What is a Domestic Asset Protection Trust?Domestic asset protection trusts are trusts formed under the laws of US jurisdictions, and have such an identity for "tax purposes". Although they are designed to hinder creditor attack, they may still be susceptible to US judgments. The most favorable legislation for domestic asset protection trusts exists in Alaska and Delaware. At this point we do not believe there is sufficient legal authority to convince us that they will withstand creditor attack in the long term. Although certain states have enacted complimentary legislation, on the surface it seems to fly in the face of the US federal constitutional provisions that guarantee "Full Faith and Credit" in the enforcement of a judgment won in one jurisdiction and sought in another. Whether or not the trust is titled a "self settled trust", the state legislation does not seem to trump the federal constitution on the issue of making ones assets immune from creditor attack. Perhaps the power of these "self-settled" state trusts will become more evident in the future, but for the time being, we would not recommend a self-settled trust in the US. Self Settled trusts are common in foreign jurisdictions.
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