Domestic Asset Protection Trusts (Portfolio 868)

Description

Bloomberg Tax Portfolio, Domestic Asset Protection Trusts, No. 868, discusses various aspects of domestic asset protection trusts (APTs), including the reasons for and against recognizing such trusts, the benefits of such trusts, and the potential application of the fraudulent transfer rules. An APT is an irrevocable trust in which the settlor retains some benefits that cannot be reached by his or her creditors. The Portfolio gives particular attention to defending APTs against creditor attacks, noting, where appropriate, matters addressed by the Uniform Trust Code or the Restatement (Second) Conflict of Laws. The Portfolio also discusses the ethical and liability concerns of attorneys involved in domestic APT planning.

In addition, the Portfolio covers the income and transfer tax ramifications of domestic APTs. The ability of a creditor to reach trust assets often impacts whether a transfer to a domestic APT is a completed gift and whether a domestic APT will be included in the settlor’s estate.

After reviewing various state statutes governing domestic APTs, the Portfolio compares Delaware APTs to Alaska and Nevada APTs. The Portfolio then compares domestic APTs to foreign APTs.

The Portfolio concludes by describing the designing, drafting, and funding of domestic APTs and various issues related to trust distributions. To avoid distribution problems, the Portfolio recommends, among other things, that the attorney and trustee make it clear to the APT’s settlor at the beginning that the settlor will receive distributions only in accordance with the trust terms.

This Portfolio is not designed or intended to provide financial, tax, legal, accounting, or other professional advice because such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional adviser should be sought. This Portfolio is for informational purposes only; it is not intended as a recommendation, offer, or solicitation with respect to the purchase or sale of any security.

This Portfolio may be cited as Nenno & Sullivan, 868 T.M., Domestic Asset Protection Trusts.

Table of Contents

I. Introduction
II. Benefits of Domestic APTs
III. Fraudulent Transfer Rules
IV. Defenses to Creditor Attacks on Domestic APTs
VII. Delaware Qualified Dispositions in Trust Act
VIII. Alaska APT Act
X. Other Statutes
XI. A Comparison of Alaska and Delaware APTs
XII. A Comparison of Nevada and Delaware APTs
XIII. A Comparison of Foreign and Domestic APTs
XIV. Designing, Drafting, and Funding a Domestic APT
XV. Distributions from Domestic APTs: Who Is in Charge and Other Issues