Delaware’s Domestic Asset Protection Trusts (DAPTs) remain powerful tools for shielding assets, offering unique defenses against creditor claims and legal challenges.
Delaware law protects settlors from fraudulent transfer claims, insulates trusts from “illusory trust” arguments, and enforces Delaware law even when challenged elsewhere.
For debtors, understanding and strategically leveraging these features can help preserve assets and strengthen protection against aggressive creditors.
As creditors find ways to crack Delaware’s trusts, debtors should remain mindful of the debtor-friendly features of Delaware trust law.
Delaware allows individuals to shield assets through a domestic asset protection trust (DAPT), where the trust's settlor is also the trust’s beneficiary. Using DAPTs, a settlor can shield his or her assets from creditors while retaining the right to benefit from those assets.
Although DAPTs are inherently robust, settlors should take every precaution to maximize their protective measures.
Judgment and award debtors often hold assets in offshore jurisdictions such as the BVI – but these places are notoriously creditor- and enforcement-friendly.
When cornered by a creditor, debtors often find few – if any – legal avenues to challenge the claim against them.
However, a recent Kobre & Kim victory in the BVI demonstrates that, through deep familiarity of and ability to connect both offshore and foreign law, debtors can defy conventional wisdom and succeed.
