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Establishing a domestic asset-protection trust

On Behalf of | Oct 18, 2021 | Uncategorized

Establishing a trust is a good way for Indiana residents to protect their assets. In particular, a DAPT or domestic asset-protection trust, can be helpful. The benefits of this kind of trust include making it harder for creditors to access someone’s assets. It can also have important tax benefits. Understanding how to set up a DAPT can be a great way to create and pass on generational wealth.

How DAPTs work

Establishing a trust involves a three-party relationship. The trustor funds the trust. A trustee manages the assets. And the beneficiary is the one who ultimately gets the assets. In the case of a DAPT, the trustor and beneficiary are the same person. This is known as a self-settled trust. So DAPTs make it possible to shield your assets, and you’re still the person who benefits from those assets.

DAPTs are funded with assets like cash, stocks and bonds or even LLCs. Real estate can also be held and managed by a DAPT. However, real estate holdings can become slightly complex. If you own property in a state other than the one where the trust is set up, that can raise the issue of jurisdiction. A DAPT doesn’t have to be set up in Indiana. It’s generally possible to establish one in a different location with no state income tax.

Using a DAPT can give you and your family peace of mind. It’s a great instrument for holding business assets or personal assets that carry an inherent risk. For example, many people hold vehicles like planes and jet skis in their DAPTs. A domestic asset-protection trust can also be used to quickly and easily pass assets to your heirs after your death. This may help your loved ones avoid financial stress during the probate process.