Michigan Domestic Asset Protection Trusts (DAPTs): Protect Your Wealth While Staying in Control

Michigan’s Domestic Asset Protection Trusts (DAPTs) are a game-changer for anyone looking to safeguard their assets while maintaining some control and even benefiting from them. These irrevocable trusts, introduced under Michigan law, offer powerful protection from creditors when the trust is properly established and funded.

What Is a DAPT?

A DAPT is an irrevocable trust that allows you, the person creating it (called the “transferor”), to:

• Protect assets you place in the trust from creditors.
• Potentially benefit from the trust as a beneficiary.
• Retain certain management rights over trust assets.

Think of it as building a financial fortress: your assets stay protected inside, but you still hold the keys to some doors.

Who Should Consider a DAPT?

DAPTs aren’t for everyone. They’re best suited for individuals with significant assets and higher exposure to risk, such as:

• Doctors, lawyers, and professionals in high-risk fields: If lawsuits are part of your industry, this trust shields your personal wealth from liability.
• Business owners: Protect personal assets while managing the ups and downs of running a business.
• Wealthy individuals: Preserve assets for future generations, even during financial turbulence.
• Those planning for marriage: Shield premarital assets from becoming marital property (a great complement to a prenuptial agreement).
• Investors or property owners: Safeguard properties, investments, and other high-value assets against unexpected claims.

Example: Imagine you’re a surgeon with a $10 million portfolio and concerns about malpractice claims. A DAPT lets you set aside a portion of your wealth (say $3 million) in a protected trust while continuing to invest those funds under the trust’s guidelines.

What Can You Do with a DAPT?

With a properly structured DAPT, you can:

• Receive trust income: You can enjoy the income generated by the trust, such as dividends or interest.
• Access discretionary distributions: While the trustee makes final decisions, they can distribute funds to you at their discretion.
• Direct investments: Retain control over how trust assets are invested.
• Appoint and remove trustees: You stay in the driver’s seat for trust management decisions.
• Control distributions after your death: Specify exactly how assets should pass to your beneficiaries.

Key Benefits of a DAPT

• Creditor Protection: Assets in a DAPT are shielded from most creditors after they’ve been in the trust for the statutory period.
• Marital Property Protection: Assets placed in a DAPT at least 30 days before marriage or explicitly excluded from marital property can remain separate during a divorce.
• Estate Planning Tool: Use a DAPT in conjunction with wills and other trusts to reduce tax burdens and provide for loved ones.
• Flexibility and Control: Retain certain powers over trust management without exposing the assets to creditors.

What’s the Catch?

While a DAPT offers tremendous advantages, it’s not without its limitations:

• Irrevocability: Once you place assets into the trust, you give up ownership of them.
• No Protection for Fraudulent Transfers: If you transfer assets into a DAPT to hide them from creditors, those assets will not be protected.
• Not for Last-Minute Planning: DAPTs must be set up in advance. If you’re already facing lawsuits or creditors, it’s likely too late.

Why Michigan’s DAPT Law Matters

Michigan’s DAPT laws are especially attractive because they allow residents to establish these trusts right here, without relying on other states like Nevada or Delaware. Plus, Michigan’s framework provides clear guidelines for ensuring creditor protection and long-term wealth preservation.

Ready to Protect What’s Yours?

If you’re a professional, business owner, or anyone with significant assets, a Michigan Domestic Asset Protection Trust could be the tool you need to secure your future. Don’t wait until it’s too late—plan now and enjoy the peace of mind that comes from knowing your wealth is protected.

Contact us today to explore how a DAPT can work for you: