In 2013, the Ohio Asset Management Modernization Act took effect, creating one of the nation’s most popular state asset protection trust statutes – the Ohio Domestic Asset Protection Trust (DAPT). While asset protection trusts are available in 16 other states, certain provisions in Ohio’s statute made it one of the top states for protecting assets.

Notably, an individual does not have to be a resident of Ohio to create an Ohio DAPT. In fact, nonresidents may find great benefit to using an Ohio DAPT.

A DAPT is an irrevocable self-settled trust for which the settlor (creator of the trust) is permitted to be a beneficiary. In addition, a properly drafted DAPT allows for the settlor to have some access to the funds in the trust beyond just the income. So why create a DAPT? Our clients primarily use the trust to protect themselves from possible future creditors and, in some instances, to take advantage of potential tax benefits.

You can use a variety of assets to fund a DAPT, with the most common assets being cash, investment securities, LLCs or other business interests, real estate, or other valuables. Once a DAPT is funded, Ohio has a very short limitation for future and pre-existing creditor access to the assets – just 1.5 years, which is shorter than most states allow. This accounts for Ohio’s growing popularity in housing such trusts. Again, you do not need to be an Ohio resident to establish a DAPT, and in many cases, non-resident beneficiaries may have greater advantages.

At Stock Yards Bank & Trust, many of our DAPTs have been created as a result of business succession planning discussions with business owners looking to protect their family wealth. We’ve found that DAPTs can be a powerful tool to help alleviate those concerns.

Domestic asset protection trusts offer many advantages and benefits, but they need to be properly drafted and funded. Unfortunately, some attorneys and financial advisors are still unfamiliar with them. Therefore, make sure you seek out an expert in the field if you think you could benefit from this strategy.