Asset Protection Trust

A Utah Domestic Asset Protection Trust (UDAPT), often referred to as a DAPT, is a powerful tool for safeguarding your assets. Utah law explicitly provides a high level of creditor protection for a DAPT, provided the trust is set up correctly and meets all the state requirements. 

Here is a brief overview of the Utah Domestic Asset Protection Trust

Protection from Creditors: The primary purpose of a UDAPT is to protect your assets from future creditors or legal claims. 

Irrevocability: Once you put your assets into this trust, you generally can’t change your mind and take them back out whenever you want. This irrevocability is different from a “revocable trust”, where you have more flexibility. That said, there are some things that can remain amendable even in an irrevocable trust. At Morgan Law, we often build in flexibility such as the power to change who gets the trust assets when the creator passes away. 

Control: Even though the assets are in the trust, you can still have some control over them. You can be a beneficiary and benefit from the assets, you can even control how assets are used within the trust as a co-trustee, but you wouldn’t have complete control. Instead, a third-party trustee (which can be another person or a bank) has authority to make withdrawals from the trust on your behalf. This third-party would serve as a distribution trustee. 

Waiting Period: There’s typically a waiting period after you place your assets into the trust before they’re protected from creditors. So, you can’t just quickly move your assets into the trust right before you think you’re going to get sued and expect them to be shielded immediately.

Solvency Affidavit: When an individual creates a Utah Domestic Asset Protection Trust, they must sign a sworn statement certifying among other things they actually own the assets being transferred to the trust, that the transfer to the trust will not render the trust creator insolvent, meaning unable to pay their debts, also that the trust isn’t being created to defraud a creditor, and that the creator is not behind on a domestic obligation such as alimony or child support.

Legitimate Planning: It’s essential to understand that this kind of trust isn’t a way to fraudulently hide assets or evade legitimate debts. It’s designed for legitimate planning and asset protection purposes.

Specific Statutes: The Utah Asset Protection Trust is governed by specific statutes, ensuring assets within the trust are safe from certain creditors. A key provision, Utah Code § 25-6-502 (3), stipulates that if an irrevocable trust’s creator is also its beneficiary, a creditor can’t claim an interest in assets under the trust’s name or force distributions, given certain conditions are met.

In conclusion, a UDAPT is a highly protective tool designed to hold assets for a lengthy period of time. It is one of the most protective—if not the most protective—tool for most clients. While anyone can create this trust at any time, due to the cost and the complexity of the additional layer of protection, it is something recommended to clients with significant assets that they want to protect for a long time. Always consult with a professional to understand the full benefits and implications of setting up a UDAPT.