Domestic Asset Protection Trust (DAPT) statutes have been enacted in numerous jurisdictions over the past decade. DAPTs are irrevocable trusts permitted to be formed in a limited number of states that have provisions for such. As of this writing, seventeen states in the United States provide for these asset protection tools.
Asset Protection Statutes and Creditor Protection
Understanding the flexibility and restrictions pertaining to DAPTs within each state can help individuals select an ideal jurisdiction for their asset management needs. For example, Alaska’s government has made several amendments to laws supporting DAPTs, specifically addresses the interests (principal and income) the settlor may retain, trustee’s distribution authority, use of trust protectors, and other related matters. However, Colorado’s legislature has not amended the law nor enacted provisions that address any of these areas. Aside from trust administration differences, creditor protections vary by state. Child support, divorce, elective share, and future creditor claims are uniquely addressed in each jurisdiction.
Rank and Compare DAPT States
Attorney Steve Oshins annually publishes state rankings for DAPTs. States are ranked based on weighted methodology that incorporates creditor protections, flexibility, statute of limitations, tax, and transfer abilities. For the past decade, attorney David G. Shaftel has published an annual comparison of DAPT statutes by state. The 47-page comprehensive report and its charts evaluate more than three dozen factors and features of DAPTs and how they relate to the statutes in each state.
Case Law on DAPTs
Since legislation pertaining to DAPTs is evolving, case law serves as a strong reference yet is still somewhat limited in scope. According to Shaftel’s comparison report, only three cases related to DAPT laws have been ruled upon. Schedule time with a trust attorney to review options for establishing an asset protection trust, examine case law, and select an ideal jurisdiction.