Charles E. Rounds, Jr.: The Domestic Asset Protection Trust (DAPT) and the Full Faith and Credit Clause: Some practical considerations (July 1, 2021)

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.

Click here to view Charles E. Rounds, Jr.’s summary of “The Domestic Asset Protection Trust (DAPT) and the Full Faith and Credit Clause: Some practical considerations.”

Posted by Bella Hoang, Managing Associate Editor, Wealth Strategies Journal.