A Domestic Asset Protection Trust (APT) is a self settled spendthrift trust, (A trust that you establish in order to protect yourself from creditors) with similar provisions built into its trust deed as an offshore trust.

The self settled spendthrift trust "trust deed" allows the Grantor, the trustee and the beneficiary to be the same person allowing control of trust asset upon transfer to the trust. This is the weakness of this trust for asset protection. 

This trust is established mostly in the trust friendly states of Alaska, Delaware and Nevada. Recent changes to the Bankruptcy code however, change the viability of the Asset Protection Trust as an asset protection strategy. The changes to the bankruptcy code now set a 10 year limitations period from the date that a bankruptcy petition was filed on the transfer of assets to a self settled spendthrift trust.

Limitations of the Asset Protection Trust

• Because this trust is subject to U.S jurisdiction, a Judge can make a judgment and order the trustee of the trust to release assets in favour of the defendant creditors.
• There is no privacy with this APT
• If you were to form an APT in a state outside the trust friendly states of Alaska, Delaware or Nevada, a local Judge will apply federal law to override the state legislation

In conclusion, the Domestic asset protection trust is generally not a viable trust formation or asset protection strategy unless you are a resident of the states that have enacted trust friendly legislation, and even then it has limited application.

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