Title

Judgment Proof: Can Connecticut Residents Insulate Assets from Creditors Using a Delaware Domestic Asset Protection Trust Note

Authors

Wesley D. Cain

Document Type

Article

Abstract

Domestic Asset Protection Trusts are an asset protection vehicle that let settlors retain beneficial title to assets while simultaneously insulating those assets from creditors' claims. The strategy essentially renders settlors who place assets in a Domestic Asset Protection Trust judgment proof. Such settlors enjoy the benefits of the assets, but because they do not hold legal title to the assets, their creditors are unable to reach the assets. Sixteen states have enacted legislation sanctioning Domestic Asset Protection Trusts. The majority of states, however, consider Domestic Asset Protection Trusts to be against public policy. Settlors who reside in a state that is hostile to Domestic Asset Protection Trusts, but who seek the asset protection that Domestic Asset Protection Trusts offer can simply create a Domestic Asset Protection Trust in one of the sixteen states that sanction such trusts. It is unclear, however, if a Domestic Asset Protection Trust would effectively shield assets from creditors when the settlor of the trust is domiciled in a state that prohibits Domestic Asset Protection Trusts as a matter ofpublic policy. This Note seeks to predict whether Connecticut residents can effectively shield assets from creditors using a Delaware Domestic Asset Protection Trustthus making themselves judgment proof.

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