What if we told you that there is a perfectly legal way to protect your assets from the reach of creditors? Would you be interested? You should be, especially if you are in a field that invites frequent litigation, like medicine, dentistry, or any number of professions. This isn’t to say that you shouldn’t pay legitimate creditors, but having an asset protection structure in place is a good way to deter frivolous lawsuits or set yourself up to reach an amicable settlement.
The domestic asset protection trust (or, “DAPT”) is a trust that you create in a state that permits them (Nevada is a good example). You then transfer nominal ownership of important assets to an independent trustee of the new trust to hold for your benefit. If a creditor comes into the picture somewhere down the line, he will not be able to access the assets that are in the trust. At its best, a creditor will abandon a lawsuit knowing that the DAPT will block access to your assets. The worst case scenario is that you will come into settlement negotiations with a good amount of leverage, hardly a bad situation under the circumstances.
What’s the catch? There are some who say that these trusts do not work because a court from a non-DAPT state could grant a creditor access to the trust, and the DAPT-state court would have to enforce the judgment (under the Full Faith and Credit Clause of the Constitution). This is a theory with no support. As the pioneer of domestic asset protection trusts, Steve Oshins, puts it:
“After 20 years of DAPTs, there still isn’t even one known case where a creditor was able to get a judgment or settlement against a debtor (where there was no bankruptcy or fraudulent conveyance) and then actually reach into the DAPT and access the trust assets. Zero, zilch, nada, nope, not even once.
Therefore, as we celebrate the 20th anniversary of DAPTs, we are celebrating that they have a perfect record. There is no way to count the number of favorable settlements, including lenders who modified loans because of the fear of facing a DAPT. But they do exist. Those are all victories for the debtors.”
Interested in setting up this kind of trust? We highly recommend that you reach out to us. Our firm’s founding attorney, Steven T. Welch, has been setting up domestic asset protection trusts for almost two decades. How many times have creditors been able to reach into the trusts and take out assets? Again, zero times.