Domestic Asset Protection Trusts: Key Income and Transfer Tax Implications

Structuring DAPTs to Minimize Federal and State Taxes, Gifting, Creditor Issues, Other Legal Implications

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Wednesday, July 15, 2020

Recorded event now available

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This CLE course will provide trusts and estates counsel an in-depth analysis of federal income and transfer tax consequences of domestic asset protection trusts (DAPTs). The panel will discuss key tax planning issues and structuring techniques to minimize federal and state taxes, navigating the differences between jurisdictions, and analyze other legal implications and limitations.

Description

Domestic asset protection trusts (DAPTs) are an integral part of many estate and asset protection plans. Under current tax law, trusts and estates counsel must identify critical structuring techniques and significant differences among jurisdictions to minimize income and transfer taxes.

States have enacted asset protection legislation allowing individuals to create a trust with themselves as a beneficiary while still removing the trust assets from the reach of their creditors and estate taxation. However, they raise significant federal income and transfer tax issues to consider when structuring transactions.

Trusts and estates counsel are considering establishing DAPTs to lock in transfer tax exemptions before 2026. The IRS acknowledges that a transfer to a DAPT can be a completed gift even if the asset is distributed back to the settlor at the trustee's discretion. If a grantor makes a transfer while retaining the right to the income from the asset, then it may be included in the estate under Section 2036. Furthermore, a DAPT might be used to escape the income taxes of many states if structured correctly, but if not, unintended state taxes can be significant.

Listen as our panel comprised of estate planning, tax, and asset protection experts discusses best practices for using DAPTs, essential structuring techniques to minimize income and transfer taxes, identifying the differences among jurisdictions, and other tax and legal implications.

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Outline

  1. Asset protection planning under current tax law
  2. How the domestic asset protection trust works
    1. Statute of limitations
    2. Fraudulent transfers
    3. Exception creditors
  3. Structuring DAPTs to minimize income and transfer taxes
  4. State law considerations

Benefits

The panel will review these and other key issues:

  • In asset protection planning, what factors should counsel consider in deciding how and where to structure the DAPT?
  • How does the DAPT work and what are the rules regarding statute of limitations, fraudulent transfers, and creditor exceptions?
  • How do recent tax law changes impact the structuring of a DAPT?
  • What factors must be considerd in structuring DAPTs to minimize income and transfer taxes?
  • What state law issues must be considered?

Faculty

Gopman, Jonathan
Jonathan E. Gopman
Partner, Tax Trusts & Estates Practice
Akerman

Mr. Gopman's practice focuses on sophisticated wealth accumulation and preservation planning strategies for...  |  Read More

Els, Anna
Anna E. Els
Attorney
Akerman

Ms. Els’ practice is focused on trusts and estates planning. She works primarily with high net worth...  |  Read More

Rodriguez, Melissa A.
Melissa A. Rodriguez
Attorney
Akerman

Ms. Rodriguez focuses her practice on structuring and implementing methods for clients’ wealth and business...  |  Read More

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