NRS: CHAPTER 166 - SPENDTHRIFT TRUSTS

[Rev. 6/29/2024 3:08:24 PM--2023]

CHAPTER 166 - SPENDTHRIFT TRUSTS

GENERAL PROVISIONS

NRS 166.010 Short title.

NRS 166.015 Applicability of chapter; requirement of trustee if settlor is beneficiary of trust.

NRS 166.016 Definitions.

NRS 166.018 “Settlor” defined.

NRS 166.020 “Spendthrift trust” defined.

NRS 166.025 Terms: “Writing” or “written.”

CREATION OF SPENDTHRIFT TRUSTS

NRS 166.040 Competency of settlor; writing required; circumstances when writing meets requirements for trust to be created for benefit of settlor; settlor’s ability to hold other powers.

NRS 166.045 Powers of settlor.

NRS 166.050 No specific language necessary for creation of trust.

PRINCIPLES GOVERNING CONSTRUCTION

NRS 166.070 Principles enumerated in NRS 166.080 to 166.150, inclusive.

NRS 166.080 Beneficiaries to be named.

NRS 166.090 Provision for support.

NRS 166.100 Income.

NRS 166.110 Discretion of trustee.

NRS 166.120 Restraints on alienation; exclusive jurisdiction of court.

NRS 166.130 Legal estate of beneficiary in corpus.

NRS 166.140 Perpetuities.

NRS 166.150 Accumulation of income.

NRS 166.160 Settlor may make different provisions.

MISCELLANEOUS PROVISIONS

NRS 166.170 Limitation of actions with respect to transfer of property to trust; certain transfers of property disregarded; limitation of actions against advisers to settlors or trustees and against trustees; transfers to trust.

NRS 166.180 Trust administered under laws of another state or foreign jurisdiction.

_________

GENERAL PROVISIONS

NRS 166.010 Short title. This chapter may be referred to by the short title of Spendthrift Trust Act of Nevada, and such reference will be sufficient for all purposes.

[7:86:1939; 1931 NCL § 6880.06]

NRS 166.015 Applicability of chapter; requirement of trustee if settlor is beneficiary of trust.

1. Unless the writing declares to the contrary, expressly, this chapter governs the construction, operation and enforcement, in this State, of all spendthrift trusts created in or outside this State if:

(a) All or part of the land, rents, issues or profits affected are in this State;

(b) All or part of the personal property, interest of money, dividends upon stock and other produce thereof, affected, are in this State;

(d) At least one trustee qualified under subsection 2 has powers that include maintaining records and preparing income tax returns for the trust, and all or part of the administration of the trust is performed in this State.

2. If the settlor is a beneficiary of the trust, at least one trustee of a spendthrift trust must be:

(a) A natural person who resides and has his or her domicile in this State;

(b) A trust company that:

(1) Is organized under federal law or under the laws of this State or another state; and

(2) Maintains an office in this State for the transaction of business; or

(1) Is organized under federal law or under the laws of this State or another state;

(2) Maintains an office in this State for the transaction of business; and

(3) Possesses and exercises trust powers.

3. As used in this section, “trust company” does not include a foreign independent trust company authorized to engage only in the solicitation of trust company business in this State pursuant to NRS 669.205.

[4:86:1939; 1931 NCL § 6880.03]—(NRS A 1999, 1236; 2011, 1480; 2017, 561)

NRS 166.016 Definitions. As used in this chapter, unless the context otherwise requires, the words and terms defined in NRS 166.018 and 166.020 have the meanings ascribed to them in those sections.

(Added to NRS by 2019, 1874)

NRS 166.018 “Settlor” defined. “Settlor” means:

1. The person who creates a spendthrift trust however described in the trust instrument; or

2. Any person who contributes assets to the spendthrift trust as to the assets he or she contributed to the spendthrift trust except to the extent of consideration received therefor by that person.

(Added to NRS by 2019, 1874)

NRS 166.020 “Spendthrift trust” defined. “Spendthrift trust” means a trust in which by the terms thereof a valid restraint on the voluntary and involuntary transfer of the interest of the beneficiary is imposed. It is an active trust not governed or executed by any use or rule of law of uses.

[1:86:1939; 1931 NCL § 6880]—(NRS A 2019, 1874)

NRS 166.025 Terms: “Writing” or “written.” As used in this chapter, unless the context otherwise requires, when the term “writing” or “written” is used in reference to a will, trust or instrument, the term includes an electronic will as defined in NRS 132.119 and an electronic trust as defined in NRS 163.0015.

(Added to NRS by 2001, 2353)

CREATION OF SPENDTHRIFT TRUSTS

NRS 166.040 Competency of settlor; writing required; circumstances when writing meets requirements for trust to be created for benefit of settlor; settlor’s ability to hold other powers.

1. Any person competent by law to execute a will or deed may, by writing only, duly executed, by will, conveyance or other writing, create a spendthrift trust in real, personal or mixed property for the benefit of:

(a) A person other than the settlor;

(b) The settlor if the writing is irrevocable, does not require that any part of the income or principal of the trust be distributed to the settlor, and was not intended to hinder, delay or defraud known creditors; or

2. For the purposes of this section, a writing meets the requirements of paragraph (b) of subsection 1 even if under the terms of the writing:

(a) The settlor may prevent a distribution from the trust;

(b) The settlor holds a special lifetime or testamentary power of appointment that cannot be exercised in favor of the settlor, the settlor’s estate, a creditor of the settlor or a creditor of the settlor’s estate;

(c) The settlor is a beneficiary of a trust that qualifies as a charitable remainder trust pursuant to 26 U.S.C. § 664, or any successor provision, even if the settlor has the right to release the settlor’s retained interest in such a trust, in whole or in part, in favor of one or more of the remainder beneficiaries of the trust;

(d) The settlor is authorized or entitled to receive a percentage of the value of the trust each year as specified in the trust instrument of the initial value of the trust assets or their value determined from time to time pursuant to the trust instrument, but not exceeding:

(1) The amount that may be defined as income pursuant to 26 U.S.C. § 643(b); or

(2) With respect to benefits from any qualified retirement plan or any eligible deferred compensation plan, the minimum required distribution as defined in 26 U.S.C. § 4974(b);

(e) The settlor is authorized or entitled to receive income or principal from a grantor retained annuity trust paying out a qualified annuity interest within the meaning of 26 C.F.R. § 25.2702-3(b) or a grantor retained unitrust paying out a qualified unitrust interest within the meaning of 26 C.F.R. § 25.2702-3(c);

(f) The settlor is authorized or entitled to use real property held under a qualified personal residence trust as described in 26 C.F.R. § 25.2702-5(c), and any successor provision, or the settlor may possess or actually possesses a qualified annuity interest within the meaning of that term as described in 26 C.F.R. § 25.2702-3(b), and any successor provision;

(g) The settlor is authorized to receive income or principal from the trust, but only subject to the discretion of another person; or

(h) The settlor is authorized to use real or personal property owned by the trust.

3. Except for the power of the settlor to make distributions to himself or herself without the consent of another person, the provisions of this section shall not be construed to prohibit the settlor of a spendthrift trust from holding other powers under the trust, whether or not the settlor is a cotrustee, including, without limitation, the power to remove and replace a trustee, direct trust investments and execute other management powers.

4. As used in this section, “remainder beneficiary” has the meaning ascribed to it in NRS 164.785.

[2:86:1939; 1931 NCL § 6880.01]—(NRS A 1999, 1236; 2007, 894; 2009, 801; 2011, 1480)

NRS 166.045 Powers of settlor. The settlor of a spendthrift trust has only those powers and rights that are conferred to the settlor by the trust instrument. An agreement or understanding, express or implied, between the settlor and the trustee that attempts to grant or permit the retention of greater rights or authority than is stated in the trust instrument is void.

(Added to NRS by 2011, 1480)

NRS 166.050 No specific language necessary for creation of trust. No specific language is necessary for the creation of a spendthrift trust. It is sufficient if by the terms of the writing (construed in the light of this chapter if necessary) the creator manifests an intention to create such a trust.

[3:86:1939; 1931 NCL § 6880.02]

PRINCIPLES GOVERNING CONSTRUCTION

NRS 166.070 Principles enumerated in NRS 166.080 to 166.150, inclusive. Unless the writing shall declare to the contrary, expressly, the construction, operation and enforcement of all spendthrift trusts, heretofore or hereafter created in this state, shall be governed by the principles stated in NRS 166.080 to 166.150, inclusive, to the same effect as if they were written therein.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.080 Beneficiaries to be named. The beneficiary or beneficiaries of such trust shall be named or clearly referred to in the writing. No spouse, former spouse, child or dependent shall be a beneficiary unless named or clearly referred to as a beneficiary in the writing.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.090 Provision for support.

1. Provision for the beneficiary will be for the support, education, maintenance and benefit of the beneficiary alone, and without reference to or limitation by the beneficiary’s needs, station in life, or mode of life, or the needs of any other person, whether dependent upon the beneficiary or not.

2. The existence of a spendthrift trust does not depend on the character, capacity, incapacity, competency or incompetency of the beneficiary.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.100 Income. Provision for the beneficiary will extend to all of the income from the trust estate, devoted for that purpose by the creator of the trust, without exception or deduction, other than for:

1. Costs or fees regularly earned, paid or incurred by the trustee for administration of or protection of the trust estate;

2. Taxes on the same; or

3. Taxes on the interest of the beneficiary thereof.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.110 Discretion of trustee.

1. In all cases where the creator of a spendthrift trust shall indicate the sum to be applied for or paid to the beneficiary or shall make the application or payment of sums or further sums for or to the beneficiary discretionary with the trustee, or shall make the amount thereof discretionary with the trustee, or shall give the trustee discretion to pay all or any part of the income to any one or more of the beneficiaries, such discretionary power shall be absolute, whether any valid provision for the accumulation of income is made or not and whether it relates to the income from real or personal property.

2. Such discretion shall never be interfered with for any consideration of the needs, station in life or mode of life of the beneficiary, or for uncertainty, or on any pretext whatever.

3. The giving of any such discretion does not invalidate any spendthrift trust.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.120 Restraints on alienation; exclusive jurisdiction of court.

1. A spendthrift trust as defined in this chapter restrains and prohibits generally the assignment, alienation, acceleration and anticipation of any interest of the beneficiary under the trust by the voluntary or involuntary act of the beneficiary, or by operation of law or any process or at all. The trust estate, or corpus or capital thereof, shall never be assigned, aliened, diminished or impaired by any alienation, transfer or seizure so as to cut off or diminish the payments, or the rents, profits, earnings or income of the trust estate that would otherwise be currently available for the benefit of the beneficiary.

2. Payments by the trustee to the beneficiary, whether such payments are mandatory or discretionary, must be made only to or for the benefit of the beneficiary and not by way of acceleration or anticipation, nor to any assignee of the beneficiary, nor to or upon any order, written or oral, given by the beneficiary, whether such assignment or order be the voluntary contractual act of the beneficiary or be made pursuant to or by virtue of any legal process in judgment, execution, attachment, garnishment, bankruptcy or otherwise, or whether it be in connection with any contract, tort or duty. Any action to enforce the beneficiary’s rights, to determine if the beneficiary’s rights are subject to execution, to levy an attachment or for any other remedy must be made only in a proceeding commenced pursuant to chapter 153 of NRS, if against a testamentary trust, or NRS 164.010, if against a nontestamentary trust. A court has exclusive jurisdiction over any proceeding pursuant to this section.

3. The beneficiary shall have no power or capacity to make any disposition whatever of any of the income by his or her order, voluntary or involuntary, and whether made upon the order or direction of any court or courts, whether of bankruptcy or otherwise; nor shall the interest of the beneficiary be subject to any process of attachment issued against the beneficiary, or to be taken in execution under any form of legal process directed against the beneficiary or against the trustee, or the trust estate, or any part of the income thereof, but the whole of the trust estate and the income of the trust estate shall go to and be applied by the trustee solely for the benefit of the beneficiary, free, clear, and discharged of and from any and all obligations of the beneficiary whatsoever and of all responsibility therefor.

4. The trustee of a spendthrift trust is required to disregard and defeat every assignment or other act, voluntary or involuntary, that is attempted contrary to the provisions of this chapter.

[Part 5:86:1939; 1931 NCL § 6880.04]—(NRS A 2009, 802)

NRS 166.130 Legal estate of beneficiary in corpus. A beneficiary of a spendthrift trust has no legal estate in the capital, principal or corpus of the trust estate unless under the terms of the trust the beneficiary or one deriving title from him or her is entitled to have it conveyed or transferred to him or her immediately or after a term of years or after a life, and in the meantime the income from the corpus is not to be paid to him or her or any other beneficiary.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.140 Perpetuities. A spendthrift trust may not continue for a period longer than that allowed under NRS 111.103 to 111.1039, inclusive. The free alienation of the legal estate by the trustee may not be suspended for a period exceeding the limit prescribed in any constitutional or statutory prohibition against perpetuities existing in this State or in the state where the lands affected by the trust are situate, but a contingent remainder in fee may be created on a prior remainder in fee, to take effect if the persons to whom the first remainder is limited die under the age of 21 years, or upon any other contingency by which the estate of those persons may be determined before they attain that age.

[Part 5:86:1939; 1931 NCL § 6880.04]—(NRS A 1999, 1237)

NRS 166.150 Accumulation of income. An accumulation of the income of trust property may be directed in the will or other writing creating a spendthrift trust, for the benefit of one or more beneficiaries, to commence within the time permitted for the vesting of future interests and not to extend beyond the period limiting the time within which the absolute power of alienation of property may be suspended. If the direction is for a longer term than is permitted by law, it is void only as to the excess time, whether the direction be separable from the other clauses in the trust or not, and in such cases of invalidity the income may be paid and distributed to the next succeeding beneficiary in interest.

[Part 5:86:1939; 1931 NCL § 6880.04]

NRS 166.160 Settlor may make different provisions. The principles stated in NRS 166.080 to 166.150, inclusive, shall not prevent the creator of any spendthrift trust, by will or other writing, from making other or different provisions provided he or she uses express, specific language to that end.

[Part 5:86:1939; 1931 NCL § 6880.04]

MISCELLANEOUS PROVISIONS

1. A person may not bring an action with respect to a transfer of property to a spendthrift trust:

(a) If the person is a creditor when the transfer is made, unless the action is commenced within:

(1) Two years after the transfer is made; or

(2) Six months after the person discovers or reasonably should have discovered the transfer,

Ê whichever is later.

(b) If the person becomes a creditor after the transfer is made, unless the action is commenced within 2 years after the transfer is made.

2. A person shall be deemed to have discovered a transfer at the time a public record is made of the transfer, including, without limitation, the conveyance of real property that is recorded in the office of the county recorder of the county in which the property is located or the filing of a financing statement pursuant to chapters 104 to 104C, inclusive, of NRS.

3. A creditor may not bring an action with respect to transfer of property to a spendthrift trust unless a creditor can prove by clear and convincing evidence that the transfer of property was a fraudulent transfer pursuant to chapter 112 of NRS or that the transfer violates a legal obligation owed to the creditor under a contract or a valid court order that is legally enforceable by that creditor. In the absence of such clear and convincing proof, the property transferred is not subject to the claims of the creditor. Proof by one creditor that a transfer of property was fraudulent or wrongful does not constitute proof as to any other creditor and proof of a fraudulent or wrongful transfer of property as to one creditor shall not invalidate any other transfer of property.

4. If property transferred to a spendthrift trust is conveyed to the settlor or to a beneficiary for the purpose of obtaining a loan secured by a mortgage or deed of trust on the property and then reconveyed to the trust, for the purpose of subsection 1, the transfer is disregarded and the reconveyance relates back to the date the property was originally transferred to the trust. The mortgage or deed of trust on the property shall be enforceable against the trust.

5. A person may not bring a claim against an adviser to the settlor or trustee of a spendthrift trust unless the person can show by clear and convincing evidence that the adviser acted in violation of the laws of this State, knowingly and in bad faith, and the adviser’s actions directly caused the damages suffered by the person.

6. A person other than a beneficiary or settlor may not bring a claim against a trustee of a spendthrift trust unless the person can show by clear and convincing evidence that the trustee acted in violation of the laws of this State, knowingly and in bad faith, and the trustee’s actions directly caused the damages suffered by the person. As used in this subsection, “trustee” includes a cotrustee, if any, and a predecessor trustee.

7. If more than one transfer is made to a spendthrift trust:

(a) The subsequent transfer to the spendthrift trust must be disregarded for the purpose of determining whether a person may bring an action pursuant to subsection 1 with respect to a prior transfer to the spendthrift trust; and

(b) Any distribution to a beneficiary from the spendthrift trust shall be deemed to have been made from the most recent transfer made to the spendthrift trust.

8. Notwithstanding any other provision of law, no action of any kind, including, without limitation, an action to enforce a judgment entered by a court or other body having adjudicative authority, may be brought at law or in equity against the trustee of a spendthrift trust if, as of the date the action is brought, an action by a creditor with respect to a transfer to the spendthrift trust would be barred pursuant to this section.

9. For purposes of this section, if a trustee exercises his or her discretion or authority to distribute trust income or principal to or for a beneficiary of the spendthrift trust, by appointing the property of the original spendthrift trust in favor of a second spendthrift trust for the benefit of one or more of the beneficiaries as authorized by NRS 163.556, the time of the transfer for purposes of this section shall be deemed to have occurred on the date the settlor of the original spendthrift trust transferred assets into the original spendthrift trust, regardless of the fact that the property of the original spendthrift trust may have been transferred to a second spendthrift trust.

10. As used in this section:

(a) “Adviser” means any person, including, without limitation, an accountant, attorney or investment adviser, who gives advice concerning or was involved in the creation of, transfer of property to, or administration of the spendthrift trust or who participated in the preparation of accountings, tax returns or other reports related to the trust.

(b) “Creditor” has the meaning ascribed to it in subsection 4 of NRS 112.150.

(Added to NRS by 1999, 1236; A 2007, 894; 2009, 803; 2011, 1481)

NRS 166.180 Trust administered under laws of another state or foreign jurisdiction.

1. A trust administered under the laws of another state, or under the laws of a foreign jurisdiction, is a spendthrift trust pursuant to this chapter if:

(a) The trustee of the trust complies with any requirements set forth in the trust instrument and any requirements of the laws of the state or jurisdiction from which the trust is being transferred;

(b) The trustee or other person having the power to transfer the domicile of the trust declares such intent to transfer in writing;

(c) The writing declaring the intent to transfer the domicile of the trust is delivered to the trustee, if it is executed by a person other than the trustee; and

(d) All requirements of this chapter are satisfied simultaneously with, or immediately after, the change of domicile.

2. For purposes of NRS 166.170, if the domicile of an existing trust is transferred from another state or from a foreign jurisdiction to this State and the laws of the other state or jurisdiction are similar to the provisions of this chapter, the transfer shall be deemed to have occurred:

(a) On the date on which the settlor of the trust transferred assets into the trust if the applicable law of the trust has at all times been substantially similar to the provisions of this chapter; or

(b) On the earliest date on which the applicable laws of the trust were substantially similar to the provisions of this chapter.

(Added to NRS by 2011, 1479)