Asset Protection Trusts
Domestic Asset Protection Trusts (DAPTs) – available exclusively in a handful of jurisdictions, including South Dakota – are a formidable planning strategy that legally shields assets from third-party liability (including spouses in a divorce proceeding) and lawsuits while permitting settlors (the person establishing the trust) to retain some control over the trust assets and enjoy a discretionary benefit during their lifetime.
Therefore, an individual can establish a DAPT that is fully discretionary, meaning settlors can receive financial benefit from the trust (income and discretionary principal distributions), and protect trust assets from creditor claims and lawsuits, while maintaining control over the investment management function through the directed trust structure. South Dakota has one of the oldest and most progressive self-settled domestic asset protection provisions in the U.S. With its two-year “look back” fraudulent conveyance statute, South Dakota’s provision is among the shortest in the country.
Asset Protection: Bringing Together Domestic and Offshore Strategies
As domestic and international families continue to seek asset protection strategies, there continues to be a debate over whether offshore asset protection trusts, available in jurisdictions such as Nevis and the Cooks Island, are better asset protection vehicles than U.S. domestic asset protection trusts, available in a small number of states including South Dakota.
As the U.S. continues to emerge as an asset protection “haven” globally, South Dakota law offers a unique opportunity to integrate both domestic and offshore asset protection within a single trust instrument, thereby providing a solution that brings the “best of both worlds.” By combining the power of these asset protection strategies in one trust instrument, South Dakota law effectively resolves the debate surrounding domestic versus offshore asset protection, presenting settlors with a clear and compelling option for obtaining asset protection. For additional information on this asset protection planning technique, we encourage you to read this article, Domestic and Offshore Asset Protection: The Best of Both Worlds.
When coupled with South Dakota’s powerful privacy provisions – considered the best in the nation – this asset protection planning technique available under South Dakota law is yet another example of the vital importance of selecting the best U.S. trust jurisdiction in the trust planning process.
To learn more about this powerful planning tool used for both U.S. and international families, you can watch a webinar hosted by Bridgeford Trust Company – The U.S. as the International Trust Jurisdiction of Choice for Privacy, Asset Protection, and Tax Planning. In it, Bridgeford’s team examines worldwide factors for the historic movement of money into the U.S. including FACTA, CRS, secrecy v. privacy; tax evasion v. tax planning; and asset protection as a powerful planning tool for both U.S. and international families.
For more information on Domestic Asset Protection Trusts, call (605) 224-9189 or contact us online.
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