TENNESSEE: A TRUST-FRIENDLY STATE
Tennessee has long been a friendly state to trusts, thanks to its favorable tax laws and its adoption of the Prudent Investor Act, the Uniform Trust Code and other asset protection legislation.
The Prudent Investor Act, passed in 2002, encourages the use of modern portfolio theory in managing trust assets and defines how trust investment management may be delegated to an investment manager.
The Uniform Trust Code, passed in 2004, provides a comprehensive set of laws that allow a trust to be administered very efficiently and effectively. Many matters that used to require a court to resolve may now be resolved by agreement among the beneficiaries.
The Tennessee Investment Services Act, passed in 2007, allows the creator of a trust to place assets in a Tennessee Investment Services Trust, also known as a self-settled or asset protection trust, to protect them from future lawsuits, creditors, and other predators. The Tennessee asset protection trust is available to anyone in the country as long as a qualified trustee is a resident of Tennessee or a Tennessee-based trust institution.
The Tennessee Community Property Trust Act, passed in 2010, creates benefits for trusts owned by spouses, including providing equal ownership of property and the sharing of appreciation and income. It also reduces capital gains tax implications after the death of one spouse. As with the TISA, this act requires that the trustee is a Tennessee resident or trust company.
- Multi-Participant Trust legislation was enacted in 2013 that encourages the use of trust advisors and trust protectors to assist in the management of a trust. This legislation allows all of the trust creator's top advisors to be involved in the trust management.