By Steven J. Oshins, Esq., AEP (Distinguished)

It’s that time of year again!  The time when estate planners hold their breath, anxiously awaiting the release of the Annual Domestic Asset Protection Trust State Rankings Chart.  Where will their favored jurisdiction land?

The 11th Annual Domestic Asset Protection Trust State Rankings Chart was created to serve as a single page guide to various states’ DAPT statutes.  The states are ranked based on various material factors that are important in selecting a situs for the trust.  Although the weights that are applied to different variables are subjective, the methodology used is likely very similar to what most advisors would likely follow.

What is a Domestic Asset Protection Trust?

A DAPT is an irrevocable trust set up under the laws of one of the 19 states that allows such a trust.  The person setting up and funding the trust (the “settlor”) does not need to reside in one of those 19 jurisdictions.  Under the statutes of each of those jurisdictions, after a certain waiting period, the assets transferred to the trust by the settlor should be protected from the settlor’s creditors.

Do DAPTs Work for Residents of Non-DAPT States?

After more than two decades since the first DAPT legislation passed, no non-bankruptcy creditor has challenged a DAPT all the way through the court system and been able to access any DAPT assets based on the judge applying local law rather than the law of the DAPT jurisdiction.  Most likely this is because such a large majority believes that if tested the DAPT will work to protect its assets from a creditor of the settlor.

However, despite the very high likelihood of protection, there are many people who don’t think a DAPT will hold up if challenged.  And, in fact, in the dicta of In re Huber, 2013 Bankr. LEXIS 2038, May 17, 2013, the judge said that local law would prevail.  Most estate planners believe that the rationale was incorrect, but still that case exists, so people cite it.

The good news is that a settlement is just as good as a victory in court.  In fact, our clients want cheap and quick settlements.  The lack of case law after so many years indicates that DAPTs have worked rather nicely since this indicates that they all just settle.

Connecticut and Indiana Added

Connecticut and Indiana are the latest additions to the list of states having DAPT statutes.  Connecticut is ranked #5 and Indiana #10.

Connecticut’s #5 ranking will likely shock almost everybody in the estate planning industry simply because it’s just not supposed to happen.  But the Chart has never been about which state markets itself the best or which states are perceived to be legislatively proactive.  The Chart rewards the states with the most protective DAPT statutes regardless of the states’ reputations.

If this were all about reputations and marketing, then we would all simply assume that the top four states are Alaska, Delaware, Nevada and South Dakota simply because those are the four states that have been pushed on all of us as the top states through many years of marketing.

Summary

The 11th Annual Domestic Asset Protection Trust State Rankings Chart has been released and if you’re not using this tool, it’s time to take a good, hard look at doing so.  Our clients want to protect their assets.  It’s the advisor’s job to open the asset protection conversation.  And there’s no better time than right now to open up that conversation!

RELATED EDUCATION

If you found this article interesting, you might also be interested in these other educational programs and products by Steve Oshins:

• Fear Factor: “Protecting Assets by Getting into the Creditor’s Head and Controlling his Mind”
• The Hybrid DAPT
• Asset Protection Other than DAPTs: Overlooked Alternatives That Will Grab Your Clients’ Attention!
• The NING Trust: Saving Significant State Income Taxes for Your Clients in High State Income Tax Jurisdictions
• Advanced-Level Estate Planning Sales & Marketing Kits
• Steve’s FREE State Rankings Charts

ABOUT THE AUTHOR

Steven J. Oshins, Esq., AEP (Distinguished) is a member of the Law Offices of Oshins & Associates, LLC in Las Vegas, Nevada. He was inducted into the NAEPC Estate Planning Hall of Fame® in 2011. He was named one of the 24 “Elite Estate Planning Attorneys” and the “Top Estate Planning Attorney of 2018” by The Wealth Advisor. Steve was also named one of the Top 100 Attorneys in Worth and is listed in The Best Lawyers in America® which also named him Las Vegas Trusts and Estates Lawyer of the Year in 2012, 2015 and 2018 and Tax Law Lawyer of the Year in 2016 and 2020.  He can be reached at 702-341-6000, ext. 2, at soshins@oshins.com or at his firm’s website, www.oshins.com.