Domestic Asset Protection Trusts
Under the law of most states, an individual cannot benefit from asset protection by placing assets in a trust of which he or she is a beneficiary. These trusts are called “self-settled trusts” or “Domestic Asset Protection Trusts” (DAPTs). Some states, however, recognize the validity of DAPTs, and specifically exempt transfers of assets to DAPTs after the applicable statute of limitations has run.
By creating a DAPT, an individual can transfer his or her assets, including securities, cash accounts and business interests, into a DAPT that is established under the law of a domestic jurisdiction. The Trustee, who must be a resident of such domestic jurisdiction, or a corporate Trustee chartered in such domestic jurisdiction, can make distributions back to the individual who created the DAPT, as well as the other trust beneficiaries.
It is not recommended to transfer real estate located in a jurisdiction that does not recognize self-settled trusts because the real estate will be subject to the state’s jurisdiction in which it is located.