DAPT's: A Multi-State Evaluation of Debtor Asset Protection

By: Adam Lapidas, Andy Leslie, Michael Levine, and Eric Maddox
Summary: We are going to create a hypothetical situation in which a debtor attempts to use a domestic asset protection trust to protect his assets from the grip of creditors. We will discuss how a debtor can create a self-settled trust with a spendthrift clause in order to make all assets in the trust immune from creditor interference. While this process is not recognized in North Carolina it has been recognized in a few states across the country including Alaska, the first state to allow DAPTs. We will focus on how a person can create a DAPT in Alaska and how the rules are different in Alaska and North Carolina.
We will then explain how a person who resides in North Carolina can use the lenient Alaska laws concerning trust creation to protect their assets by creating a DAPT in Alaska. We will discuss the barriers a North Carolina resident will encounter in attempting to create a DAPT in Alaska and will follow with a discussion of the advantages and disadvantages a North Carolina citizen faces in creating a DAPT in Alaska.