Tennessee is considered a “trust-friendly state”. In the past few decades, Tennessee has adopted legislation that puts it at the forefront of Trust Law and makes it an attractive jurisdiction for trusts. In addition, Tennessee has a favorable tax structure that encourages people to form their trusts in Tennessee. Some highlights include:
- The Uniform Trust Code (2004) – The goal of the Uniform Trust Code is to provide “precise, comprehensive, and easily accessible guidance on trust law questions”. It allows a trust to be administered very efficiently and effectively and gives beneficiaries the ability to resolve by agreement among themselves many matters that formerly required court intervention.
- Tenancy by the Entirety Trust (2014) – A Tennessee Tenancy by the Entirety Joint Revocable Trust enables married couples to transfer property to a joint trust and obtain the asset protection from the separate, individual debts of one spouse. Before passage of this law, married couples who transferred jointly owned property to a trust lost this advantage.
- The Tennessee Investment Services Act (2007) – This is Tennessee’s version of the domestic asset protection trust or self-settled spendthrift trust. It allows someone to put assets in a trust to protect them from future lawsuits and creditors. The adoption of this law, however, made it possible for the creator of the trust to name himself or herself as the beneficiary of the trust. The trustee must be a Tennessee resident or trust company.
- The Tennessee Community Property Trust Act (2010) – Presently, Tennessee is one of only a few states to allow this type of trust. One of the most attractive features of this trust is the reduction of capital gains taxes upon the sale of joint assets following the death of one spouse. It also provides for equal ownership of assets and the sharing of income from and appreciation of assets. This type of trust also requires a Tennessee resident or trust company as trustee.
- Trust Advisors and Trust Protectors (2013) – Trusts with these features are sometimes called “true directed trusts” or “multi-participant trusts”. This legislation promotes the use of trust advisors and trust protectors to help manage trusts. This allows the trust creator to involve advisors in the management of the trust.
In addition, Tennessee allows most types of trusts commonly available in other states such as Special Needs Trusts, Irrevocable Life Insurance Trusts and Charitable Lead Trusts, which can be useful in specific circumstances. Taken together, these progressive features of Tennessee law make the State a leader in Trust Law and a magnet for trust creation.
This information is not intended as legal, insurance or tax advice. For such advice, please consult an attorney, insurance agent or tax advisor.