Fueled
by the multi-million dollar marketing budges of
some trust companies, the Domestic Asset
Protection Trust (DAPT) is being heavily
promoted as being as good as an offshore trust
for asset protection but without all the
negative sleaze and stigma that associated with
the debtor haven jurisdictions.
That something is being heavily marketed does
not, of course, mean that it works. It only
means that it is being heavily marketed.
The DAPT may serve some limited asset protection
role for those people who live in a DAPT state
and have all of their DAPT state, and who can
avoid the 10-year clawback in bankruptcy. For
everybody else, DAPTs are probably a bad deal.
A DAPT is a self-settled spendthrift trust,
meaning that it is a trust that you create for
your own benefit and then attempt to stand
behind the trust as a mere beneficiary when
creditors come a' calling. However, the laws of
by far the majority of states refuse to
recognize such trusts. That the trust was formed
in a DAPT-friendly state will be of little help
to a person not living in that state or who have
assets out of the DAPT state.
For several years, there was rush by some states
to adopt DAPT legislation. After Congress
enacted the 10-year clawback in the 2005
Bankruptcy Act which was aimed precisely at
these trusts, only one state (Tennessee) has
adopted DAPT legislation. Because of the 10-year
clawback, it means that one who forms a DAPT
must avoid bankruptcy for 10 years -- whether
the person lives in a DAPT state or not. This
glaring defect and other possible defects makes
one wonder why anybody would ever form a DAPT
for asset protection.
Like most popular but defective asset protection
techniques, the answer is all in the marketing.
More information about Domestic Asset Protection
Trusts
Buy Asset Protection: Concepts and Strategies from
Amazon.com or buy from
Barnes & Noble
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