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For
many years now we've been using Nevada entities like corporations, limited liability
companies and family limited partnerships for Asset Protection and tax saving
purposes with terrific success. But, why Nevada and not California? Many reasons,
including: Nevada has far less taxation on individuals and businesses; Nevada
is the only state in the U.S. that doesn't have a reciprocity agreement with the
Internal Revenue Service to disclose information about you. The
California Franchise Tax Board (CFTB) recently challenged a California resident
over the payment of California Franchise Taxes on a Nevada Limited Liability company
he had. The case is titled "Mockingbird". In the Mockingbird case the
CFTB took the position that even though the entity had a Nevada address as its
domicile; the fact that the officer was a California resident caused the entity
to be liable for the $800.00 a year California Franchise Tax. The CFTB has always
been extremely aggressive in pursuing taxes. Although this ruling specifically
challenges a Limited Liability Company we feel that this case ruling will end
up spilling over to Corporations and Partnerships as well. If
you want a terrific asset protection device but don't want to pay $800.00 a year
per device to California, then the Nevada Asset Protection Trust is for you. This
asset protection device was created in 1999 by the Nevada legislature. Even though
the trust is called the Nevada Asset Protection Trust it can be utilized by anyone
living in any of the 50 states, and even internationally. The
Nevada Asset Protection Trust is by statute an irrevocable trust. However, unlike
most other irrevocable trusts, you, the grantor can also be a beneficiary and
a trustee. This means you retain full control of your assets. For
income and capital gains tax purposes this trust is treated as a Nevada based
grantor trust. That means that for tax purposes it passes its income on to you,
the grantor, however to the extent that income is not produced in California,
no California taxes would be due. A
Nevada Asset Protection Trust must have a Nevada resident as a trustee. However,
you, no matter where you live, may be the co-trustee. A trust can do anything
a legislatively enacted entity (Corporation, LLC, LP) can do. You can stack Nevada
Asset Protection Trusts to build firewalls around various types of assets in California
or any other states. A
Nevada Asset Protection Trust can own anything a person (you) or other entity
(LLC, etc.) can own, but we do not recommend that your personal residence be owned
within this trust. This trust is a very good financial tool. Many people see "irrevocability"
as a problem, but it's not a problem for you. Irrevocability is a problem for
anyone who wants to attack the trust. Irrevocability does not mean you lost control
of your assets; instead, irrevocability forms a permanent shield of protection
surrounding your assets. Throughout your lifetime, you have full control and benefit
of the trust property. An
irrevocable trust can also protect a grantor from harming himself or herself.
For example, what if an elder person was living alone and had dementia or Alzheimer's,
and they decided to give their funds away? If they personally own the funds or
if their funds were owned in a revocable trust, and the successor trustee was
not aware of their health problem, whose signature would be needed to give away
their funds or property? Only one, just theirs - and therein lies the problem.
However, if their funds or property were in an irrevocable trust, they would need
the trustee to sign, this preventing the problem. The
Nevada Asset Protection Trust is completely private, and it's not prone to IRS
audits and investigations. You can protect any amount of assets from creditors
by using this trust. One
caution on transfers of property into a Nevada Asset Protection Trust, or any
irrevocable trust, is that you must place assets into a trust before there are
any liabilities on any of the assets. Creating a trust or transferring property
into a trust after a liability on any of the assets has occurred may not protect
the assets. Each state has statutes of limitations which prevents a person from
suing another person after a few years. Under the legislation of Nevada, there
are 2 situations where the Nevada Asset Protection Trust is vulnerable. Creditors
existing at the time of the creation of the trust have a 2 year window to access
or encumber assets or they have 6 months after they discover the conveyance -
whichever is longest. After 2 years the trust offers terrific asset protection,
assuming that nothing has been done to void the trust. Trusts
have become a cornerstone for financial and estate planning. The proper use of
a trust can offer true asset protection and flexibility to accommodate changing
situations for a family or business estate. Trusts can help you avoid Probate
with your estates. Trusts can say when and how monies held in the trust should
and should not be paid out. Trusts can protect beneficiaries from a lawsuit or
divorce, even after you have passed away. Trusts can also protect a special needs
family member. Certain types of trusts can remove capital gains taxes. The proper
use of a trust can accomplish many goals for you today. 
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