Only a few states have enacted asset protection trust legislation to provide creditor protection through a self-settled irrevocable trust. Those states with domestic asset protection trust (DAPT) statutes compete with one another by maintaining laws that attract investment assets to their state from people seeking asset protection benefits. In 2013, Utah enacted a revised domestic asset protection trust statute that includes many attractive creditor protection features.
Florida, and most states, provide no asset protection for trust set up by the debtor for his own benefit. Asset protection trust legislation enacted by Utah and other states expressly provides asset protection for these trustmakers.
Here are some of the features I like about Utah’s DAPT law:
- The trustmaker can help direct investment of trust assets.
- The trustmaker may receive distributions, although he may not control or direct distributions.
- The trustmaker may be a trustee so long as there is at least one co-Trustee situated in Utah. The Utah trustee may be any individual residing in Utah, and does not have to be an institutional trustee such as a bank or trust company.
- The law protects trustees and any professional who assist in the creation of the trust or transfers to the trust from liability for conspiracy to commit a fraudulent transfer.
- The statute of limitations for fraudulent transfers to a Utah trust is generally two years. (Four years in Florida and other DAPT states.) The debtor may shorten the statute of limitations to 120 days by providing notice to potential creditors or by publication as to unknown future creditors.
There is no Florida court decision concerning whether Utah trust law would apply to the collection of a Florida judgment. The more that the parties and assets to a Utah trust are located in Utah increases the probability of success against creditor attacks in Florida against debtors with Utah trusts.
The features of Utah DAPT statute compare favorably with the laws of better known DAPT statues such as Nevada, Delaware, or Alaska. People considering domestic trusts as part of an asset protection plan should consider using the Utah DAPT.
About the Author
Jon Alper is an expert in estate planning for individuals and small businesses.
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