How Acts 291 and 293 Changed the Estate Planning Landscape
In 2023, the Arkansas General Assembly passed two laws, Act 291 and 293, that significantly expanded trust estate planning and asset protection planning options in Arkansas. These Acts make Arkansas a more competitive and “trust friendly” jurisdiction and reduce the need for Arkansans to rely on out of state planning strategies.
Act 291: Domestic Asset Protection Trusts (DAPTs)
Act 291 allows Arkansans to create Domestic Asset Protection Trusts (DAPTs), which are irrevocable, self-settled trusts (grantor contributes assets and is the beneficiary of the trust assets) designed to protect trust assets from future creditors while still allowing the settlor/grantor to benefit from the trust. DAPTs provide protection of trust assets from creditors while still allowing the settlor/grantor to benefit from the trust assets, a concept which was previously not possible under Arkansas law. This is a significant step in Arkansas estate planning because it now allows for a grantor to benefit from the trust assets while also protecting the assets from creditors after the trust assets have been put into the trust for the initial two-year statute of limitations.
To qualify as a DAPT, the trust must be irrevocable, provide for discretionary distributions by a qualified, independent trustee, not be created to hinder, delay, or defraud known creditors, and have an Arkansas connection, such as an Arkansas settlor/grantor, trustee, or real property. Importantly, the settlor/grantor cannot serve as trustee, but they may retain certain powers, including removing and replacing trustees, directing investments, and exercising limited management rights.
Act 291 also limits creditor claims. Existing creditors generally must bring claims within two years of the transfer or six months after the discovery of the trust, while future creditors must bring claims within two years of the transfer. Creditors must prove fraud or a violation of a legal obligation by clear and convincing evidence to prevail.
DAPTs can be especially useful for professionals and business owners in high-liability fields, such as physicians, accountants, dentists, attorneys, real estate investors, etc., individuals with significant assets, or those concerned about future financial exposure.
Act 293: Trust Decanting in Arkansas
An irrevocable trust generally cannot be amended or revoked. They are “set in stone” leaving the settlor/grantor with limited ability to change the terms of the trust. Act 293 was passed primarily to soften the “irrevocable” nature of a trust and give the settlor/grantor a way to update the trust terms authorizing trust “decanting,” which allows trustees to move assets from an existing irrevocable trust into a new irrevocable trust with updated or improved terms, typically without court approval.
A trust may be decanted if it is irrevocable and grants the trustee discretion to distribute income or principal. The new trust cannot add new beneficiaries, but it may modify administrative provisions, tax planning strategies, or trust duration.
Trust decanting is commonly used to correct outdated language, change trustees, improve tax treatment, respond to changed family circumstances, or create special needs planning solutions.
Why These Changes Matter
Together, Acts 291 and 293 modernize Arkansas trust law and provide powerful tools for estate planning, asset protection, and long term wealth management. While these strategies are not appropriate for every situation, they offer meaningful benefits when properly structured.
You can find more information on these concepts at the following link: https://www.lexology.com/library/detail.aspx?g=69941e56-04a6-4e80-8617-3975ed865e13
Located in Batesville, Melbourne, Heber Springs, and Mountain View, Arkansas, and serving all of Arkansas, Reeves Law Firm stands ready to handle any civil, estate, family law, guardianship, personal injury, probate, or any other litigation matters that may arise.
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