Two recent developments in Utah Domestic Asset Protection Trust law are worth mentioning. First, the Utah Supreme Court issued a ruling in the case of Dahl v. Dahl, dealing with a DAPT in the context of a divorce. Ms. Dahl appealed a lower court's decision, arguing that it erred in holding that she had no enforceable interest in the assets of a DAPT established by Mr. Dahl, and the Utah Supreme Court agreed.
Although the trust agreement specified Nevada law as the law governing the trust, the Utah Supreme Court applied Utah law for public policy reasons. Whereas under Nevada law the trust would have been irrevocable, under Utah law the Court found that the trust was revocable. Even though the trust agreement stated that it was irrevocable, another provision said that Mr. Dahl could amend the trust with the consent of the beneficiaries, and the trust did not include any express restrictions on this power.
This case is not a "traditional asset protection planning case," according to Jay Atkisson writing for Forbes. However, it reminds planners and clients alike that in order for a DAPT to be effective, it should, at a minimum, be formed pursuant to the law in which the settlor is domiciled and not be used to try and "cheat another spouse."
In another development, a bill has been proposed in the Utah legislature, H.B. 318 - Domestic Asset Protection Trust Amendments, which would repeal and replace Section 25-6-14, the current Utah asset protection trust statute. The "new type of asset protection trust" the bill creates would, among other things, require asset protection trusts to be registered with the Utah Division of Corporations and reduce the value of a settlor's assets that would be protected from creditors. Specifically, a DAPT could assert only the following exemptions:
Although the trust agreement specified Nevada law as the law governing the trust, the Utah Supreme Court applied Utah law for public policy reasons. Whereas under Nevada law the trust would have been irrevocable, under Utah law the Court found that the trust was revocable. Even though the trust agreement stated that it was irrevocable, another provision said that Mr. Dahl could amend the trust with the consent of the beneficiaries, and the trust did not include any express restrictions on this power.
This case is not a "traditional asset protection planning case," according to Jay Atkisson writing for Forbes. However, it reminds planners and clients alike that in order for a DAPT to be effective, it should, at a minimum, be formed pursuant to the law in which the settlor is domiciled and not be used to try and "cheat another spouse."
In another development, a bill has been proposed in the Utah legislature, H.B. 318 - Domestic Asset Protection Trust Amendments, which would repeal and replace Section 25-6-14, the current Utah asset protection trust statute. The "new type of asset protection trust" the bill creates would, among other things, require asset protection trusts to be registered with the Utah Division of Corporations and reduce the value of a settlor's assets that would be protected from creditors. Specifically, a DAPT could assert only the following exemptions:
The Median Exemption is an amount equal to the sum of the median value of a Utah owner occupied housing unit and the median Utah household income as determined in the most recent American Community Survey conducted by the United States Census Bureau.For 2013, the Median Exemption would appear to only be $211,400 for median owner-occupied unit value plus $59,770 for median household income. This would represent a significant creditor-friendly change to Utah's DAPT law.
The 50% Exemption is determined on a claim by claim basis and is an amount equal to the sum of [certain amounts] reduced by the Median Exemption...