domestic asset protection trustn.
A self-settled irrevocable trust allowed in certain states that can shield the person who created it from their own future creditors, something most states, including Colorado, don't permit.
A domestic asset protection trust is an irrevocable, self-settled trust authorized by statute in a minority of states that lets the settlor be a discretionary beneficiary while shielding the trust assets from the settlor's future creditors. It is a U.S.-based alternative to offshore protection trusts.
Effectiveness depends heavily on choosing a permitting jurisdiction, observing waiting periods, and avoiding transfers that are fraudulent as to existing creditors.
Colorado does not authorize DAPTs, so a Colorado resident seeking self-settled protection typically uses another state's law. Wyoming does authorize them as qualified spendthrift trusts (Wyo. Stat. Title 4, Ch. 10), which makes Wyoming a common destination for this planning.
Related terms
- Wyoming asset protection trustWyoming's version of a self-settled asset protection trust, allowed under state law to protect the creator's own assets from future creditors.
- asset protection planningArranging ownership of assets in advance and lawfully so they are harder for future creditors to reach, done before a claim arises rather than after.
- spendthrift trustA trust with a clause that keeps a beneficiary from giving away or borrowing against their interest and blocks the beneficiary's creditors from reaching it before distribution.
- self-settled trustA trust the creator sets up for their own benefit. In most states this offers little protection from the creator's creditors; a few states allow protective versions.