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 Illinois, 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 other parties. Trusts are typically established through a written trust agreement, signed by both the trustor and the trustee, demonstrating the trustor's intent to create the trust. Illinois does not currently recognize Domestic Asset Protection Trusts (DAPTs), which are special types of trusts designed to shield assets from creditors, divorce, or bankruptcy. DAPTs are irrevocable and often allow the trustor to be a beneficiary. While some states do permit DAPTs, Illinois is not among them. Therefore, individuals in Illinois seeking to create a trust for asset protection purposes may need to consider alternative trust structures or asset protection strategies. It's important to consult with an attorney to understand the current laws and how they apply to your specific situation, as trust laws can be complex and subject to change.