Asset Protection Trusts

Domestic Asset Protection Trusts, available only in a small number of states including South Dakota, are a formidable planning strategy that legally shields assets from third party liability (including spouses in a divorce proceeding) and law suits while permitting settlors (the person establishing the trust) to retain some control over the trust assets and enjoy a discretionary benefit during their lifetime.

Therefore, an individual can establish a Domestic Asset Protection Trust that is fully discretionary, meaning settlors can receive financial benefit from the trust (income and discretionary principal distributions), and protect trust assets from creditor claims and lawsuits, while maintaining control over the investment management function through the directed trust structure. South Dakota has one of the oldest and most progressive self-settled Domestic Asset Protection Provisions in the United States. With its two year “look back” fraudulent conveyance statute, South Dakota’s is among the shortest in the country (Delaware has a four year fraudulent conveyance statute).

South Dakota Codified Law (SDCL) § 55-3-47 provides a mechanism to have both domestic and offshore asset protection within one trust instrument. By combining the power of both offshore and domestic asset protection strategies in one trust instrument, South Dakota law appears to render the debate over offshore verses domestic asset protection moot and gives settlors an easy to understand and compelling option for obtaining asset protection.  Click here to learn more.

You can also click here to watch a webinar that details the importance of choosing a trust jurisdiction with asset protection.