The value of an independent trustee on your asset protection trust

When establishing an asset protection trust, I advise my clients to retain an independent professional trustee in Nevada with limited duties in addition to the trustee they have chosen who will carry the bulk of the responsibility. Here are a few reasons why:

1) If the Nevada resident settlor ever leaves the state, establishing a domicile elsewhere, then the settlor risks losing Nevada as the trust situs. NRS 166.015(1)(c) requires the settlor to be domiciled in Nevada for NRS 166 to govern the trust. Alternatively, the trust property may be located in Nevada, but as the years go by, Nevada property may be sold and accounts may be moved out of state, so I don't feel comfortable relying on those provisions alone. Moreover, if the trust is self-settled then the Nevada property provisions don't apply. The safer option is to take advantage of paragraph (d) in that statute that provides for a "qualified person" trustee (aka Nevada trustee) who has limited powers such as maintaining trust records and handling some trust administration. No matter what becomes of the trust property or where the settlor is domiciled, the trust will remain a "Nevada Trust."

2) A Nevada trustee will add another layer of legitimacy as a result of the trustee's independent relationship with the settlor. Unlike the appointed investment trustee, the Nevada trustee has no prior relationship with the settlor. In exchange for a fee agreed upon between the settlor and the trustee, the Nevada trustee will fill his or her role from a distance without any personal ties to the settlor.

3) The Nevada trustee's job description includes duties that might otherwise be overlooked. If a note is owed by the trust, the trustee will maintain an amortization schedule to keep track of payments. The trustee will arrange for tax returns to be filed and maintain all trust records. In my opinion the value of the trustee's administrative supervision far exceeds the monetary cost to retain the trustee.

Ultimately it's the client's decision whether to appoint a Nevada trustee since it's not mandatory, provided the other requirements in NRS 166.015 are met. But when the purpose of the trust is to protect significant and valuable assets against all claims, any additional layers of available, nonsuperfluous protection should be investigated and considered.