August 15th 2016
Even if the settlor of a domestic asset protection trust (“DAPT”) resides in the DAPT jurisdiction and all the assets of the trust are located in the DAPT jurisdiction, the efficacy of a DAPT may be challenged under the Supremacy clause of the U.S. Constitution, under the applicable fraudulent transfer statute, or because the settlor retained some prohibited control over the trust.
The only possible way of avoiding all these obstacles when planning with trusts is through the means of a foreign trust. A foreign trust, per se, does not have any asset protection benefits. The benefits come from the jurisdiction which governs the trust. Several jurisdictions compete in the foreign trust arena and have drafted their trust laws to address all or most of the problems and issues discussed above.View Memo