will ultimately be resolved in the Courts. One concern involves the application of Federal Law. Federal Bankruptcy Law may override the state statute. Another relates to judgments rendered in other states and domesticated in Nevada. Such questions are likely to be resolved in Alaska Courts and will provide some insight as to how Nevada’s law will be treated.

You may be interested in establishing a Nevada Asset Protection Trust for different reasons. You may simply wish to protect a certain amount of your assets from creditors. Or you may wish to use this Trust to hold title to your home if the equity in your home exceeds the $550,000 protected by a homestead declaration. Or you may have a life insurance policy which has a large cash value built up inside of the policy. Unlike retirement plans and IRA’s, Nevada has a virtually nonexistent protection of cash value in insurance policies. If the cash value in your life insurance policy is substantial, you may wish to transfer the policy to one of these Trusts to protect the cash value from creditors.

If a Nevada Asset Protection Trust is something that may help you meet certain asset protection goals, please contact our firm to further discuss how the Nevada Asset Protection Trust might be incorporated into your particular situation.

Offshore Trusts


Our society has experienced a disturbing rise in litigation in recent years. Creative lawyers and judges have become ever more imaginative in finding ways to dip into any available “deep pocket” to satisfy often spurious and costly legal claims. However, those who are exposed to a higher risk of injurious litigation now have a weapon with which to fight back.


A common misconception is that by merely placing assets in trust, the assets are beyond the reach of creditors. In reality, many trusts offer no protection against creditors whatsoever. Furthermore, those trusts that do provide creditor protection require that you part with ownership and control of the assets conveyed to the trust.

By contrast, the Offshore Asset Protection Trust (“APT”) allows you to enjoy the benefits of both control and protection. With the goal of putting as much distance as possible – both literally as well as figuratively – between your assets and future potential creditors, the APT is designed to allow you to retain control and enjoyment over your assets while locating title to those assets in a trust established in a foreign jurisdiction, out of reach of potential creditors.


The premise upon which an Asset Protection Trust provides protection is, in part, based on the fact that certain foreign jurisdictions do not recognize the judgments of United States courts. If a judgment is obtained against you in the United States and your creditor seeks to enforce that judgment against your assets held by a foreign trust, the foreign trustee will not be required to submit to the jurisdiction of the United States court. The trustee, therefore, cannot be compelled to surrender the trust assets.

If the creditor really wants to reach the assets held by the foreign trust, it will be required to retry the case in the foreign jurisdiction where the trust is located. Faced with such a costly prospect, the creditor will usually either walk away entirely or settle the suit for pennies on the dollar.

In addition, some foreign jurisdictions prohibit attorneys from accepting a case on a contingency fee basis. This acts as a further deterrent since many lawsuits are often stopped in their tracks because the claimant must actually pay the attorney regardless of the outcome of the litigation. Where a bar to contingency fee exists, defendants are placed on a more equal footing with claimants, since claimants are also exposed to the “hazards of litigation” from a cost standpoint.

Another practical barrier offered by the APT is simply the expense of having to pursue judgment and collection in an overseas jurisdiction. Many litigants confronted with costs in both time and travel, opt either to drop their claims or, again, to seek settlement on terms much more favorable to you.

Finally, individuals with substantial wealth often represent a potential “deep pocket” and therefore become targets of litigation. Transferring title in significant assets to an APT can make you a less desirable target for litigation by diminishing your financial profile.

The foregoing illustrates some of the formidable barriers constructed by an Offshore Asset Protection Trust against creditors and their attorneys. And while an APT may not deter every potential creditor or claimant, the vast majority will elect a much cheaper resolution simply because they lack, or are not willing to expend, the resources necessary to seek satisfaction of their claims.


Typically, an Asset Protection Trust is formed in conjunction with a limited liability company (“LLC”). If an LLC is used, the trustee of the APT receives a membership interest and thereby becomes only a passive investor in the entity. However, you would retain full control of the assets as the LLC’s manager.

If unanticipated creditor problems develop later, the LLC assets are distributed to the APT. This effectively renders the assets exempt from execution under an order from a United States court.

Moving assets around the world has become a much simpler process with the growth in global communications and financial markets. Many domestic brokerage firms, for example, have foreign offices, so accounts may be established worldwide to facilitate transfers.

Thus, with an APT, the assets need not be held in the situs country of the trust, but may be located to any major international financial center of your choosing. There is one important note, real estate is not a favored asset for an APT because the protection of the APT-LLC arrangement comes from the ability to move assets quickly out of the United States.


The Asset Protection Trust is not designed to offer any tax advantages. The objectives of an APT are to provide creditor protection and meaningful economic diversification for your property. Therefore, there are no income, estate or gift tax opportunities to be gained with an APT. However, the APT does allow you to avoid probate with respect to property placed in the APT.

The APT is one of the most costly estate planning tools to form and administer. With other domestic asset protection techniques available, we recommend the APT only to those clients with substantial liquid assets. If you are prepared to place a substantial amount of assets in an offshore trust, you may find the APT to be an excellent tool for providing you with peace of mind.

Contact our office to discuss which method of protection works best for you.

Gerrard Cox Larsen
2450 St. Rose Parkway, Ste. 200
Henderson, Nevada 89074


©2002-2015 Gerrard Cox Larsen. All Rights Reserved.
The content provided in this web site is offered for informational purposes only and should not be construed as legal advice or legal opinion on any matter. We have made every effort to ensure the accuracy of the information presented, and if you have any questions regarding the contents, please contact us. The information provided in this site is subject to change without notice.

Family Limited Partnership


Two of the most powerful and flexible estate planning tools available today are the family limited partnership and the family limited liability company (“FLLC”). For purposes of this article, “family limited partnership” shall be used to refer to both entities, unless a specific distinction needs to be made. Among the many advantages offered by the family limited partnership are the following: a method for reducing the size of your taxable estate while at the same time allowing you to retain full control and management of your estate; a way to effectively compound your available gift and estate tax credits and exemptions; the spreading of income among children who are in lower tax brackets; and placing assets beyond the reach of creditors. The following will introduce you to some of these planning techniques.


A limited partnership generally consists of two classes of partnership interests – general and limited. (An FLLC can be established with voting and nonvoting interests.) The general partnership interest carries with it many rights and obligations. The general partner (or partners) retain full control of the partnership operations. The general partner has the power to make and implement decisions regarding the purchase, sale, development and investment of partnership assets; to control the purse strings, determining the amounts and timing of distributions to limited partners; and, in most cases, the general partner may choose to forego all distributions of partnership profits, and retain funds for payment of taxes, debt service, expenses and for funding future acquisitions and development of partnership interests.

Along with the right to manage partnership properties, the general partner is personally obligated for all debts of the partnership, and conversely, the limited partners’ liability is limited to the extent of their partnership investments. Thus, if the partnership becomes obligated for debts in excess of what the partnership can pay, then the general partners will be jointly and severally liable for such excess debt obligations. For this reason, it is often recommended that a corporation, of which the general partner is the controlling stockholder, be the general partner so in the event of unforeseen liability, the excess debt may be satisfied only from partnership and corporate assets.

One advantage of an FLLC over a Limited Partnership is that an FLLC provides limited liability to all of its members, not just the limited partners. Another advantage an FLLC has over a Limited Partnership is that all of the voting members can participate in the management of the FLLC without losing their limited liability status. Whereas, in a Limited Partnership, only the general partners can participate in the management of the business.


Lifetime gifts of partnership interests are an excellent way of reducing the size of your taxable estate, while at the same time keeping certain properties intact and under your continued control.

As a general rule, lifetime gifts of interests in property are subject to the gift tax. However, through utilization of the annual gifting exclusions and the unified credit, substantial lifetime gifts may be made without incurring this tax. The annual exclusion allows you and your spouse to each gift up to $14,000 in value of property to as many individuals as you choose without incurring any gift tax. For example, if you have two children, you and your spouse could each give each child $14,000 every year, or a total of $56,000 per year.

In addition to the annual exclusion, you and your spouse may each gift property valued at $1,000,000 during your lifetimes, not including the $14,000 per done annual gifts, without incurring a gift tax.

Currently, the estate tax rates run as high as 45% of the taxable estate; therefore, reducing the taxable estate as much as possible can result in substantial tax savings. By making lifetime gifts of partnership interests, the taxable estate is reduced not only by the amount of the gifts, but also by the income and appreciation of the gifted assets, which, if retained in the estate, would be taxed at the very high estate tax rates. For example, if you make a gift of $200,000 in partnership interests, and the value of the partnership assets double between the date of the gift and your date of death, then you have actually reduced your taxable estate by $400,000, not just the $200,000 which was initially gifted. The tax savings achieved through lifetime gifting can be further compounded through the use of valuation discounts. There are two types of valuation discounts available.

The first, the minority discount, is applicable where a gift of a minority interest in a closely‑held business is made. The minority discount is based upon the fact that the lack of control in a closely‑held business is a severe limitation on the value of the minority interests and should, therefore, be taken into account in valuing those interests. Minority discounts of twenty to fifty percent of fair market value are commonly allowed.

The other valuation discount is the discount for lack of marketability. Because partnership interests are not listed on a securities exchange, there is no ready market for the partnership interest. Obviously, if there were no ready market, a seller of the partnership interest would encounter difficulty in finding a buyer willing to pay full market price for the partnership interest, especially when the sale of that interest is restricted by the partnership agreement. Marketability discounts of up to forty or fifty percent are often found acceptable by the courts (although the IRS may challenge them).

By combining the minority and marketability discounts to the gift of $200,000 described above, the gift, for gift tax purposes, may be valued at only $100,000, assuming a combined discount of fifty percent. Thus, through proper valuation planning, your lifetime exclusion may be effectively increased to allow giving away property with significant value without being subject to the gift tax. Valuation discounts may be applied to your annual exclusion gifting as well.


Your family limited partnership will be drafted in a manner which allows for the shifting of income from you to the donees of the partnership interests. This shifting of income occurs because the donee is deemed to be the owner of the partnership interest, and income is properly attributable to the owner. The partnership, however, cannot act as a conduit to transfer your personal service income to a donee. Income is shifted only for the income that is earned from capital where the capital is a material income-producing factor. Earnings by a partner for personal services are attributable solely to that partner.

Shifting income among family members may have the effect of shifting income to children who are in tax brackets lower than those of the parent-donors. However, income in excess of $1,600 attributable to children under 14 years of age is taxed at the parents’ top marginal rate, thus limiting some of the potential benefits of income shifting.


Although the benefits of lifetime gifting are substantial, in certain cases the benefits may be outweighed by the loss of the step-up in basis to fair market value on assets owned at death. For example, assume you purchased stock in XYZ Corporation in 1985 for $50 and it is now valued at $100. If you were to sell it now, you would have a taxable gain of $50.

However, if you were to hold the stock until your death, and then your heirs receive the stock from your estate and sell it for $100 (the value of the stock on the date of your death), then there will be no taxable gain because of the step‑up in basis to date of death value of $100. When you make gifts of property, the donee must take a basis equal to the basis in the hands of the donor. So if you were to make a lifetime gift of the stock in XYZ Corporation, and then the donees sell it for $100, they will have a taxable gain of $50. Of course, in most cases, the advantage in avoiding the confiscatory estate tax of up to 55% outweighs the increased income taxes, with a probable capital gains rate of 20%; however, each case should be evaluated separately to determine the best course of action.


It is our position, and the opinion of many other legal practitioners, that a limited partnership may be a highly effective tool for protecting assets from the claims of creditors. Nevada limited partnership laws provide that in the event a partner is liable to a judgment creditor, the debtor’s partnership interest may only be reached to the extent allowed under a “charging order.” The charging order does not allow the creditor to force a liquidation of the partnership and a distribution to the creditor of the debtor‑partner’s share of partnership assets. Rather, the creditor is only entitled to “intercept” partnership distributions made to the partner. Therefore, if the general partner can withhold distributions in order to accumulate assets for partnership purposes, a creditor of a partner may be effectively foreclosed from receiving any benefit from the assets held in the partnership.

Although it is theoretically possible for a creditor to proceed against a limited partner’s interest, as a practical matter the interest would have no value to a non‑family member because of the general partner’s power to withhold distributions of partnership income. Furthermore, as an added layer of protection, the children’s interests in the partnership could be transferred to a trust for the benefit of the child, so that any partnership distributions could be controlled by the parent/trustee and held or distributed in the parent’s discretion.

As all of the foregoing illustrates, the family limited partnership is a valuable tool which can be used to enhance and protect the value of your estate, not only in your hands, but to the objects of your bounty as well. If you would like to meet with us to discuss how these techniques may be put to work for you, please give our office a call.