Domestic Asset Protection Trusts

Domestic Asset Protection Trusts, or DAPTs, are a type of irrevocable trust. They can be helpful estate planning tools and potentially provide protection from creditors. In this article, we will go over the basics of DAPTs.

Set Up

Only 17 states currently allow Domestic Asset Protection Trusts. These include Alaska, Delaware, Hawaii, Michigan, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming. You can name yourself as a beneficiary. This type of trust is self-settled. This means you can set up an irrevocable trust in which you receive asset protection. To protect your assets from creditors you must transfer them to the DAPT.

Considerations

When creating a DAPT there are some things you will have to take into consideration. First, if you have current debts or creditors, transfers into the trust must not leave you unable to pay them. This would include potential creditors, like in a pending litigation. Additionally, you can fund the DAPT with large amounts of funds, but you just cannot impoverish yourself. Third, there may be a time limit on the transfer of assets. This means assets must have been transferred into the trust within a specific period of time or they can be subject to creditors claims. For example, in South Dakota there is a two-year time limit. Fourth, this type of trust does not automatically exclude assets from estate tax. A Domestic Asset Protection Trust should be part of a larger asset protection strategy.

Setting Up a Domestic Asset Protection Trust

If you feel like a DAPT is right for you, contact a law firm that specializes in them. They can walk you through the process to have a successful estate plan.

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