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  • Utah Domestic Asset Protection Trust

    These domestic asset protection trusts vary from state to state. So my questions likely just pertain to Utah. I haven't heard much about these, and I stumbled upon this Utah Domestic Asset Protection Trust (UDAPT) when I was searching about protecting assets (house).

    For those that have a UDAPT, have you found them worthwhile? Any cons? Seems like a no-brainer to protect assets for high income professionals.

    If anybody has a referral for someone in Utah that can help me set this up I would appreciate it.

    https://www.djplaw.com/news/benefits...tection-trust/
    https://www.kmclaw.com/media/publica...iness_9-13.pdf

  • #2
    What are you trying to protect your house from? Get good umbrella insurance (cheap) for non medical reasons, and malpractice for professional reasons.

    Comment


    • #3
      I and the other estate planners at my firm offer domestic asset protection trusts (DAPTs) for clients. Some people feel it’s really nice to know at least some of the assets they have will always be theirs and can’t be taken by future creditors. The Utah legislature has made DAPTs an option for the last several years, and these grant many asset protection benefits most states don’t offer. What is unusual is the person funding the trust, the “settlor,” can still receive distributions from the trust, be a co-trustee, and have loans against the property. A DAPT should be coordinated with a client’s other estate planning goals; it's not a stand-alone product people purchase. Some aspects I should mention include that the settlor must be willing to live with some limitations, especially that an independent co-trustee must have the power to make or withhold discretionary trust distributions (although the settlor can participate in the distribution process). Assets contributed to a DAPT must be in excess of a person’s existing debts and monthly expenses (the contribution to a DAPT can’t be all of one’s assets because the person would then be insolvent). For people with extra assets besides those parked in retirement accounts, putting some of those assets in a DAPT can give them peace of mind.
      Last edited by Gavin West; 11-16-2020, 07:40 PM.

      Comment


      • #4
        Originally posted by Gavin West View Post
        I and the other estate planners at my firm do offer domestic asset protection trusts (DAPTs) for clients. Some people feel it’s really nice to know at least some of the assets they have will always be theirs and can’t be taken by future creditors. The Utah legislature has made DAPTs an option for the last several years, and these grant many asset protection benefits most states don’t offer. What is unusual is the person funding the trust, the “settlor,” can still receive distributions from the trust, be a co-trustee, and have loans against the property. A DAPT should be coordinated with a client’s other estate planning goals; it's not a stand-alone product people purchase. Some aspects I should mention include that the settlor must be willing to live with some limitations, especially that an independent co-trustee must have the power to make or withhold discretionary trust distributions (although the settlor can participate in the distribution process). Assets contributed to a DAPT must be in excess of a person’s existing debts and monthly expenses (the contribution to a DAPT can’t be all of one’s assets because the person would then be insolvent). For people with extra assets besides those parked in retirement accounts, putting some of those assets in a DAPT can give the peace of mind they desire.
        Can you elaborate on which type of clients are getting these trusts? And what is the ballpark fees associated with setting one up and maintaining it? Bc I fail to see how a doctor with adequate umbrella and malpractice insurance would need one unless they are fiscally irresponsible (so bankruptcy due to their own fault) or they are nearing retirement/spouse or child is disabled and they are protecting the house for the next generation. Is it for medicaid purposes? I believe in Utah medicaid does not count the home one lives in as an asset for eligibility.

        OP- heres one of WCIs blog posts on asset protection for review https://www.whitecoatinvestor.com/asset-protection/

        Comment


        • #5
          Originally posted by billy View Post
          What are you trying to protect your house from? Get good umbrella insurance (cheap) for non medical reasons, and malpractice for professional reasons.
          Most malpractice insurance, including the one I get from my employer, covers $1,000,000/$3,000,000. Not every lawsuit falls below the amount set forth by your malpractice. If you are sued, and the damages are more than what your malpractice covers, then wouldn't it be smart to have your house in a Trust where it couldn't be taken?

          Comment


          • #6
            Originally posted by Gavin West View Post
            I and the other estate planners at my firm do offer domestic asset protection trusts (DAPTs) for clients. Some people feel it’s really nice to know at least some of the assets they have will always be theirs and can’t be taken by future creditors. The Utah legislature has made DAPTs an option for the last several years, and these grant many asset protection benefits most states don’t offer. What is unusual is the person funding the trust, the “settlor,” can still receive distributions from the trust, be a co-trustee, and have loans against the property. A DAPT should be coordinated with a client’s other estate planning goals; it's not a stand-alone product people purchase. Some aspects I should mention include that the settlor must be willing to live with some limitations, especially that an independent co-trustee must have the power to make or withhold discretionary trust distributions (although the settlor can participate in the distribution process). Assets contributed to a DAPT must be in excess of a person’s existing debts and monthly expenses (the contribution to a DAPT can’t be all of one’s assets because the person would then be insolvent). For people with extra assets besides those parked in retirement accounts, putting some of those assets in a DAPT can give the peace of mind they desire.
            Thanks for your reply.

            Comment


            • #7
              Originally posted by Good Life View Post

              Most malpractice insurance, including the one I get from my employer, covers $1,000,000/$3,000,000. Not every lawsuit falls below the amount set forth by your malpractice. If you are sued, and the damages are more than what your malpractice covers, then wouldn't it be smart to have your house in a Trust where it couldn't be taken?
              Absent of complete negligence, it is very rare for a malpractice judgement (once all the dust has settled) to be over your insurance limits. Many of the sensational jury awards get lowered back down to limits, as long as the defendants are practicing general standard of care. WCI has written about this a few times. If this is the sole reason for the trust, not sure the risk/reward benefit is there.
              Interested to know the fees associated with these trusts.
              Last edited by billy; 11-15-2020, 10:07 AM.

              Comment


              • #8
                Originally posted by billy View Post

                Absent of complete negligence, it is very rare for a malpractice judgement (once all the dust has settled) to be over your insurance limits. Many of the sensational jury awards get lowered back down to limits, as long as the defendants are practicing general standard of care. WCI has written about this a few times. If this is the sole reason for the trust, not sure the risk/reward benefit is there.
                Interested to know the fees associated with these trusts.
                I've been an expert witness in multiple malpractice cases. Negligence is almost always something that is part of the lawsuit. I think at some point in our careers, all of us have had times where we messed something up, or missed something that could be considered negligent. Even though it is rare, I don't think it is a bad idea to be prepared in case something like this happens (lawsuit above what your malpractice would pay).

                Comment


                • #9
                  https://casetext.com/case/ellis-v-cl...NUMBER_GROUP=P

                  massive judgment upheld at appeal.

                  Summary of Medscape malpractice survey

                  https://www.medscape.com/slideshow/2...ort-6009206#20
                  Medscape 2017 malpractice survey. Survey of 4100 physicians. Of cases that resulted in payments, 11% were above $1M and 5% were above $2M.

                  Comment


                  • #10
                    Insurance and DAPTs are very different types of protection, and arguments can be made for utilizing each. Besides the cost of regular estate planning that needs to occur at the same time, or that occurred prior, a DAPT can cost somewhere around $3,000 to $5,000 to set up, and a small amount to maintain spread out over many years, depending on a variety of factors. Costs can be pretty low, especially when the right assets go into the trust, and the trust maker is willing to be hands-on. I can’t say enough about how what normally keeps costs down is a person being proactive about management and decision-making, vs. wanting to talk a lot with or get assistance from the lawyer about all the decisions to make and management activities to carry out.

                    A person can’t transfer in enough property to make the person insolvent. A few definitions exist for insolvency. Generally speaking, this can mean if your home has a large mortgage and you have little equity in it, and not many other assets to counterbalance the mortgage, just this transfer to a DAPT could cause you to be insolvent, and hence you shouldn't make the transfer. However, the investor who has assets to spare can consider putting away some in a DAPT. Funding a DAPT using assets without debts attached to them makes the assets easier to deal with.
                    Last edited by Gavin West; 02-15-2021, 10:07 PM.

                    Comment


                    • #11
                      Originally posted by Good Life View Post
                      These domestic asset protection trusts vary from state to state. So my questions likely just pertain to Utah. I haven't heard much about these, and I stumbled upon this Utah Domestic Asset Protection Trust (UDAPT) when I was searching about protecting assets (house).

                      For those that have a UDAPT, have you found them worthwhile? Any cons? Seems like a no-brainer to protect assets for high income professionals.

                      If anybody has a referral for someone in Utah that can help me set this up I would appreciate it.

                      https://www.djplaw.com/news/benefits...tection-trust/
                      https://www.kmclaw.com/media/publica...iness_9-13.pdf
                      I'm thinking about getting one. Remember my general rule for "advanced asset protection techniques" (of which this is one) is that you have to have significant assets not protected in some other way. If everything you have is in a 401K, you don't need an asset protection trust.

                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

                      Comment


                      • #12
                        Originally posted by billy View Post

                        Can you elaborate on which type of clients are getting these trusts? And what is the ballpark fees associated with setting one up and maintaining it? Bc I fail to see how a doctor with adequate umbrella and malpractice insurance would need one unless they are fiscally irresponsible (so bankruptcy due to their own fault) or they are nearing retirement/spouse or child is disabled and they are protecting the house for the next generation. Is it for medicaid purposes? I believe in Utah medicaid does not count the home one lives in as an asset for eligibility.

                        OP- heres one of WCIs blog posts on asset protection for review https://www.whitecoatinvestor.com/asset-protection/
                        It's definitely a belt and suspenders approach. But at a certain level of assets unprotected in any other way (aside from insurance), what's a few thousand to set up a trust? It's just a hedge, a cost of insurance.

                        A house in Utah in particular doesn't get much protection in bankruptcy. I think it's $40K the last time I looked. I don't know about you, but most doctors I know in Utah are living in $500-1.5M houses. $40K isn't going to go very far to protecting that. Combine that with a 7 figure taxable account and I think you can make a good case for dropping a few thousand on a trust. But for the paranoid new attending with $25K in his 401(k), a home bought with a doctor loans, and $250K in student loans? No.

                        These are the sorts of things you should be looking at about the same time you're thinking about boosting that umbrella policy from $1M to $5M.

                        But I wouldn't expect to ever actually use it. In the words of The Hunger Games, May the odds ever be in your favor. They're not zero, but they're close.
                        Helping those who wear the white coat get a fair shake on Wall Street since 2011

                        Comment


                        • #13
                          I agree with Dr. Dahle's view on when a DAPT is worth it, and when to wait. There's no hard and fast rule; the right answer is a lot about what feels right for the individual, but especially early on in one's career, $4,000 is much better spent in other ways a person will notice. Later on with a sizable net worth, A DAPT starts to become attractive. Remember, unlike insurance, it doesn't have a cap.
                          Last edited by Gavin West; 02-15-2021, 10:07 PM.

                          Comment


                          • #14
                            I am by no means an expert on DAPT. ACTEC, which is composed of attorneys who are experts in estates and trusts law, has prepared a document summarizing DAPT laws across the states.

                            http://www.actec.org/assets/1/6/Shaf...t-Statutes.pdf

                            To my reading, Nevada and South Dakota seem to have the strongest protections, with Nevada perhaps having stronger evidence of ongoing support by the state legislature and case law in favor.

                            Note the discussion in the document around the protection afforded to people who are not residents of the asset protection state but who create their trusts there. It seems they could find themselves in a fight in their states of residence or some other state in which they were sued. The ACTEC experts said that it was an open question how much protection a nonresident would have based on establishing a DAPT in an asset protection state. They suggest that a Nevada resident who established a DAPT in SD might be in better shape than a NY resident who did the same thing.
                            Clearly requires expertise from a lawyer who knows the business. Hard to know how to find someone who is expert enough to tell you how much protection you get but is not heavily incented to do a DAPT for every client who walks in the door.

                            Comment


                            • #15
                              Originally posted by Gavin West View Post
                              Insurance and DAPTs are very different types of protection, and arguments can be made for utilizing each. Besides the cost of regular estate planning that needs to occur at the same time, or that occurred prior, a DAPT can cost somewhere around $1,000 to $2,500 to set up, and a small amount to maintain spread out over many years, depending on a variety of factors. Costs can be pretty low, especially when the right assets go into the trust, and the trust maker is willing to be hands-on. I can’t say enough about how what normally keeps costs down is a person being proactive about management and decision-making, vs. wanting to talk a lot with or get assistance from the lawyer about all the decisions to make and management activities to carry out.

                              A person can’t transfer in enough property to make the person insolvent. A few definitions exist for insolvency. Generally speaking, this can mean if your home has a large mortgage and you have little equity in it, and not many other assets to counterbalance the mortgage, just this transfer to a DAPT could cause you to be insolvent, and hence you shouldn't make the transfer. However, the investor who has assets to spare can consider putting away some in a DAPT. Funding a DAPT using assets without debts attached to them makes the assets easier to deal with.
                              To Gavin (or anyone else) - what would your advice be to someone in a Tenants by Entirety state where brokerage accounts and other significant assets are held in this fashion? Is Tenants by Entirety as iron clad as people say? I would be interested to know if there are additional advantages of a DAPT over protections provided by Tenants by Entirety.

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