A domestic asset protection trust (DAPT) is one of many different entities that may (or may not) be an appropriate part of an asset protection plan.

  • At least eleven states have enacted DAPT legislation.
  • States that have DAPT statutes include Alaska, Delaware, Nevada, South Dakota, Hawaii, Missouri, New Hampshire, Rhode Island, Tennessee, Utah and Wyoming.
  • While there are similarities, each state statute has different provisions.
  • A DAPT must be irrevocable; the trustee must be a resident of the state in which the trust is formed, or a bank, trust company or other financial institution with offices in that state.
  • The validity of these trusts is still unsettled.  There is no reported court decision either affirming or striking down this relatively new type of trust.

Asset protection lawyers have varying views about DAPTs.  Foreign asset protection trusts provide greater certainty because court decisions have either directly or indirectly upheld their validity in many circumstances.  But these trusts are more expensive to set up, and holding assets offshore can create certain issues and reporting requirements that are not applicable to domestic trusts.

My own view is that each client’s situation has to be examined individually.  A DAPT might be an appropriate alternative for some (but certainly not all) of a client’s assets.  If you are thinking about a DAPT or any other form of asset protection, it is critical that you consult with an attorney who will look at all alternatives (and who is not simply selling a particular kind of trust or other device).