ASSET PROTECTION TRUSTS
In 2007, Tennessee joined the select list of states that offer asset protection trusts, known as Tennessee Investment Services Trusts. Also known as self-settled, these trusts can provide benefits for those creating them. An asset protection trust can be an excellent way for high-net-worth individuals to protect their assets from a lawsuit, bankruptcy, divorce or other similar financially damaging situation, while continuing to benefit personally from these assets. These trusts are particularly appealing to those whose occupations expose them to risk or liability. Regardless of occupation or net worth, everyone is exposed to liability, so any individual or family can benefit from an asset protection trust.
Under this law:
Assets (including homes) are insulated from creditors, yet individuals may take out income or principal and direct the investments of the trust.
Such a trust can exist for up to 360 years, thereby protecting family wealth for many generations.
Tennessee residents can keep their assets in state, while residents of other states may now create an asset protection trust in Tennessee with a Tennessee trust company.
When creating an asset protection trust, the grantor must sign an affidavit stating that he or she is not trying to avoid a legitimate creditor or one with a claim currently pending. Any assets placed in the trust are then subject by law to a two-year waiting period before they are protected. Also, the grantor cannot be his or her own trustee. The trust creator must appoint a corporate trustee authorized to do business in Tennessee or a third-party individual who resides in the state.