Also known as domestic asset protection trusts (DAPTs) and Alaska/Delaware Trusts – currently valid in 17 states: Alaska, Delaware, Hawaii, Michigan, Mississippi. Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia, West Virginia, and Wyoming

Allows individuals to put assets beyond the reach of creditors while retaining some control over and access to those assets

Independent trustee given discretion to make distributions to beneficiaries

Beneficiaries are prevented from transferring rights in the trust

Creditors cannot claim that trust assets are assets of the beneficiary and may only collect money that is distributed to the beneficiary

Trust must follow state specific laws

Grantor may retain certain interests – discretionary distributions of income and/or principal, veto power over distributions and special or limited power of appointment

May be included in the grantor’s estate depending on degree of control

Transfer to trust subject to gift tax unless grantor has a general power of appointment

Grantor-type trust – grantor pays tax on trust income but could be a non-grantor trust

The validity of self-settled spendthrift trusts has yet to be tested in the United States Supreme Court