Asset Protection Trust
An irrevocable trust designed to protect assets from creditors, lawsuits, and judgments. Some states (like Nevada, South Dakota, and Delaware) allow self-settled asset protection trusts where the trust creator can also be a beneficiary.
Legal Definition
An irrevocable trust, typically established in a jurisdiction with favorable asset protection statutes, designed to place assets beyond the reach of the grantor's future creditors while potentially allowing the grantor to remain a discretionary beneficiary (domestic asset protection trust or DAPT).
Practical Example
A surgeon worried about malpractice liability creates an asset protection trust in Nevada and transfers investment accounts into it. If he is later sued for more than his insurance covers, the assets in the Nevada trust are generally protected from the judgment creditor.