Jeramie J. Fortenberry, the firm’s founder, will sit on the Asset Protection Sub-Group of the 2009 Business Reform Committee formed by the Mississippi Secretary of State. Fortenberry was appointed in June to sit on the Trust Laws Study Group of that Committee, which will review and make proposals regarding Mississippi trust legislation.
Fortenberry’s sub-group will be responsible for making policy recommendations for Domestic Asset Protection Trusts. DAPTs were first recognized in 1997 when Alaska enacted the first DAPT statute. Until then, asset protection trusts were only available in foreign jurisdictions, where they attracted American dollars. Once Alaska took the first step, other states quickly followed suit. In just 10 short years, ten other states had enacted some form of DAPT. States with some form of DAPT now include Alaska (1997), Delaware (1997), Nevada (1999), New Hampshire (2009), Rhode Island (1999), Utah (2003), Missouri (2004), Oklahoma (2004), South Dakota (2005), Tennessee (2007), and Wyoming (2007).
It has long been recognized that a person is free to include a spendthrift clause in a trust instrument that prohibits the beneficiary from transferring, assigning, or otherwise alienating his or her right to future payments of income or principal. This means that if the beneficiary is unable to pay a debt, the creditor will be unable to access trust assets to satisfy the debt (or even to collect upon a judgment) until those assets are paid to the beneficiary.
But this general rule assumes that the person who established the trust (the settlor) is not also the beneficiary. In other words, the asset protection works only if the beneficiary is someone other than the trust creator. DAPTs are a departure from this traditional rule in that they allow the trust creator to fund a trust for his or her own benefit and still shield the trust assets from creditors.
DAPTs are typically subject to exceptions to protect against situations that would violate public policy. For example, many DAPT statutes provide exceptions for transfers to DAPTs that are made in anticipation of insolvency or otherwise to defraud creditors (usually as determined under the Uniform Fraudulent Transfers Act). Other common exceptions include domestic claims such as alimony or child support and, less commonly, tort claims.
Fortenberry will work with the other members of the Asset Protection Sub-Group to review legislation from other jurisdictions and make policy recommendations regarding Mississippi’s adoption of DAPT legislation.
About Jeramie Fortenberry
