What is a DAPT in Real Estate?

A Domestic Asset Protection Trust (DAPT) is a legal tool that involves protection against potential creditors concerning an asset, for instance, real estate. An asset protection trust created in specific jurisdictions that allow these trusts-which enables the grantor of such a trust to transfer assets into the trust and, simultaneously, retain partial control over the assets while offering protection against claims by future creditors.

In estate planning, DAPTs are often used to protect assets from potential litigation or creditor claims. This makes it a very valuable tool for high-net-worth individuals or professions that carry a high level of legal risk. Property held in a DAPT is held to be the trust property, not the property of the individual, and thus generally protects from seizure during litigation or in satisfaction of debts.

But, importantly, a DAPT provides great protection, but not all states accept these trusts, and some limitations exist. For example, prior creditors, at the time the trust was created, may still make claims against the assets, and fraudulent transfers—those attempted to be transferred into the trust in order to avoid known debts—are not allowed.

The DAPT is generally created in real estate, but it also forms part of a big asset protection and estate plan. They give peace of mind to people who have highly valued properties that they will not be lost through lawsuits or financial liability. If considering a DAPT, seeking the advice of a legal professional is strongly advised regarding implications and to ensure proper compliance with state laws. One Pacific Trust assists in establishing DAPTs, ensuring real estate assets are safeguarded effectively.