Domestic Asset Protection Trusts: An Examination of Existing Legislation & Potential Complications

The objective of this DAPT research is to understand: (1) what the benefits of creating a DAPT are by analyzing what asset protections are provided, depending on the governing state; and (2) what ethical and legal concerns are presented with varying DAPT statutory schemes that ought to be considered by (a) the states enacting these laws; and (b) individuals who are establishing their own DAPTs. In general, it can be determined that the main benefit of creating a DAPT is the asset protection provided and its potential dissuasion of creditors pursuing litigation. During examination of the differing DAPT statutory schemes in the first chapter, it becomes evident that some states provide for more asset protections than exceptions to such, creating both legal and ethical concerns. The second chapter discusses the potential legal and ethical complications that DAPTs present by reviewing and analyzing current case law. These complications include the improper application of legislation, divorce, child support, creation to avoid current known claims, loan securitization, bankruptcy, crossing legal jurisdictions, and trust law changes and amendments. Chapter 3 then uses the potential complications to urge states to reflect on their moral duties when establishing DAPT legislation and encourages individuals to review the consequences they may have when creating a DAPT based on their personal situation. Concludingly, a DAPT is a helpful asset protection tool. However, legislation ought to have a set standard for exclusions from protection for division of marital assets, child support claims, creation of and transfers to a DAPT in an attempt to deprive active known creditors from collecting on their rightful judgements, loan securitization, and state and federal government claims.