Your divorce will be decided where you live. Not where you filed a trust.

That sentence is the whole article, and almost everything that gets sold on this subject depends on you not thinking about it.

Here is how it usually arrives. A man gets engaged. He owns a business. Someone tells him that if he sets up a Nevada asset protection trust before the wedding, his future spouse can never reach it.

He does not live in Nevada. The business is not in Nevada. If that marriage ends, it ends in the state where he lives.

I am going to use Minnesota as the example throughout, because I had this exact conversation recently and the Minnesota statutes are clean to read. Substitute your own state. The structure of the problem does not change, and I will show you why at the end.

The case being sold is Klabacka v. Nelson, 394 P.3d 940 (Nev. 2017). It is a real case, it is a strong case, and the Nevada Supreme Court decided it en banc. I want to take it seriously, because the people citing it are not making it up.

I also want to read the facts out loud. They are the whole story.

What Klabacka actually involved

Eric and Lynita Nelson married. Ten years in, in 1993, they signed a separate property agreement that transmuted their community property into separate property and split it between two separate property trusts. Both of them had counsel. Lynita retained her own outside counsel on top of that, specifically to advise her on the consequences before she signed.

Eight years later, in 2001, they converted those into two self-settled spendthrift trusts — one for each of them — and funded each with that person’s own separate property. Each trust named a Nevada resident as distribution trustee, as NRS 166.015(2)(a) requires.

Eight years after that, in 2009, Eric filed for divorce.

So the sequence is a separate property agreement signed a decade into the marriage, trusts created eight years before anyone filed, funded with property that had already been made separate by written agreement with independent counsel on both sides, in Nevada, administered by a Nevada trustee, and litigated in a Nevada court applying Nevada statutes.

And one more finding, because it is a statutory element under NRS 166.040(1)(b): the court found no evidence the trust was created to hinder, delay, or defraud known creditors.

Every one of those facts was doing work.

What the court held — and the half that gets left out

The Nevada Supreme Court held that separate property inside a validly created self-settled spendthrift trust is not subject to attachment or execution. The district court erred by equalizing the two trusts. It erred by using the parties’ testimony about what they really intended, because the documents were unambiguous. It erred by ordering Eric’s personal obligations paid out of his trust.

That is the holding people quote. Here is the part they stop before.

The $800,000 lump-sum alimony award was affirmed. The court vacated it only to the extent it ran against the trust instead of against Eric personally. Same with child support — affirmed as to amount, vacated as to who pays.

Read that carefully. The trust corpus was protected. The obligation was not. It simply attached to the man instead of to the entity, and he still owed every dollar of it.

The court also held that the district court erred by failing to trace the trust assets. Separate property inside the trust is protected; any community property found inside it is subject to equal distribution under NRS 125.150(1)(b). The trust is not a laundry. What went in keeps the character it had.

Why Klabacka is a Nevada case and stays one

Two passages in the opinion explain why this does not travel, and neither is quoted in the marketing.

First, Nevada deliberately went the opposite direction from most of the country on support obligations. The opinion walks through Gilbert v. Gilbert, 447 So. 2d 299 (Fla. Dist. Ct. App. 1984), where a Florida court described the strong public policy favoring subjecting a trust beneficiary’s interest to alimony — “the obligation to pay alimony is a duty, not a debt.” It notes South Dakota’s statute, S.D. Codified Laws § 55-16-15(1), which strips spendthrift protection as to support and alimony.

Then it rejects all of it. Under NRS 166.090(1), provision for a Nevada spendthrift beneficiary is for that beneficiary “alone, and without reference to… the needs of any other person, whether dependent upon the beneficiary or not.” The court said plainly that it “expressly reject[s] that exception here.”

So Nevada is not the consensus. Nevada is the outlier, by design.

Second — and this is the sentence I would put on a slide — the court explained why the statute exists. Citing the 1999 legislative history, it said the Legislature enacted the framework allowing these trusts “to make Nevada an attractive place for wealthy individuals to invest their assets, which, in turn, provides Nevada increased estate and inheritance tax revenues.”

That is the Nevada Supreme Court describing its own statute as an economic development measure.

Now put yourself in a judge’s chair in your own state. You are being asked to apply, against one of your own residents, a Nevada statute that Nevada’s own high court says was written to attract out-of-state money to Nevada, and that Nevada’s own high court acknowledges departs from the public policy of other states on spousal and child support.

Courts are not required to extend that courtesy. Many do not.

What your state’s court can do regardless

Set the trust corpus aside entirely. Assume it holds. Your home state’s court still has tools that do not require touching it. Here is Minnesota as the worked example.

It can treat the trust and the business as an economic circumstance. Under Minn. Stat. § 518.58, subd. 1, the division of marital property must be “just and equitable,” and the court weighs the length of the marriage, each party’s age, health, income and needs, and each party’s contribution including as a homemaker. The statute presumes each spouse made a substantial contribution to the acquisition of income and property during the marriage. What sits in a trust informs what a just and equitable division of everything else looks like.

It can treat income as available for support. Distributions and business income are income.

And § 518.58, subdivision 2 reaches nonmarital property directly. If the court finds a spouse’s resources or property “are so inadequate as to work an unfair hardship, considering all relevant circumstances,” it may, in addition to the marital property, apportion up to one-half of the property otherwise excluded — to prevent that unfair hardship. The court has to make findings supporting it. But the power is there, in the statute, and a premarital business is not immune from it. Prenuptial agreement or not.

Your state’s statute will not read word for word like Minnesota’s. Look for the same three levers anyway: what the court may consider in dividing property, what counts as income for support, and whether the court has any route to separate or nonmarital property. That is the question to put to counsel where you live.

The appreciation problem, and why it is not a Minnesota problem

This is the one that actually decides outcomes, and no trust in any state addresses it.

In Nardini v. Nardini, 414 N.W.2d 184 (Minn. 1987), the Minnesota Supreme Court looked at a closely-held fire equipment business. The husband had bought a half interest in 1949 for $2,500 — before the marriage. Thirty-one years later it was the principal asset of the marriage.

He argued the business grew because of his “key man” effort. The court was not persuaded that this helped him, and it rejected the idea that his nonmarital half stayed a nonmarital half forever:

“The assumption ignores the fact that the events of the past 31 years have diluted the significance of the original nonmarital interest: Ralph’s $2,500 investment in 1949 has been dwarfed by the overall success of the business.”

On whether the growth was just the economy doing its work, the court wrote one of my favorite lines in any marital property case:

“But a business, like a garden, must be tended if it is to flourish.”

Now here is why this travels. Nardini did not invent that rule. The opinion surveys other states that got there first, under different statutes, in different systems.

It cites McLeod v. McLeod, 74 N.C. App. 144, 327 S.E.2d 910 (1985), where a North Carolina court treated the increase in value of nonmarital shares of a closely held corporation as marital property — distinguishing growth attributable to the efforts of the parties from growth attributable to inflation and general market conditions.

It cites Cockrill v. Cockrill, 124 Ariz. 50, 601 P.2d 1334 (1979), where the increase in value of separate property due to the husband’s efforts during the marriage was held to be community property.

Look at those two together. North Carolina is an equitable distribution state. Arizona is a community property state. Two completely different systems, same answer. And the Nardini court noted that some of these courts reached that result “despite statutory language which appears to make no such distinction” — meaning judges got there by reasoning about what a marriage is, not because a statute handed it to them.

That is what a durable legal principle looks like. Your state is very likely somewhere in that pattern.

And here is the trap, wherever you live: if he puts the business into a trust and keeps running it, the income is still marital and the appreciation argument gets worse, not better — because he has just documented, in writing, that he is the person whose efforts drive the value.

What Klabacka is actually good for

I am not telling you Nevada trusts are useless. I am telling you what that case required, which is a different thing.

It required separate property. It required a written agreement, with independent counsel on both sides, made at a time when nobody was contemplating divorce. It required years of distance between the planning and the claim. It required no intent to hinder a known creditor. It required Nevada residents, a Nevada trustee, and a Nevada court.

Strip out any one of those and you are not standing on Klabacka anymore. You are asking a judge in another state to extend a Nevada statute past where even Nevada put it.

And notice which fact is doing the most work across all of them. It is not the jurisdiction. It is the calendar. A structure built a decade into a marriage, funded with property already made separate by agreement, years before any dispute, is a different artifact from one built on the eve of a wedding for the stated purpose of defeating the person you are about to marry.

A court can read a calendar. It is the first thing I read when I was on the other side of these cases, and it is the first thing I look at now.

If you are getting married and you own a business, the conversation to have is about what you actually want to protect, which state’s court will decide it, and what gets documented before the wedding rather than after. That is a conversation to have in a legal consultation.

You can schedule an initial legal consultation with me here: calendly.com/btb-asset-protection/asset-protection-legal-consultation

Structure before stress.