We absolutely love revocable living trusts (RLT) and recommend most of our clients include an RLT in their estate plans. One of our favorite RLT benefits is the ability to pass assets to loved ones in asset protection trusts; these are trusts that can’t be seized in the event of a lawsuit, divorce, bankruptcy, medical crisis, business failure, and the like. But while you can use an RLT to provide asset protection for loved ones, you can’t use it to create asset protection for yourself. That’s why we use domestic asset protection trusts (DAPT).
Here are the benefits of a domestic asset protection trust:
- The DAPT – domestic asset protection trust – provides asset protections for your own assets. It’s a trust you set up to benefit yourself, yet keep your creditors out.
- You benefit from asset protection laws within the United States and don’t need to move assets offshore.
- While an independent trustee must have sole discretion in distributing assets, you can remove and replace the trustee with another independent trustee.
- You retain the power to pass assets to loved ones at your death.
- We can design the trust to be an incomplete gift and keep it part of your estate, yet outside the reach of creditors. Or, in the alternative, your loved ones can be the primary beneficiaries and you can receive funds at the discretion of your trustee, if needed.
- You do not need to be a resident of a state to site your trust in that state; thus, you can use asset protection laws of a state without uprooting your life.
DAPTs are not all peaches and cream. Like all asset protection planning, they cannot be used to defraud current creditors. They must be carefully drafted, funded, and administered. If you think a domestic asset protection trust may be a good fit for you, let’s explore it.
