What is a Tennessee Asset Protection Trust?
In 2007 Tennessee enacted a law which permits Tennessee residents and non-residents alike to shield their assets from creditors by transferring property to a trust called a Tennessee Asset Protection Trust.
Are there any minimal requirements for Asset Protection Trusts?
Under Tennessee’s statute the following minimal requirements must be met:
- The trustee may not be the person who creates the trust
- The trustee must be a Tennessee resident or corporate fiduciary authorized by Tennessee law to act as trustee, and the Tennessee trustee must materially participate in the administration of the trust
- Custody of at least some of the assets must be in Tennessee
- The settlor must sign an affidavit which states that the settlor is not insolvent, trying to avoid creditors, has pending or threatened lawsuits, or has filed or contemplated filing bankruptcy.
While a Tennessee Asset Protection must be irrevocable, the settlor may still retain the right to receive income and to receive principal payments at the trustee’s discretion. So long as a creditor does not seek the assets transferred to the trust within the later of two years of their transfer to the trust or 6 months after the creditor knows or reasonably knows of their transfer to the trust, they will be barred from reaching the assets.
Several considerations must be contemplated when determining whether a Tennessee Asset Protection Trust is right for your particular situation. A qualified Tennessee estate-planning attorney can assist you in determining whether a Tennessee Asset Protection Trust is right for you.