A Domestic Asset Protection Trust (“DAPT”) is designed to protect and preserve assets from creditor and marital risks while permitting you to remain a beneficiary. There are a number of states that allow you to set up a self-settled DAPT, Florida is not one. However, you do not have to reside in one of these states to be able to set up a DAPT. A DAPT generally requires an individual or institution within the state where the trust is established, to act as a trustee. Many local banks and trust companies in these states offer trustee services.
DAPT’s offer many of the same benefits of an Offshore Trust without the need to leave the United States. For a long time, offshore trusts were the only viable option for clients wishing to “judgment proof” themselves to the highest extent possible under the law.
What type of individual qualifies for a DAPT? Business owners, doctors, lawyers, high risk professionals and other individuals of high net worth are good candidates. The DAPT should be established before the threat of creditor action or before any legal proceedings begin.
Establishing a DAPT not only protects you from creditors, but it can also earn you significant estate tax savings. Based upon a Private Letter Ruling issued by the IRS, a DAPT can be structured to be a completed gift for federal gift tax purposes and the assets transferred into the trust can be excluded from the Grantor’s gross estate for federal estate tax purposes.
At Morris Law Group, let us guide you through the complex process of setting up a DAPT. We will ensure that you are up to speed when it comes to all the restrictions and freedoms available to you under state laws and the DAPT. To find out more about a DAPT and to determine if it is the right choice for you, please contact us and together we can craft the best possible strategy.
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.