What is a self-settled trust?
A self-settled trust is a type of trust that is established by the person who will benefit from the trust, usually to protect their assets from creditors or other claimants. In California, self-settled trusts are commonly known as Domestic Asset Protection Trusts (DAPT). These trusts are designed to protect the trust creator’s assets from creditors, lawsuits and other claims. The trust creator, also known as the grantor, is not allowed to access the trust funds for their personal use. Instead, the trust assets are managed by the trustee, who is responsible for making distributions for the benefit of the trust creator. Since the trust creator is excluded from taking any benefit from the trust, it is seen as an ideal way to protect their assets from claims. This also means that any assets transferred to the trust are no longer subject to the claims of creditors, as the assets are now held in the trust. A self-settled trust is a powerful tool for those who are concerned about the potential of their assets being subject to claims. It can be used to protect family assets, such as a home, investments, or other valuable assets. However, there are certain restrictions that apply, such as the creator cannot access or control the trust assets, and the assets may only be used for the benefit of the grantor.
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