Cumberland Trust

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.
  • 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 or creditors. The Tennessee asset protection trust is available to anyone in the nation as long as a qualified trustee is a resident of Tennessee or a Tennessee-based company.
  • In 2010, the state passed the Tennessee Community Property Trust Act, which created significant benefits for trusts owned by husbands and wives, including providing equal ownership of property and the sharing of appreciation and income. It also reduces tax implications after the death of one spouse. It is especially beneficial for non-residents who live in states that impose income taxes on capital gains or rental incomes. The act additionally enhanced creditor protection for various trusts, including special needs and inter vivos marital trusts. As with the TISA, this act requires that the trustee is a Tennessee resident or trust company.

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