For Florida residents seeking to protect their assets before getting married, a Domestic Asset Protection Trust may be the answer. Although this type of trust is only available in just over a dozen states, it can provide big advantages over other asset protection methods.
In the lead up to a marriage, a conversation about a prenuptial agreement can be awkward and uncomfortable for many couples. Even if a prenuptial agreement is signed, it may be contested in court during the divorce. This can lead to expensive legal fees, and the court could potentially throw out the agreement.
A DAPT is an irrevocable trust. Although one would typically lose control of any assets in an irrevocable trust, the owner may be named as the discretionary beneficiary. By doing this, the owner can still access the money inside the trust, whereas creditors and ex-spouses cannot. Creditors are then unable to withdraw any funds for their claims.
Currently, Florida does not support this type of trust. Individuals may still file for a DAPT outside of their resident state, however. It is important to note that in this situation, the property in the trust should be non-real, like cash and stock. Items such as real estate would still be subject to the laws of the state where it is located, making it vulnerable to creditors.
Experts warn against setting up such a trust during the marriage, as this could potentially be seen as a fraudulent transfer or an attempt to hide marital property. An attorney who has experience in divorce may be able to set up the trust or draft a prenuptial agreement that protects assets well before a couple marries.
Source: Divorce, "How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust", Robert Pagliarini , May 15, 2014