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The Matrimonial StrategistKickerFeaturesSectionsNewsLJN Newsletters

Challenging Estate Plans

By Martin M. Shenkman
June 02, 2015

Modern trust drafting has introduced new concepts that will affect the analysis of trusts. The powers granted to the settlor of the trust and other persons to characterize the trust as grantor trust status present interesting challenges and opportunities for matrimonial practitioners. Some of these issues are discussed below. Apart from the terms of the governing instrument and state law, the manner in which the trust is operated could have important bearing on its treatment in a divorce. As trusts have grown more complex, the ability of most clients to administer them in conformity with their terms has become more problematic. These growing lapses may well serve as fodder for matrimonial practitioners looking for a way to access trust income or assets. Part One of this two-part series which appeared in last month's issue, discussed bypass trusts, QTIP trusts, spousal lifetime access trusts (SLATs) and qualified personal residence trusts (QPRTs). This final installment reviews additional trusts with a focus as to how matrimonial practitioners may attack assets held in such trusts.

Domestic Asset Protection Trusts (DAPTs)

Summary: A domestic asset protection trust is a self-settled trust that the client can create and for which the client is also a beneficiary. DAPTs are used in a number of circumstances. A client might fund a DAPT prior to marriage in order to remove those assets from his or her control before the marriage occurs. For clients facing a state or federal estate tax, transferring assets to a DAPT may be used to remove future appreciation from their estate and thereby minimize or avoid estate tax.

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