What if you could take a portion of your hard-earned wealth, lock it up from your creditors, but keep the key for yourself? It sounds too good to be true, but the Domestic Asset Protection Trust provides a very real and very valuable estate planning tool for achieving this objective.
The Domestic Asset Protection Trust, commonly referred to as a DAPT, is a type of spendthrift trust, created by statute, for the benefit of the Trustmaker. A spendthrift trust is an irrevocable trust containing certain legalese that prevents the creditors of a trust beneficiary from accessing the trust assets to satisfy the debts of the beneficiary. Traditionally, spendthrift trusts were a tool used to protect an irresponsible person from spending their inheritance. While this is still a very common use of the spendthrift trust, more and more states are allowing individuals to utilize spendthrift trusts to protect themselves from future creditors.
Of course, there are just a few catches and hoops to jump through to achieve this type of asset protection, but, in many cases, they are well worth the time and hassle. The following information should be considered in your evaluation as to whether or not a DAPT is right for you:
Because DAPTs are a relatively new estate planning tool, there have only been a very limited number of cases where creditors have attempted to reach the assets of the Trustmaker of the DAPT, and they have generally related to fraudulent transfers and statutes of limitations. We look forward to seeing how this trend can benefit our clients in the future.