There are many issues in a divorce that must be resolved by everyone involved. One major issue that plagues many divorcing couples in Montgomery County, Tennessee, and other parts of the country is property division. In the event that a prenuptial agreement was not signed by the couple, it is natural for the couple to feel that their assets are unprotected during divorce. In some states, however, a person may be able to safeguard the person’s property by forming a Domestic Asset Protection Trust.
A DAPT is an irrevocable trust; however, it has certain differences. In a regular irrevocable trust, a person loses all control over the person’s assets because those assets have been placed in a trust. Therefore, the person is not able to withdraw or control the funds. The same rule applies to creditors and ex-spouses. However, with a DAPT, the creator of the trust can remain a discretionary beneficiary. Currently, there are 15 states in the country, including Tennessee, that have officially allowed DAPTs. Recently, however, the state of Nevada has become immensely popular with setting up a DAPT in that state because Nevada protects assets from all creditors as well as former spouses, which may not be the case in Tennessee or the other 13 states.
However, putting real assets in a DAPT in another state may not be a smart decision, however, a person from Tennessee cannot put the person’s real assets into the state’s DAPT because the property is physically present within the state. On the other hand, putting cash, bonds, mutual funds and stocks in a DAPT in a person’s home state may prove to be a wise decision, which can protect assets during a divorce.
In a state like Tennessee, it may be a smart decision for a couple who is contemplating divorce to put the money into a DAPT, where it will remain safe. However, in addition to a DAPT, an in-depth understanding of state and federal laws is also necessary to protect a person’s assets during divorce.
Source: Forbes, “How to protect yourself in a divorce using domestic asset protection trust,” Robert Pagliarini, May 15, 2014