The asset protection attorneys at the Dilendorf Law Firm advise clients on the most advantageous legal strategies to preserve wealth and provide for future generations.
Claims from creditors and lawsuits can pose a substantial threat to the assets of individuals, families, and businesses. The domestic asset protection trust (DAPT) offered through several states provides a level of protection that was previously available only through offshore trusts.
New Hampshire enacted its own asset protection trust in 2009, making it one of seventeen jurisdictions in the United States that offer a DAPT. Only a handful of states, including New Hampshire, Delaware, Alaska, Nevada, and Wyoming, are considered more favorable for certain features than others.
New Hampshire laws and trust options
For our clients with assets that are vulnerable to liens and other creditor attachments, a New Hampshire DAPT eliminates the need to place assets outside of the United States. The domestic asset protection trust (DAPT) laws of New Hampshire also require these trusts to be irrevocable.
The assets within a DAPT are held at arm’s length from the grantor’s estate for the purpose of protecting them from creditors, but they are still available to the trust’s beneficiaries through distributions. An independent trustee is designated to makes decision regarding the payment of income from the trust, meaning the grantor cannot dictate distributions. Because the Qualified Dispositions Act requires that the trustee must be a company licensed to do business in New Hampshire, our firm works closely with firms that have been vetted for our clientele.
While the New Hampshire DAPT has many applications, it is especially useful for contractors, professionals, and corporate officers, or anyone who might become personally liable for judgments related to business operations.
Like most states, New Hampshire requires a four-year waiting period after assets are transferred into the trust before they are fully protected against creditors’ claims. Exceptions to this protection would include court orders for alimony, child support, civil judgments, personal injury, and death.
Advantages of a New Hampshire DAPT
The State of New Hampshire continues to gain credibility as a premier location for establishing and administering an asset protection trust. Because the state’s progressive tax code is frequently revised to remain at the forefront of state trust laws, it is often cited as the main reason New Hampshire is chosen by individuals and families.
Recent enhancements to the New Hampshire trust code include the following:
- New Hampshire was the first state to allow civil foundations to be established
- Self-settled spendthrift trusts are now easier to create in New Hampshire
- New Hampshire trust laws offer greater creditor protection
- Private family trust companies may be established in New Hampshire without the need to register with or be regulated by the state banking commission
Additionally, New Hampshire continues to be known for its welcoming environment and flexibility, such as allowing for the bifurcation of trustee functions, providing tools to fix broken trusts, and ensuring a tax-friendly venue for establishing a trust.
One of the bedrock principles of New Hampshire’s Trust Code is the sanctity of the grantor’s intent in creating the trust, so that when disputes arise the expressed intent cannot be overridden. While all fiduciaries must act in good faith according to the terms of the trust and in the interest of its beneficiaries, the grantor’s intent is of paramount importance.
Enhanced creditor protection in New Hampshire asset protection trusts
New Hampshire has recently narrowed the class of creditors who can access the assets held in irrevocable DAPTs. While these trusts cannot protect against every state or federal claim against a beneficiary, the only creditors that may attach assets in the trust are those that existed at the time the trust was established, as well as “exception creditors” such as court orders for child support or alimony.
All grantors in a New Hampshire DAPT receive creditor protection, whether they live in New Hampshire or out of state. For grantors outside of New Hampshire, the state’s trust laws afford significant tax advantages. For example, while New Hampshire imposes taxes on dividends and interest income for state residents, it does not impose a capital gains tax. It also exempts out-of-state beneficiaries from paying New Hampshire taxes on the ultimate distribution of trust assets.
The Dilendorf Law Firm is ready to engage with and advise clients as they seek out asset protection strategies, such as the New Hampshire domestic asset protection trust.