What is a Domestic Family Protection Trust
Domestic Asset Protection Trust is a trust with a trust document that has basically the same anti-creditor features as an offshore trust, and is formed in one of the several states that have anti-creditor trust acts and now allow Self-Settled Spendthrift Trusts (i.e., trusts which protect yourself from creditors).
Alaska was the first state to enact an anti-creditor trust act, followed quickly by Delaware, and then later by Nevada. A couple of other states have since enacted nearly identical legislation, but when you think of DAPTs you typically think of these three states. Thus, sometimes these trusts are called, almost interchangeably, “Alaska Trusts”, or “Delaware Trusts”, or “ Nevada Trusts”.
Domestic Asset Protection Trusts (DAPT) function by allowing:
Self-Settled Spendthrift Trusts – These states allow you to form a trust for your own benefit that protects you against creditors, something expressly disallowed as against public policy of the other 40+ states.
Shorter Statute of Limitations – There is a shorter time period for a creditor to challenge a transfer to one of these trusts.
Conservative Fraudulent Transfer Standards – It is more difficult for a creditor to prove that a transfer to the trust was a fraudulent transfer.
A DAPT is essentially a domestic version of a Foriegn Asset Protection Trust. As far as asset protection is concerned, there are a lot more effective ways to protect your assets than with a DAPT. DAPTs are somewhat limited any might only be effective in the few states that allow such trusts.