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Asset protection is a vital part of estate planning. Indeed, you want to pass on as much of your wealth to family and friends as possible. This can be achieved only if you shield your assets from frivolous creditors\u2019 claims and lawsuits.<\/p>\n
One option available is to establish a domestic asset protection trust (DAPT) in the many states that currently offer them. (You don\u2019t necessarily have to live in one of those states.) While DAPTs can offer creditor protection even if you\u2019re a trust beneficiary, there are risks involved: DAPTs are relatively untested, so there\u2019s some uncertainty over their ability to repel creditors\u2019 claims.<\/p>\n
A \u201chybrid DAPT\u201d offers the best of both worlds. Initially, you\u2019re not named as a beneficiary of the trust, which virtually eliminates the risk described above. But if you need access to the funds down the road, the trustee or trust protector can add you as a beneficiary, converting the trust into a DAPT.<\/p>\n
A hybrid DAPT in action<\/strong><\/p>\n A hybrid DAPT is initially set up as a third-party trust \u2014 that is, it benefits your spouse and children or other family members, but not you. Because you\u2019re not named as a beneficiary, the trust isn\u2019t considered a self-settled trust, so it avoids the uncertainty associated with regular DAPTs.<\/p>\n There\u2019s little doubt that a properly structured third-party trust avoids creditors\u2019 claims. If, however, you need access to the trust assets in the future, the trustee or trust protector has the authority to add additional beneficiaries, including you. If that happens, the hybrid account is converted into a regular DAPT subject to the previously discussed risks.<\/p>\n An alternative to a hybrid DAPT<\/strong><\/p>\n Before considering a hybrid DAPT, determine whether you need such a trust at all. The most effective asset protection strategy is to place assets beyond the grasp of creditors by transferring them to your spouse, children or other family members, either outright or in trust, without retaining any control.<\/p>\n If the transfer isn\u2019t designed to defraud known creditors, your creditors won\u2019t be able to reach the assets. And even though you\u2019ve given up control, you\u2019ll have indirect access to the assets through your spouse or children (provided your relationship with them remains strong).<\/p>\n A flexible tool<\/strong><\/p>\n The hybrid DAPT can add flexibility while offering significant asset protection. It also minimizes the risks associated with DAPTs, while retaining the ability to convert to one should the need arise. We can help you assess whether a hybrid DAPT is right for you.<\/p>\n \u00a9 2023<\/em><\/p>\n <\/body> Asset protection is a vital part of estate planning. Indeed, you want to pass on as much of your wealth to family and friends as possible. This can be achieved only if you shield your assets from frivolous creditors\u2019 claims and lawsuits. One option available is to establish a domestic asset protection trust (DAPT) in […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,9,10],"tags":[8,11,12],"class_list":["post-16905","post","type-post","status-publish","format-standard","hentry","category-articles","category-estates","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16905","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=16905"}],"version-history":[{"count":1,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16905\/revisions"}],"predecessor-version":[{"id":16906,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/16905\/revisions\/16906"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=16905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=16905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=16905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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