What is a Delaware Asset Protection Trust and how does it work?

When it comes to securing your hard-earned assets, a Delaware Asset Protection Trust can be an effective strategy. Title 12, Chapter 35 of the Delaware Code sets the rules for the creation and function of this type of trust.

This legal structure protects your assets from creditors and potential lawsuits as it establishes a level of separation between your assets and any financial liabilities you may have.

Creating the trust

To initiate a DAPT, you transfer ownership of your assets to the trust. While you no longer have direct ownership, you maintain control over the assets as the trust’s grantor. There is a waiting period of four years before the protections are fully effective. Creditors cannot pursue the assets once this period has passed.

Assigning an independent trustee

A key component of a DAPT is having an independent trustee. This trustee manages the trust and makes decisions regarding distributions and other matters. The trustee’s role ensures the legitimacy of the trust’s purpose and adds an additional layer of separation between you and your assets.

Ensuring irrevocability

The trust must be irrevocable. While this means you relinquish direct ownership, it reinforces the legitimacy of the trust’s protective purpose. This stipulation also signifies your commitment to asset protection, as it prevents you from changing your mind and attempting to undo the transfer later.

Maintaining compliance

A DAPT requires adherence to specific legal guidelines. You must ensure proper management, including records maintenance and abide by all Delaware laws in the ongoing management.

A Delaware Asset Protection Trust can provide you with another estate planning option for handling your assets. Keep in mind that it does have specific rules you must follow, and make sure it is the right fit for your situation.



FindLaw Network