Reference
Asset protection glossary.
The terms that actually decide outcomes, defined plainly, with the practical consequence attached.
Short answer: plain-English definitions of the terms that actually decide asset protection outcomes, written by a firm whose principal attorney litigates these disputes, with the practical consequence attached to each rather than just the dictionary meaning.
Most of the confusion in this field comes from a handful of words used loosely. “Irrevocable” does not mean what a caption says it means. A “charging order” protects less than most people assume, and almost nothing in a single-member LLC. A “seasoning period” does not bind a bankruptcy trustee. Definitions below.
Asset protection trust
An irrevocable trust designed so that assets transferred into it are placed beyond the easy reach of the settlor's future creditors. Effective only when established and funded before a claim arises.
Badges of fraud
The eleven non-exclusive factors under UVTA § 4(b) that courts weigh to infer actual intent to hinder, delay or defraud: transfer to an insider; retained possession or control; concealment; suit filed or threatened before the transfer; transfer of substantially all assets; absconding; removal or concealment of assets; consideration not reasonably equivalent; insolvency; timing close to a substantial debt; and transfer of essential business assets to a lienor who passes them to an insider.
Beneficiary
A person or entity entitled to receive, or eligible in the trustee's discretion to receive, distributions from a trust.
Bridge trust
A marketed structure that operates as a domestic trust until a threat appears, then “bridges” offshore. The timing is the problem: moving assets once a threat has materialized is the fact pattern fraudulent-transfer law was written to catch.
Charging order
A judgment creditor's remedy against an LLC or partnership interest, limiting the creditor to receiving distributions the entity actually makes rather than seizing the interest or the entity's assets. In stronger states it is the exclusive remedy and foreclosure is barred.
Clear and convincing evidence
An elevated standard of proof, higher than a preponderance and lower than beyond reasonable doubt. Most DAPT statutes require a creditor to meet it, in contrast to the preponderance standard under UVTA § 4(c).
Corporate Transparency Act
Federal legislation requiring many U.S. entities to report beneficial ownership information. Compliance obligations have shifted materially since enactment; confirm current requirements before acting.
DAPT
Domestic asset protection trust, a self-settled irrevocable trust established under the law of a U.S. state that authorizes them. Twenty-two states do.
Duress clause
A provision instructing a foreign trustee to disregard instructions given by the settlor under legal compulsion. Its effectiveness depends on the settlor not holding powers that override it, see FTC v. Affordable Media.
Dynasty trust
A trust designed to continue for multiple generations, avoiding transfer tax at each generational level. Duration depends on state law: South Dakota permits perpetual trusts, Wyoming 1,000 years.
Exception creditor
A category of claimant a DAPT statute carves out from spendthrift protection, most commonly spousal and child support. Nevada uniquely has none, which drove the result in Klabacka v. Nelson.
FBAR
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. Required annually where aggregate foreign financial accounts exceed the reporting threshold at any point in the year.
Form 3520 / 3520-A
U.S. information returns reporting transactions with, and the annual activity of, foreign trusts. Required for offshore asset protection trusts. Penalties for failure to file are severe.
Fraudulent conveyance
Also fraudulent transfer or voidable transaction. A transfer made with actual intent to hinder, delay or defraud a creditor, or made without reasonably equivalent value while insolvent. Voidable by the creditor. Timing is what separates lawful planning from this.
Grantor trust
A trust whose income is taxed to the settlor. Properly structured offshore asset protection trusts are grantor trusts, which is why they are tax-neutral.
Homestead exemption
State-law protection of some or all equity in a primary residence from creditors. Ranges from nothing to unlimited. Capped at $214,000 in bankruptcy under 11 U.S.C. § 522(p) for equity acquired within 1,215 days of filing.
Irrevocable trust
A trust the settlor cannot revoke or unilaterally amend. Irrevocability is the source of protection, and a caption saying “irrevocable” does not create it, as Dahl v. Dahl shows.
Protector
A person, other than the trustee, holding specified powers over a trust, commonly to remove and replace trustees or veto distributions. Protector powers held by the settlor can defeat the entire structure.
Qualified disposition
The statutory term in most DAPT legislation for a transfer to a qualifying self-settled trust, which starts the seasoning clock running.
Reverse veil piercing
An equitable remedy reaching an entity's assets to satisfy the personal debt of an owner, the inverse of ordinary veil piercing. Available against LLCs in California under Curci Investments v. Baldwin, and easier where the LLC has a single member.
Seasoning period
The time that must pass after a transfer to a DAPT before a creditor is barred from challenging it. Ranges from 120 days (Wyoming, on notice) to five years (Virginia). No state period binds a bankruptcy trustee applying the federal ten-year look-back.
Section 548(e)
11 U.S.C. § 548(e), the federal ten-year look-back permitting a bankruptcy trustee to avoid a transfer to a self-settled trust of which the debtor is a beneficiary, made with actual intent to hinder, delay or defraud. It overrides every state seasoning period, but still requires proof of intent.
Self-settled trust
A trust the settlor creates for their own benefit. At common law, self-settled spendthrift provisions are void as to creditors; DAPT statutes are legislative departures from that rule.
Settlor
The person who creates a trust and transfers property into it. Also called grantor or trustor.
Situs
The jurisdiction whose law governs a trust and where it is administered. A choice of situs must be backed by genuine contacts to hold up, see In re Huber.
Spendthrift clause
A provision preventing a beneficiary from assigning their interest and preventing creditors from reaching it before distribution. Fully effective for third-party trusts; effective for self-settled trusts only under DAPT statutes or foreign law.
Tenancy by the entireties
A form of co-ownership available only to married couples in some states, under which property is generally not reachable by the creditors of only one spouse. Abolished in several states, and always subject to federal tax liens under United States v. Craft.
Trustee
The person or institution holding legal title to trust property and owing fiduciary duties to the beneficiaries. Most DAPT statutes require at least one qualified trustee resident in the state.
UVTA
The Uniform Voidable Transactions Act, the 2014 revision of the Uniform Fraudulent Transfer Act. Adopted in a majority of states. Section 10(b) makes a voidable-transfer claim governed by the law of the debtor's location, a critical provision for DAPT planning by a non-DAPT-state resident.
Go deeper
For how these concepts interact in a real plan, see asset protection, fraudulent conveyance, our state-by-state table, and the case-law library. To discuss your situation, call (858) 755-6672.
A note on these definitions
These are general explanations, not legal advice, and terms carry different meanings under different states' law. Consult a qualified attorney about your circumstances.
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