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.

 

+ READ MORE - READ LESS

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. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the views or official position of Robins Kaplan LLP.

Disclaimer

Related Publications

Summer 2020
The Brave New World of Virtual Notarization
Steven Orloff, Manleen Singh - The Robins Kaplan Spotlight, Vol. 5, No. 2
Summer 2020
What Could be the Harm? Minnesota's Harmless Error Statute
Matthew Frerichs, Ena Kovacevic - The Robins Kaplan Spotlight, Vol. 5, No. 2
Summer 2020
What's a Fiduciary To Do? Considerations for Periods of Uncertainty
Anthony Froio, Denise Rahne - The Robins Kaplan Spotlight, Vol. 5, No. 2
Spring 2020
Estate Planning for Settlements or Favorable Verdicts
Matthew Frerichs and Sarah Khoury - The Robins Kaplan Spotlight, Vol. 5, No. 1
Spring 2020
Picking Your Team: Getting the Right Trustee or Personal Representative Appointed in a Wrongful Death Case
Teresa Fariss McClain and Timothy Billion - The Robins Kaplan Spotlight, Vol. 5, No. 1
Back to Top