Ins and Outs of Domestic Asset Protection Trusts (DAPTs)

You can create this type of self-settled irrevocable trust to protect your assets for yourself, rather than for someone else, but there are limits.

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Editor’s note: This is part five of an ongoing series about using trusts and LLCs in estate planning, asset protection and tax planning. The effectiveness of these powerful tools — especially for asset protection and tax planning — depends very much on how they are configured to work together and whether certain types of control over assets and property are surrendered by the property owner. See below for links to the other articles in the series.

Almost 20 U.S. states now permit a person to set up an irrevocable trust that names themself as beneficiary even while the trust maker is alive, a type of irrevocable trust known as a domestic asset protection trust, DAPT or self-settled trust.

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Rustin Diehl, JD, LLM
Attorney and Counselor at Law, Allegis Law

Rustin Diehl advises clients on tax, business and estate planning matters. Rustin serves as an adjunct professor, frequent speaker and is current or former chair of professional associations. Rustin is a prolific author and has published many technical and popular articles on estate and business issues, as well as drafting and advising legislators in developing numerous statutes pertaining to trust and estate and business planning, creditor exemption planning and digital asset (blockchain) trusts and blockchain entities known as decentralized autonomous organizations.