Charles E. Rounds, Jr., of Suffolk University Law School, has made available for download his article, “The Domestic Asset Protection Trust (DAPT) and the Full Faith and Credit Clause: Some practical considerations,” published in
JDSUPRA. The abstract is as follows:
Assume that a debtor has established with all his property a trust in a DAPT state. Assume also that the creditor owns a judgment against the debtor that has emanated from the court of a non-DAPT sister state. Is the creditor entitled under the Full Faith and Credit Clause of the U.S. Constitution to have the judgment satisfied from the assets of the DAPT via a secondary action brought in the courts of the DAPT state? It would seem that it depends upon whether the action in the non-DAPT state had been a transitory one, see generally appendix below, such as whether the DAPT had been funded via a fraudulent conveyance. If there is an out-of-state judgment to that effect then the property ostensibly in the DAPT would be accessible to the settlor’s out-of-state judgment creditors. Moreover, a unilateral effort by the legislature of the DAPT state to grant its courts exclusive jurisdiction over such out-of-state fraudulent-conveyance claims would not be entitled to respect under the Full Faith and Credit Clause.
Posted by Bella Hoang, Managing Associate Editor, Wealth Strategies Journal.