A handful of states, including Alaska, Delaware, Nevada, and South Dakota, allow a person to create a trust that is designed to provide asset protection for the person’s own assets. These trusts are known as domestic asset protection trusts (or DAPTs) or self-settled spendthrift trusts.
While the rules differ from state to state, there are some common features:
- The trust must be irrevocable and restrict the right of the trust creator to withdraw funds
- At least one trustee of the trust must be a resident of the state where the trust is located
- Some of the trust assets must be held (or deposited) in the state where the trust is located
While a domestic asset protection trust can’t guarantee bullet-proof protection for your assets, it can serve as a strong deterrent to claims from creditors.
