What Is A Domestic Asset Protection Trust?

by Bruce Givner on October 18, 2011

A domestic asset protection trust is a trust established in one of the 13 states that has legislation that allows you to establish a trust with your own assets, with you as the beneficiary, which is protected from your own creditors.  The states with the best laws for establishing a domestic asset protection trust are Nevada, Alaska, South Dakota and Delaware.  There are several factors that make a state’s law attractive for forming a domestic asset protection trust.  First, the state must not have an income tax on trusts established by non-residents.  Second, there must be no - or limited - creditors who can get into these trusts.  For example, in Delaware and South Dakota, a person whom you have harmed in an auto accident can get into your domestic asset protection trust.  By contrast, if you establish the same trust in Alaska and Nevada, your assets would be protected.  Another type of creditor who might get to the assets would be a child or former spouse with an order for support.  In Nevada, they are out of luck.  In Alaska, the child is out of luck but the former spouse can get at the assets.

For our clients in California, we usually use Nevada to form domestic asset protection trusts.  For our Nevada clients, if they have or anticipate problems in Nevada, we might use Delaware.  Selecting the jurisdiction is only one part of the asset protection planning process.  www.GivnerKaye.com (310) 207-8008

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