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Asset protection during divorce with using a DAPT

Some individuals in Texas might be considering drafting a prenuptial agreement as their wedding approaches. While such documents often provide effective protection of premarital assets, they are might be contested when a divorce occurs, and proving the agreements legitimacy can be expensive. Individuals have other options that might provide better asset protection.

A recent article discusses a type of trust that helps some people protect their property from both creditors and spouses. The device, which is known as a domestic asset protection trust, has the added benefit of allowing a person to avoid an uncomfortable conversation about a premarital agreement. A DAPT works by taking control over the assets that the creator wants protected, placing them into an irrevocable trust. While most irrevocable trusts force the creator to lose all access to the protected property, the DAPT names the creator as a beneficiary.

The unique nature of these trusts makes them useful and flexible, but the devices are still subject to some limitations. For example, only 15 states allow a person to form a DAPT, which can limit the type of assets that may be protected. Some assets, including real estate, cannot be easily moved to the preferred state's jurisdiction, but other assets, including mutual funds, bonds and stock, can be transferred.

Because the terms that regulate DAPTs vary between states, it can be difficult to understand the protections that the trusts offer in different cases. However, individuals who are interested in using this strategy to shield assets during property division might benefit from working with a family law attorney. That attorney might have an understanding of DAPTs and other asset protection options that might be suited for a client's unique circumstances.

Source: Forbes, "How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust", Robert Pagliarini , May 15, 2014

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