(News Briefs, Lawyer Weekly, 11/25/19)
No one wants to be sued, and everyone would feel better if they knew their assets would be protected if they were sued. It is commonknowledge that we live in the most litigious country in the world. There are more lawyers in southern California than in the entire country of Japan.
A lawsuit is initiated every 15 seconds in the US. Such an atmosphere has motivated a considerable segment of the public to go to some lengths to protect their "nest egg," even to the point of moving it out of the country. Is that necessary? Isn't it possible to protect it while it's here?
In 1977, Alaska, followed quickly by Delaware, became the first states formally to adopt laws that would allow a person to establish a trust for her own benefit, the assets of which could not be reached by creditors. It is referred to as a self-settled domestic asset protection trust, or DAPT.
Of course, the various state DAPT statutes differ somewhat, but following is a brief description of the basics and some of the distinctions among the states' laws, as well as an overview of the laws of the most recent additions.
For openers, there are five requirements common to all 19 DAPT states that the DAPT must follow:
1) The trust must be irrevocable - irrevocable by the settlor, that is. The power to revoke can be given to other parties, such as the trust protector;
2) The trust must have a local trustee (but it could also have a co-trustee elsewhere, such as in the settlor's domiciliary state - generally a bad idea);
3) Some ot the trust assets must be located and administered in the DAPT state;
4) The trust must provide that its governing law is that of the DAPT state;
5) The trust must contain a spendthrift provision (prohibiting attachment or reach by creditors or assignment by the beneficiaries).
