People often turn to asset protection trusts to keep their wealth safe from lawsuits and creditors. A Domestic Asset Protection Trust (DAPT) allows someone to shield their own assets while still benefiting from them. However, Florida doesn’t allow these trusts. Therefore, residents looking for protection have to set them up in another state, which comes with some legal risks.
A DAPT is an irrevocable trust. Once you put assets into it, you can’t just take them back whenever you want. The benefit is that creditors can’t easily touch those assets either. More than a dozen states, including Nevada, Delaware, and South Dakota, allow these trusts. The settlor can also be a beneficiary, meaning they still get access to their money.
For example, someone worried about future legal claims might move a portion of their wealth into a DAPT. The assets inside the trust wouldn’t be easily accessible to lawsuits, which gives them an extra layer of protection.
Florida does not allow self-settled asset protection trusts. Therefore, if a Florida resident sets up a DAPT in another state, they might not be fully protected. Courts in Florida could override the trust protections and force the assets to be used to pay off creditors.
Another legal challenge comes from the Full Faith and Credit Clause of the U.S. Constitution. States are required to respect each other’s laws; however, in practice, courts often prioritize their own laws. For instance, a Florida judge might ignore Nevada DAPT’s protections in favor of Florida’s stricter asset protection rules.
Since Florida doesn’t recognize DAPTs, residents looking for asset protection have other options, including:
While DAPTs might seem appealing, they’re risky for Florida residents. If you’re looking for ways to protect your assets, there are alternative legal strategies that actually work. Contact Schnauss Naugle Law today to discuss the best options for your situation.
