Asset Protection
What is a domestic asset protection trust?
For years, protecting your assets in a trust while still benefiting from them meant going offshore. The domestic asset protection trust changed that, here’s how it works.
A traditional irrevocable trust protects assets but requires giving up all benefit, you can’t protect assets in a trust and remain a beneficiary. The DAPT is the innovation that lets you do both, under U.S. law, in states that specifically permit it.
How a DAPT works
You transfer assets into an irrevocable trust formed in a DAPT-friendly state, with a qualified trustee there. Because the trust is irrevocable and you don’t control distributions, the assets are no longer yours for a creditor to reach, yet the trust can make discretionary distributions to you. This “self-settled” protection is what makes the DAPT special; most states don’t allow it, which is why the state you choose matters.
Which states allow them
A minority of states have DAPT statutes, including Wyoming, Nevada, South Dakota, Alaska, and Ohio. You generally don’t have to live in the state to use its trust law, but a qualifying connection (like an in-state trustee) is required.
Strengths and limits
A DAPT is far stronger than holding assets in your own name and much simpler than an offshore trust. Its limit is that it operates inside the U.S. system, so a domestic court still has some reach, and protection may be less certain against certain claims than an offshore structure. For maximum protection, an offshore trust or the Bridge Trust® goes further. Tresp, Day & Associates helps you choose, call (858) 755-6672.
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Common questions
Frequently asked
What is a domestic asset protection trust?
A domestic asset protection trust (DAPT) is an irrevocable trust formed in a U.S. state that allows them, which protects the assets inside from your future creditors while still letting you be a discretionary beneficiary. This 'self-settled' protection, being both the person who funds the trust and a beneficiary, is what makes it special, and it's only available in states with DAPT statutes like Wyoming, Nevada, South Dakota, Alaska, and Ohio.
Can I be a beneficiary of my own asset protection trust?
With a domestic asset protection trust in a state that allows them, yes, you can remain a discretionary beneficiary while the assets are protected from your creditors. This is different from a traditional irrevocable trust, where you'd give up all benefit. The trust must be irrevocable and you can't control distributions, which is what keeps the assets protected.
This article is general information, not legal or tax advice, and does not create an attorney-client relationship?
This article is general information, not legal or tax advice, and does not create an attorney-client relationship. Every situation is different and the law changes; consult a qualified attorney about your circumstances.
This website is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Every situation is different; please consult a qualified attorney about your specific circumstances.
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