Trust planning, especially self-settled trusts (DAPTs) are subject to scrutiny

The court in the Netter case held that a third-party trust set up by the son/beneficiary’s father was protected when the son later divorced. The case did mention that the son had no ability to make distributions which could be worrisome as many trusts are planned so that the beneficiary can be a trustee and make distributes limited to avoid negative tax implications. Three other validly created South Dakota asset protection trusts (DAPTs) were pierced (not protective) because their creation and funding violated public policy in the state where the couple resided. The issues in this case have broad relevance to anyone trying to protect an heir from divorce, asset protection and other planning.