
Trusts come in numerous varieties and serve different purposes. The most common trust is a revocable or living trust. Such trust enables you to name yourself as the beneficiary and trustee. The purpose of a revocable living trust is to avoid having your assets administered by a court upon your death or incapacity. (It avoids probate.) However, a revocable living trust does not protect your assets from creditors and lawsuits because: (1) you created the trust; (2) the trust holds your property; (3) you are the trustee (the person who controls the trust); and (4) you are the beneficiary (the person who is entitled to receive the trust’s assets).
Normally you are not able to create a trust naming yourself as a beneficiary or trustee and enjoy asset protection. However, a Domestic Asset Protection Trust (DAPT) allows you to do just that. With few exceptions, you can create the trust, transfer your assets into it, serve as co-trustee (you may co-manage your assets) and be the beneficiary while protecting your assets from creditors.
DAPTs work similarly to offshore trusts, but are less expensive to create and administer. A DAPT is an irrevocable trust that is owned and managed by a trustee. This is important because it creates a legal separation between you and the trust assets. This separation can help shield your assets from a creditor claim or adverse judgment.
There are rules and regulations governing how quickly assets can be transferred into a DAPT and specific “look back periods” that can expose the assets to judgments and creditor claims. This is why it is so important to work with an experienced asset protection attorney who understands the applicable rules of each DAPT state.
By way of background, DAPTs were created back in 1997. Two states – Alaska and Delaware – were the first to formally recognize a DAPT. Since that time, 15 other states have adopted DAPT statutes. Each DAPT state has distinct laws on the books that impact the level of asset protection that you can reasonably expect from the trust.
Domestic Asset Protection Trust States
As mentioned, there are currently 17 states in the U.S. that recognize DAPTs. These states include the following:
- Alaska
- Delaware
- Hawaii
- Michigan
- Mississippi
- Missouri
- Nevada
- New Hampshire
- Ohio
- Oklahoma
- Rhode Island
- South Dakota
- Tennessee
- Utah
- Virginia
- West Virginia
- Wyoming
Despite the proliferation of US-based asset protection trusts, it is important to note that many large states, including some of the most populous states (e.g., California, Texas, Florida, New York, and Pennsylvania) do not recognize DAPTs or have DAPT statutes on the books. Nevertheless, even if you don’t reside in a DAPT state, you still have pathways to protect your assets. Keep reading to learn more.
Options If You Don’t Reside in Asset Protection Trust States

If you don’t reside in one of the states listed above, do not fret. You can still access the benefits offered by an asset protection trust. For example, you have the ability to establish a DAPT in one of the states that formally recognizes DAPTs.
However, not all state DAPT statutes are created equal. It is important to consult with an experienced asset protection attorney to help you determine which state is best for your circumstances. Factors to consider include the strength of the state’s DAPT statutes, statute of limitations, ease of use, the burden of proof required by a plaintiff, among other considerations.
It is also important to understand that nearly all DAPT states have a look-back period. A look back period is the statute of limitations of future and existing creditors to attack asset transfers into the DAPT. This means if you have not transferred your assets into your DAPT prior to the look back period, then a judge may determine that your DAPT violates the Uniform Fraudulent Transfer Act, the Uniform Fraudulent Conveyance Act or one of the other fraudulent transfer and conveyance laws.
Looking for Guidance in Establishing a Domestic Asset Protection Trust? Contact Ultimate Asset Protection Today
As you can see, establishing a viable DAPT can be challenging and complex. It takes consideration of DAPT trust states, timely transference of assets into the trust (to avoid running afoul of fraudulent conveyance statutes), and requires proper oversight and management.
Skabelund PLLC, led by attorney John Skabelund, can help. We’ll work with you to develop a customized trust plan designed to meet your specific preferences and goals. Contact us today to learn more.