What is a DAPT? | Legit Asset Protection

The dapt, the Domestic Asset Protection Trust. Sounds pretty sexy and cool, right? Well, for us geeks in the asset protection world, we think these are pretty awesome and they're pretty unique. And unless you're a lawyer practicing in business and asset and tax planning, you're not going to really know about the dap. So I want to break them down, try to help you know what they're all about and when you might need one. So let's dive into it. First. Let's talk about what they're not used for. ADAPT is not used for estate planning. That's when we die. That's when we're going to use a will versus revocable Living trust. Got a great video on that in my channel. Go check it out, subscribe, you'd love it. We also don't use DAPs for tax planning. We're not going to use a DAP to save on FICA or save some sort of estate tax or income tax. They're not used for that. Also, ADAPT is not used for wealth building. That's going to be an IRA or 401k. And we're going to use rental properties and LLCs for proper protection and flexibility of control. That's going to be a whole other topic. And finally, we don't really use ADAPT for privacy. Maybe we can come up with a unique name for the debitapt and someone won't find what you own. Maybe, but it's not a privacy driven decision. That's not what ADAPT used for either. So where do we use adapt? We use them for asset protection. The very name. Domestic Asset Protection Trust. Domestic meaning in the United States for asset protection. And it's a type of trust. Now there's only 17 approximate states and they're changing all the time. Down in the description below, I've got a list of all the states that have valid domestic asset protection laws and they vary a little bit by state. I can't cover all those differences here in this video, but depending on what state you're in, you can do a little bit of research and find out real quickly how the DAPT varies and how it's applied in your state. But the DAPT is a legislative statute. It's a law passed in these approximate 17 states that says, hey, if you take an asset and put it in one of these trusts and you get sued, it's going to be harder for the creditor that's suing you to get that asset. All right, let's do an example. And I'm going to kill A tree here and maybe it was just a twig, I don't know. But. Okay, we're moving on to a new piece of paper. Now. Here's where I would normally put adapt. And if you've seen my videos before, please check them out. All about tax planning, wealth building. We're going to have our typical revocable living trust here at the bottom in our beneficiaries down here, blah blah, blah, blah. We're going to maybe have an LLC or an S corp and we're going to be doing tax planning over here. We may have. LLC is here for rental properties and. And then we've got our IRAs and HSAs and 401ks and all this good stuff I love to talk about. And frankly, we're not even talking about life insurance. Life insurance LI we'll put that over here as a little document is a whole other topic too. Where we like at our firm, and we've been doing this for years and really playing around with the DAPT to figure out their most beneficial use for ease of administration and cost. Where we like the DAPT first and foremost is right here. We want this DAPT to be the owner of your home, your primary residence. That's a lot of times in people's lives, their number one asset. Now we want retirement accounts and rental properties to supersede that someday. For a lot of people, the equity in their home is a big deal and we want to protect that from a lawsuit. So the DAPT is set up with a trustee and it's not going to be you. This trustee carries out your wishes according to the dapt and the beneficiary is your revocable living trust. So you get the use of the asset, you can sell it and put other stuff in the dap. You buy a second home and sell this one, whatever, and if you die, it all goes into the revocable living trust. So there's no probate. And we're back to our estate planning. And again, we could put a little privacy type twist to this with the name, but the whole goal here is if you're driving down the road and you're texting and driving as you know you're not supposed to, and this is you over here, the trustee of your revocable living trust. And you plow through a stop sign or some crosswalk and you really hurt someone and they come to sue you, so there's this lawsuit and there's this creditor out here that's going to come after you and they're Going to want all your assets. And that's when asset protection kicks in. We don't want to get sued from our tenants. They're the law all the way up here. And that's what LLCs are used for. But how do I protect my home? Do I put my home in an llc? Not going to work. It's generally problematic. So when this creditor comes after you in these 17 so states we come can protect your home from this creditor by creating this wall right here. So they come after you and they normally come right after your house. They can't touch your house. Can't touch this. Okay, I'm shy of the 80s, got to throw a little MC hammer. But they can't touch this because you've got this, this daft, this domestic asset protection trust. And the beauty of this trust is it can be private. The only public viewing of this trust is going to be at the county recorder as the title owner to the property. I don't have to record it with estate or anything like that. We charge around 1,500 bucks to set them up. You can shop around and that of course you will. And trustee fees are going to range from three to $400 a year. That's what we charge. And if you're paying a lot more than that, I'd reconsider. But the dapt is simple because it's a one time setup fee. There's no tax return. You've got a trustee that carries out your wishes and, and you create this protection. Now that may have seemed overly simple, but it is. And that's why I love doing some of these videos is because a lot of asset protection gurus throw a lot of smoke and mirrors and fancy language and they want to create maybe a Delaware statutory trust or some other land trust or some other irrevocable spendthrift trust and all these other trusts that can be a lot more expensive and complicated may not be worth the headache. I have a lot of clients that come to us going, can you just simplify all this garbage I paid five or ten grand for or more. Get a second or third opinion before you go down a crazy train of more elaborate trust planning when the debt could be just a simple fit depending on where you live. Now I know it's hard in some states like especially California where you're trying to protect that, you know, glorified 401k called the Equity in your home. And it's a million dollars of equity and you're trying to protect it and some schmoozy salesman is going to we can throw it in this Delaware trust or a business trust, or this or that, and it'll help you out. And it's lots and lots of money. Be cautious. I'm not saying that some of those trusts don't work, but they come with baggage, tax returns, irrevocability. They're irrevocable trusts. There's a lot of costs up front. What's the maintenance cost? Do you really understand it? You really want to make sure that you've got all those eyes dotted and T's crossed before you go down one of those paths. So maybe I'm rambling, but the point is I love the dapt. They're simple, they're easy, they've been around. They can work well in a variety of states, but not everywhere. So continue to do your research on asset protection. I've got some great podcasts on this on what trusts don't do and what trusts can do. It's over at Refresh youh Wealth. You can get it on Stitcher and Spotify and itunes, in the pipe on the podcast play button, whatever. But get over there and check out our podcast. I write about this in several of my books and just do your homework. It can be very, very affordable to get the research done so that you don't misstep when it comes to this expensive process of asset protection. But there you have it. The Domestic Asset Protection Trust. I think it's a great trust that could actually maybe work for some of you. So keep learning, keep studying and keep living that American dream. Thanks so much for watching that video and I want to be your source for tax and legal strategies. 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