The goal of effective estate planning is to try to maximize the protection of your hard-earned assets. However, most estate planning professionals will agree that there is no one “silver bullet” strategy that will guarantee absolute protection in all circumstances. Thus, we at Doane & Doane, consistent with other professional estate planning law firms, will create an estate plan for you that utilizes a number of different techniques to maximize asset protection.
Notably, an increasingly popular tool to reduce asset exposure to creditors, lawsuits, ex-spouses, and other potential asset predators is something called a “domestic asset protection trust,” or DAPT.
Accordingly, in this article, we will go into some detail about what a domestic asset protection trust is, where it comes from, and how it can help you if you are a Florida resident. If, after reading this article, you have additional questions about the Florida domestic asset protection trust process, then we welcome you to contact the Palm Beach County lawyers at Doane & Doane, PA. Call today at 561-656-0200 or fill out our online contact form.
A Little History of Asset Protection and Trusts
Traditionally, trusts were not very useful in keeping assets away from creditors. If you created trust from your assets and for your own benefit, creditors would still be able to reach those assets. Yet, about two decades ago, certain states started to change their laws on trusts so that people could create trusts that could not be reached by future creditors.
That special type of trust came to be called a domestic asset protection trust. It is one of the most effective ways to protect a personal residence from creditors, particularly when you have a lot of equity in your personal residence.
Currently, the domestic asset protection trust is recognized in 17 states. Florida, however, is not one of them. Yet, Florida residents still may be able to have a DAPT in their estate planning. Read on to learn how.
What is a Domestic Asset Protection Trust?
Before discussing Florida law specifically, let us define what makes something a domestic asset protection trust. A domestic asset protection trust is a “self-settled” trust (a form of an irrevocable trust), which means that there is an independent trustee who controls the trust and is responsible for distributing the trust asset to its beneficiaries. You as the person who created the trust (the grantor) can enjoy dual benefits:
1. Protecting assets from outside creditors, and
2. Beneficial use of the assets in the trust.
The one downside is that you lose some control over the trust, yet the asset in the trust – which could be your home – is better protected from creditors.
How Can a DAPT Work for Florida Residents?
The state of Florida doesn’t have a statute that enables you to make a domestic asset protection trust. However, many residents of Florida are allowed to make use of the laws of a state that does have a domestic asset protection statute in place.
That means that in order for you to create a domestic asset protection trust, the document itself must be drafted according to the laws of the state that has a statue allowing for these types of trusts. Additionally, you must have a trustee or co-trustee located in one of the states with a domestic asset protection trust statute in place. Generally, it is preferred to use a bank or trust company in a DAPT state as the trustee, rather than an individual.
States that have a domestic asset protection trust statute in place such as Nevada, Alaska, Delaware, Nevada, and a handful of others, all have their own specific rules and guidelines that must be adhered to. Our Florida law firm will analyze each of those state’s rules in order to determine which sate would meet your individual goals and situation.
Does a Spendthrift Trust Work Like A Domestic Asset Protection Trust in Florida?
If you have heard the term “spendthrift trust,” then you should know that a domestic asset protection trust can be a type of spendthrift trust. This type of trust allows you to create a trust for your benefit as well as for your family members that are called ‘preselected beneficiaries.’’ This trust gives you the power to determine when your trust funds are distributed among your chosen beneficiaries.
However, if your Florida trust agreement includes a ‘spendthrift provision’ the courts in Florida have been consistent in their rulings that the beneficiary’s interest in a trust that was established for their benefit by another is also protected against creditors.
Work with Domestic Asset Protection Trust Lawyers in Palm Beach
Knowing which type of trust your estate will require is an integral part of planning for the future.
At Doane & Doane, we help you determine the best tools to plan for life’s eventuality. Let us help you. We at Doane & Doane combine big firm resources and experience with the personal touch of a small, boutique firm. We pride ourselves on offering the kind of one-on-one attention that clients at big firms often do not enjoy.
After almost two decades of practice, we have earned the reputation as one of West Palm Beach’s most prominent tax and estate planning law firms. In particular, we understand that estate and probate matters involve a great deal of emotion. We are privileged to help clients on such important matters, and we genuinely care for and support our clients and their families.
We hope that all of our clients, friends, and business associates enjoy the hospitality of our firm’s legal staff. Doane & Doane serves clients in the communities along Florida’s Gold Coast and Treasure Coast, including Palm Beach, Broward, Miami-Dade, Indian River, St. Lucie, and Martin counties. For a free consultation and to get to know our firm, please give us a call at 561-656-0200.
The information in this blog post is provided for informational purposes only and is not intended to be legal advice. You should not make a decision whether or not to contact an attorney based upon the information in this blog post. No attorney-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with an attorney licensed to practice in your jurisdiction.