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Domestic Asset Protection Trust

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Are you concerned about your assets going to creditors after you’re gone — and not to those you love? If you’re in a field with a high risk of liability or debt, such as business or health care, you might consider establishing a domestic asset protection trust.

A domestic asset protection trust can be a strategic estate planning tool created to protect your legacy from liabilities and ensure your wealth is managed and distributed according to your wishes.

What Is a Domestic Asset Protection Trust?

A domestic asset protection trust (DAPT) is a type of trust designed to protect assets from creditors and lawsuits. DAPTs are typically irrevocable, meaning you cannot modify the trust once it’s established, and you must give up complete ownership of the assets transferred into the trust.

The person who transfers assets into a DAPT is called the grantor. The grantor needs to assign a trustee to hold and manage the trust on behalf of its beneficiaries — or the individuals who will receive the assets in accordance with the trust document.

Not every U.S. state allows DAPTs. However, Tennessee is one of the 20 states with laws permitting these asset protection trusts. Residents can set up a Tennessee Investment Services Trust (TIST).

A TIST protects assets from creditors and gives the grantor some control over trust management. For example, grantors with TISTs can deny asset distribution or replace the trustee. Still, as with most irrevocable APTs, a TIST requires the grantor to give most control of the trust to their chosen trustee.

What Is a Lifetime Domestic Asset Protection Trust?

A lifetime domestic asset protection trust refers to an asset protection trust (DAPT) funded and managed during the grantor’s lifetime. It also describes a DAPT designed to distribute assets to beneficiaries throughout their lifetimes. For example, you can create a DAPT that requires the trustee to transfer specific assets to one of your children at certain life milestones, such as when they get married or have their first child.

In either case, a lifetime domestic asset protection trust contrasts with a testamentary trust — which dictates how your assets will be distributed after death. Testamentary trusts can be created as part of a person’s last will and testament and only take effect after the grantor passes away.

How Do You Set up an Asset Protection Trust?

Take the following steps to set up your asset protection trust.

1. Speak to an Estate Planning Attorney

Setting up an asset protection trust begins with speaking to an experienced estate planning attorney. A lawyer can help you design a personalized APT that meets your unique needs and desires, complies with legal requirements, and incorporates strategic tax planning.

2. Choose a Trustee You Trust

You’ll also need to select a trustee to manage your trust. The trustee may be a family member, a trusted friend, or a third party, like a financial institute or law firm. 

If you feel uncertain about a family member’s or friend’s ability to handle trustee duties, working with a third-party professional may be best. A professional like a lawyer brings expertise, reliability, and impartiality to trust management, so you can be sure your assets are protected and distributed as outlined in your trust document — no matter what happens within your personal relationships.

Regardless, if you live in Tennessee, your selected trustee must be “qualified.” The trustee must be a state resident or a corporate trustee licensed under TN law. They will also need some trust management duties, like preparing tax returns. Your attorney can help you decide who should be the trustee for your APT.

3. Transfer Your Selected Assets

Finally, you’ll need to transfer your selected assets into your trust. Your assets may include real estate, bank accounts, and investments. Due to legal requirements and potential tax consequences, transferring assets can be complicated. Your lawyer will handle the legal complexities and documentation requirements and guide you through the other aspects.

What Are the Advantages of a Domestic Asset Protection Trust?

There are many options in estate planning, so it’s important to weigh the pros and cons when determining if a DAPT is right for you. Here are some of the advantages to consider:

  • Protect assets: This type of trust allows you to protect your assets from creditors and lawsuits and preserve your wealth for future generations. 
  • Bypass probate: A DAPT dictates how its assets will be distributed, allowing your beneficiaries to skip the probate process and gain access to assets faster.
  • Maintain privacy: Since a DAPT can prevent probate — a public process — you can keep information about your assets and beneficiaries private. 

What Are the Disadvantages of a Domestic Asset Protection Trust?

Although a DAPT has certain benefits, it’s not the right choice for everyone. Consider the following disadvantages:

  • Lack of asset control and ownership: Once you transfer assets into a DAPT, you no longer own them. Therefore, it’s crucial to consider your long-term financial needs and goals before establishing a DAPT. 
  • Complex process: Creating and managing a DAPT can be complex, requiring financial and legal knowledge. Choosing a lawyer who is well-versed in trust law and the right trustee is essential to effectively establish and manage your trust.
  • Does not provide immediate protection: In Tennessee, assets placed in a trust are shielded from creditors after two years. However, you can shorten this period to six months by notifying creditors of the DAPT. 

Protect Your Legacy With Crow Estate Planning & Probate

A domestic asset protection trust requires careful planning to avoid legal risks and ensure it aligns with your financial goals. If you’re seeking experienced lawyers to help you establish a strategic DAPT, we’re ready to serve you at Crow Estate Planning & Probate. 

Our attorneys provide comprehensive, personalized estate planning services to clients in Tennessee and Kentucky. We understand the importance of protecting your assets for your loved ones, and we are dedicated to ensuring your legacy is secure — whether you’re interested in establishing a domestic asset protection trust or another type of trust.

Contact us today for a free consultation and begin the process of protecting your wealth. 

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Hear From Our Clients

Krystal Rivas

I had a great experience with Crow Estate Planning & Probate! They made a complicated process feel simple, took the time to explain everything clearly, and were incredibly professional from start to finish. I felt supported and confident every step of the way. Highly recommend!

Emily Richardson

I had a great experience working with Crow Estate Planning and Probate. They made the entire process of writing my will feel simple, organized, and far less overwhelming than I expected. From start to finish, they were professional, patient, and very knowledgeable. They took the time to clearly explain everything and made sure all of my questions were answered, which gave me a lot of peace of mind. I truly appreciated how smooth and efficient the process was, while still feeling very personal and thorough. I would highly recommend them to anyone looking for help with estate planning!

Steve Baker

I can’t say enough about Crow Estate Planning & Probate. They did an excellent job explaining and drafting my estate plan. I would highly recommend.

David Sweatt

Professional above all expectations. Every question asked answered to understanding. Took time to tailor my request to the exact detail. Documents were explained to the details there in before signing. Super friendly and not showing sign of disconcerting attitude. I respect this firm and they have my “complete” trust.

Ute Bennett

We are very happy with the services provided and will recommend to family and friends.

Donald Hutcherson

The Crow law firm was absolutely wonderful from start to finish.the entire team was professional, knowledgeable and courteous. Above all they were absolutely caring in helping me through a difficult time. I highly recommend this law firm.all my needs were taken care of and were handled in a timely manner…I am forever grateful.

Bill Boyd

Where do I begin? I truly can’t say enough nice things about Crow Estate Planning & Probate and Alexandra Hulme, without her and everyone around her, I can truly say I don’t know where I would be today. Like many after losing my mother, I was lost, in a dark place and things weren’t happening how my mother had planned in her trust and will. Before waiting too long, I retained Alexandra’s services and she took me through the process step-by-step. Something that I never thought I could afford or I’d have to do. She knew I wasn’t asking her to do anything more than complete my mother’s last wishes. She did just that. They did it because they’re passionate about what they do. Communication was A+. She never left me hanging. I know family means a lot to her/them. I am indebted to her and these people forever. If you need help, call her today. I promise you won’t be disappointed. Thank you Alexandra from the bottom of my heart.
 
 

Travis Henry

I was referred to John by a fellow real estate investor when I needed guidance on structuring a couple of LLCs. From the start, he made the process incredibly smooth and straightforward. John was consistently responsive, thorough in his explanations, and showed a genuine commitment to getting everything completed on time—even working late to accommodate my schedule while I was operating from Hawaii, several time zones away. His mix of professionalism, attention to detail, and approachable demeanor made the entire experience seamless. I’m grateful to have him as a resource and wouldn’t hesitate to recommend him to anyone looking for a reliable and knowledgeable attorney.
 
 
 

Andre Christophe

Bridget and Thomas were very professional and knowledgeable in responding to my needs. Also, they were very organized and easy to work with. 
 
 
 

Allen Moser

This firm has done several things for me and real estate clients. Most recently setting up a TIST (Tennessee Investment Services Trust). And redoing my Will, Medical Power of Attorney, and Healthcare Directive. Appreciated their understanding of all of the intricacies of each document. Their timely communication and prompt service.
 
 
 

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