A domestic asset protection trust (often called DAPTs, or just APTs) allows the settlor (the trust creator or grantor) to be a discretionary beneficiary of the trust, while at the same time assuring protection of trust assets from claims of the creditors.
Trusts are powerful legal machines and the Domestic Asset Protection Trust (DAPT) is a particularly intriguing machine, indeed. A recent article in Forbes sheds light on the concept and some of the finer points. The article, titled “How To Use a Nevada Asset Protection Trust To Safeguard Your Assets,” notes that in the same way all trusts are built they are not same, not all states treat them the same. It just so happens that a Nevada DAPT is a particularly well-crafted and well-situated machine for its purpose.
DAPTs in any state are a specific subset of trusts that protect assets by placing them within the safe confines on an irrevocable trust, but allow the owner to retain a level of control over the assets. In other words, it’s a way of having your cake and eating it too. It just so happens that trusts like these are also well-suited to multiple purposes and blend well into your overall plan for your assets during life and as part of your estate. In fact, a DAPT is never going to be your sole vehicle, because putting all of your assets into a protection trust is neither practical nor entirely defensible (it might not pass the sniff test for fraud). On the other hand, a DAPT may be your most precious holding.
So why Nevada? The article speaks deeper on the specifics and there’s much to be said regarding the state laws surrounding these trusts, but it does come down to favorable laws. Namely, trusts protect assets from creditors or lawsuits by separating ownership. Nevertheless, many trusts can be ransacked all the same if a creditor can pierce/bust the trust. Nevada has a specific “seasoning” rule that protects against attempts to pierce or bust the trust once it is properly “seasoned,” which is to say after two years. That’s a neat concept.
Nevada Asset Protection Trusts are a hot topic. If you’re only now starting to look into them, consider digging in and having a look at how you can protect the assets you worked so hard to build. The DAPT is only one tool, and not without imperfections or vocal detractors, but the DAPT is still a powerful tool and prime asset protection vehicle for many.
Reference: Forbes (May 21, 2014) “How To Use a Nevada Asset Protection Trust To Safeguard Your Assets”