A subject that may interest Connecticut residents, asset protection in divorce, is addressed in a recent Forbes article. Prenuptial agreements are one way people protect their assets from possible division at divorce, but these may be contested. Even if a prenup is upheld in court, litigation to defend it can be expensive.
Another strategy is to create a domestic asset protection trust. This type of trust is an irrevocable trust, yet unlike most irrevocable trusts, the settlor retains some control over its assets. The settlor is considered a discretionary beneficiary of the trust, while at the same time creditors, including spouses, are denied access. There are about 15 states that allow DAPTs, and some allow some degree of creditor exception where some types of creditors are allowed access to the assets to settle claims. Nevada is one state that offers a popular trust, the NAPT, which allows no creditor exceptions.
It is not necessary to live in the state in which you create a DAPT. Some assets, such as real estate in another state, may not be appropriate for a DAPT. Assets such as stocks, bonds, and brokerage funds are ideal for a DAPT. It is best to create the DAPT or NAPT well in advance of marriage, as some require a two year period before becoming fully in force.
Discussing a prenuptial agreement can be difficult for people considering marriage, as it implies doubt about the strength of the relationship. However, practicality dictates that individuals with personal assets take measures to protect that property in the event the planned marriage fails. Discussing asset protection options with an experienced attorney may prevent future financial woes in the event of property division that accompanies divorce.
Source: Forbes, “How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust“, Robert Pagliarini , May 15, 2014
