NH Domestic Asset Protection Trust
New Hampshire authorizes the use of domestic asset protection trusts (DAPT) to protect trust assets from the reach of creditors. A DAPT is an irrevocable living trust, meaning that once the trust maker transfers legal title of assets to the trustee, the trust maker cannot get rid of the trust without the consent of the trustee and all of the beneficiaries. The trust maker cannot transfer his beneficial interest in the trust to a third party, until the trustee actually makes a payment from the trust to the trust maker. The trust maker receives payments from the trust principal only when the trustee makes such payments in his sole discretion or pursuant to an objective standard in the trust instrument. The trustee of a DAPT must be a New Hampshire resident or a New Hampshire-based bank or trust company. The trust maker cannot be the trustee of his own DAPT.
NH Shields Against Creditors
With certain exceptions, creditors of the trust maker cannot touch DAPT assets. New Hampshire law states that no lawsuit may be brought to attach DAPT property. The only way that creditors can reach DAPT assets is through the New Hampshire Uniform Fraudulent Transfer Act. If a creditor can prove that an asset transfer to a DAPT was a fraudulent transfer, as defined by the Act, the creditor may attach the DAPT assets, but only to the extent necessary to satisfy the trust maker’s debt, plus costs.
NH Exception Creditors
There are two types of creditors that a trust maker cannot avoid paying through a DAPT. The first are individuals who are owed child support, alimony and spousal support. The second are those who are due civil damages for wrongful death, personal injuries, or property damage caused by the trust maker.
Florida Living Trust
A Florida irrevocable living trust that is analogous to a New Hampshire DAPT does not protect trust assets from the trust maker’s creditors. The same is true with a revocable Florida living trust, which is a trust that may be changed or canceled by the trust maker. Florida living trusts do not shield assets from creditors because Florida legislators have voted that a trust maker should not be allowed to place assets in a trust for his or her own benefit to escape debts owed to creditors. Consequently, with respect to a Florida irrevocable living trust, a creditor may attach the maximum amount that the trustee may distribute back to the trust maker. With respect to a revocable trust, all trust assets are subject to creditor claims, but only if such assets would not be protected by law if the trust maker owned the assets directly instead of the trustee.