A trust is a legal entity created by a person known as the trustor, grantor, or settlor who owns assets (cash, stocks, bonds, real estate, art, jewelry, machinery, etc.) and transfers ownership of the assets to the trust—while directing a person or entity known as the trustee to hold and manage the assets for the benefit of a certain person or persons, or classification of persons (descendants) known as the beneficiary or beneficiaries. The assets or property in a trust are sometimes referred to by the Latin word res (pronounced “rays”).

Beneficiaries are often descendants or heirs of the trustor, grantor, or settlor, but in some states (and other countries) the trustor, grantor, or settlor may be the beneficiary—and in that case the trust is known as a self-settled trust.

A trust is generally created when a trustor, grantor, or settlor shows or manifests an intent to create a trust by signing or executing a written trust agreement that is also signed by the trustee.

Domestic Asset Protection Trust

An asset protection trust (APT) is a special kind of trust that is not recognized or allowed under the law in all states in the United States. In states that do recognize an APT, a trustor, grantor, or settlor may create the trust to protect assets from claims in divorce or bankruptcy, or by other creditors.

In states that do recognize an asset protection trust under state law—also known as a domestic asset protection trust (DAPT)—the trust generally must be irrevocable (not easily changed, if at all). A DAPT is usually a self-settled trust in which the trustor, grantor, or settlor is also the beneficiary of the trust.

Laws vary from state to state and may be changed by the state legislature or interpreted differently by the courts at any time, so you should be sure to confirm the status of the law in your state before making any decisions.

States that may recognize a DAPT include:

• Alaska

• Delaware

• Hawaii

• Michigan

• Mississippi

• Missouri

• Nevada

• New Hampshire

• Ohio

• Oklahoma

• Rhode Island

• South Dakota

• Tennessee

• Utah

• Virginia

• West Virginia

• Wyoming

Foreign Asset Protection Trust

A foreign asset protection trust—also known as an offshore trust—is a trust formed under the laws of another country. Foreign asset protection trusts usually cost more to create but may offer greater privacy protection and tax benefits. The protection against creditors offered by offshore trusts may vary depending on the country in which the trust is created.

In Virginia, a trust is a legal arrangement where a trustor (also known as a grantor or settlor) transfers assets to a trust, directing a trustee to manage those assets for the benefit of designated beneficiaries, which can include descendants or heirs. Virginia recognizes the creation of trusts through the execution of a written trust agreement, which must be signed by both the trustor and the trustee. Virginia is one of the states that allows the creation of Domestic Asset Protection Trusts (DAPTs), which are designed to protect assets from creditors, divorce, or bankruptcy claims. These trusts are typically irrevocable, meaning they cannot be easily altered or revoked. In Virginia, a DAPT can be a self-settled trust, where the trustor is also a beneficiary. However, laws regarding trusts can change, and it is important to consult with an attorney to confirm the current legal status and to ensure that a trust is properly established in accordance with Virginia law.