DOMESTIC ASSET PROTECTION TRUSTS

Asset protection structures may include limited partnerships, domestic and/or offshore limited liability companies, charitable remainder trusts, irrevocable life insurance trusts, domestic asset protection trusts and/or offshore asset protection trusts. The success of such vehicles depend upon how much protection is provided by the type of asset protection vehicle, how well the documents are drafted, whether the structure is properly and fully implemented, and where (state or country) the entities are domiciled. Thus, proper asset protection vehicles not only protect assets against an unfavorable judgment by a future creditor it also reduces the risk that an individual will be sued in the first place.

One highly popular vehicle being utilized is a specially-designed Domestic Asset Protection Trust ("DAPT"). Recently, in one manner or another eight states have elected to disregard historical precedent.  While there is still some controversy over just how well these new DAPT statutes may work, nevertheless, they are following a trend and are designed to take advantage of those states' laws that allow for the protection of a settlor/beneficiary's interest in a self-settled spendthrift trust.

To date there have been no reported cases on DAPT's. However, the creation of a DAPT should not be treated lightly and no one should attempt to establish a DAPT without using the services of a law firm experienced and highly qualified in the areas of domestic tax, tort and asset protection law. On a scale of 0 to 10 (10 being the best), when properly drafted and structured a DAPT would rate about a 7 for asset protection purposes.