Michigan and Utah are the most recent states to pass the Uniform Voidable Transactions Act (UVTA). Given the Act’s added protection for creditors’ rights, these passages come at no surprise; however, what makes Michigan and Utah’s passages concerning is that they are the first UVTA states that also have domestic asset protection trust (DAPT) statutes. The UVTA’s impact on estate planning can be summarized by four issues: asset substitution, entity formation/conversion, state homestead law, and DAPTs. Subsequently, a primary goal of the UVTA is to eliminate the use of DAPTs as an estate-planning tool, whereas a primary goal of a DAPT is to preserve assets against future, unknown creditors. So, why would a DAPT state adopt the UVTA? As for in-state DAPTs, it would appear that the two provisions can work in harmony and avoid conflict-of-law analysis. While Michigan and Utah may have seen the interaction of the two laws as an incentive to create in-state DAPTs, they have now opened the door to the negative effects of the UVTA, such as asset substitution, entity formation/conversion, and state homestead laws.
See George Karibjanian, Two DAPT States Adopt the UVTA, Wealth Management, April 11, 2017.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
