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Domestic Asset Protection Trust could bolster your prenup

There are few conversations that feel more awkward than discussing a prenup with your future spouse. These legal documents can prevent future heartache, but too few couples choose to protect their rights through the use of a prenuptial agreement. Even more disconcerting, though, is the fact that a prenup may not be entirely airtight -- even if the document is considered legitimate, you could spend thousands of dollars proving this fact. So, what should couples do to prevent their assets from being demolished in a divorce? Consider the Domestic Asset Protection Trust.

Trusts are generally designed to protect individual assets from creditors. Revocable trusts are less secure because they allow the owner of the trust to move assets and withdraw holdings at their own discretion. Irrevocable trusts -- like the DAPT -- are advantageous because they provide a thicker barrier against creditor intrusion. However, owners have less discretion over the management of their assets.

The DAPT is a type of irrevocable trust that actually provides more access to assets than a traditional irrevocable model. The trust creator is named as a discretionary beneficiary, but the trust assets are still shielded from creditors. These creditors can include divorcing spouses.

States such as New York may have different DAPT rules from other jurisdictions, so it is important to discuss your property division needs with a qualified professional before making any big decisions. In some areas, real estate is excluded from such a trust, for example. However, the DAPT is an excellent financial tool for those who want to draft a bullet-proof prenuptial agreement. Wealthy couples and those with specific assets they want to protect may benefit from the use of this little-known trust option.

Source: Forbes, "How To Protect Yourself In A Divorce Using A Domestic Asset Protection Trust" Robert Pagliarini, May. 15, 2014

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