Domestic Asset Protection Trusts and Fraudulent Transfer Jurisdiction
A DAPT may not insulate a settlor from a claim that assets were fraudulently transferred into the trust.
September 6, 2018
The common law rule is that self-settled spendthrift trusts may be reached by creditors. Over the years, several domestic jurisdictions, including South Dakota, Nevada, and Alaska, have enacted statutory provisions to protect self-settled spendthrift trusts from creditors. These trusts, often called ‘‘domestic asset protection trusts’’ (DAPTs), may come under attack, however, and may ultimately not shield assets from creditors (and thus from bankruptcy trustees). In particular, a DAPT may not insulate a settlor from a claim that assets were fraudulently transferred into the trust. In Toni 1 Trust v. Wacker, the Alaska Supreme Court considered the issue of whether Alaska could prevent other state and federal courts from exercising subject matter jurisdiction over fraudulent transfer claims against an Alaska DAPT.1 The court said no.
© 2018 Tax Management Inc., a subsidiary of The Bureau of National Affairs, Inc.
The articles on our Website include some of the publications and papers authored by our attorneys, both before and after they joined our firm. The content of these articles should not be taken as legal advice.
If you are interested in having us represent you, you should call us so we can determine whether the matter is one for which we are willing or able to accept professional responsibility. We will not make this determination by e-mail communication. The telephone numbers and addresses for our offices are listed on this page. We reserve the right to decline any representation. We may be required to decline representation if it would create a conflict of interest with our other clients.
By accepting these terms, you are confirming that you have read and understood this important notice.