The Georgia Assembly passes HB 441/AP which would allow the creation of Domestic Asset Protection Trusts (“DAPT”) in state. Georgia has long allowed traditional spendthrift trusts so long as such weren’t self-settled. A DAPT allows a self-settled spendthrift trust. Most states enacting DAPT laws have done so with the intent of encouraging assets to flow into the state’s trust companies. However, at least one opponent of DAPTs has opined that this DAPT law will have the exact opposite effect under Georgia’s legislation. Here’s what HB 441 would and would not do:
1. Allow spouses, parents, lineal descendants of the settlor, employer, any business entity in which the holdings of the settlor represent at least 30% of the total voting power of all interests entitled to vote, or siblings, to serve as an “independent qualified trustee”;
2. Requires at least one beneficiary other than the settlor to whom income and principal may be distributed as a “qualified interest”;
3. A “qualified interest” means that interest of the settlor of the self-settled DAPT to which such settlor is entitled to receive as a distribution of principal or income in the discretion of one or more independent qualified trustee”;
4. Would not protect from creditors of the settlor the following obligations:
a. Alimony or child support;
b. Taxes or other governmental obligations;
c. Tort judgments;
d. Judgments or orders for restitution as a result of a criminal conviction of the beneficiary; or
e. Judgments for necessaries;
f. Financial institutions to the extent that assets of the DAPT were reported to such institution as
belonging to the settlor for the purposes of obtaining or extending credit from such institution.
As we can clearly see, the exceptions may indeed swallow the whole. So, if the legislative intent was to encourage creation of DAPTs in Georgia, the exact opposite may occur: parties desiring to create such trusts may be well-advised to do so in another jurisdiction such as Nevada or Delaware and move their assets to such jurisdictions to actually obtain any such protection from creditors. NOTE: Georgia’s governor has not signed this bill into law as of the date of this writing.
So, what’s a person desiring to engage in lawful estate planning to do? Fear not, WRNicholsLaw has solutions that will accommodate both Georgia law and the desires of those persons. While nothing is fool-proof, our designs are created to comport with longstanding Georgia law and allow you to keep the assets in question invested in Georgia. If you don’t have an estate plan, Book an Appointment by clicking on the widget and schedule a time to speak with us about your planning–you’ll love doing business with WRNicholsLaw!