SPATs: A Flexible Asset Protection Alternative to DAPTs

Geography is one factor. Because most states are non-DAPT states and do not support the notion of self-settled trusts, creating one usually means that the grantor has to locate the trust in another state- a DAPT state. The SPAT is not a self-settled trust. Because the grantor is not a beneficiary, t...

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Bibliographic Details
Published in:Estate Planning 2019-02, Vol.46 (2), p.3-10
Main Authors: O'Connor, Abigail E, Gans, Mitchell M, Blattmachr, Jonathan G
Format: Article
Language:English
Subjects:
Bankruptcy laws
Beneficiaries
Equity
Estate planning
Estate taxes
Families & family life
Fraud
Jurisdiction
Offshore
Powers of appointment
Trusts
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Summary:Geography is one factor. Because most states are non-DAPT states and do not support the notion of self-settled trusts, creating one usually means that the grantor has to locate the trust in another state- a DAPT state. The SPAT is not a self-settled trust. Because the grantor is not a beneficiary, the self-settled trust rule in common law jurisdictions- under which the grantor's creditors can reach the trust's assets-is not applicable. [...]there should be no need to use a DAPT state. If the trust would qualify as a GST trust under Section 2632(c)(3)(B), then the grantor needs to opt out of automatic allocation of the GST exemption on his or her federal gift tax return, as permitted under Section 2632(b)(3). [...]if the Delaware Tax Trap accidentally is triggered (despite the warning above), then the powerholder becomes the new transferor for GST purposes and the grantor's GST exemption is wasted.41 Conclusion The SPAT essentially is a more conservative version of a self-settled trust.
ISSN:0094-1794