What is the Tennessee Investment Services Act?The Tennessee Investment Services Act is a piece of legislation that affords several advantages for trusts established in state. The Act was passed into law in 2007, and amended in 2013. Before the Act passed into law, assets in self-settled trusts were subject to creditor claims if the creator retained a beneficial interest. Lawsuits, judgments, and malpractice claims were all threats to trust assets. Modifications made in 2013 make it a greater challenge for creditors to tap trust assets.
Those who have or who are interested in creating Domestic Asset Protection Trusts (DAPTs) in Tennessee should review with a lawyer the protections and limitations the Tennessee Investment Services Act provides. Laws are favorable in Tennessee when compared to just over a dozen other states that permit DAPTs. Tennessee ranked #3 nationally in 2014 as a top state for DAPTs.
The Act protects assets after they have been held in trust for four years. At the same time, the state grants powers to the trust creator, which may include:
- Right to reside in a home owned in trust
- Right to receive trust income
- Control over trustee removals
- Investment decision power
- Authority to reject proposed distributions
- Control over how trust assets are distributed post-mortem
State law poses certain requirements over who may be named trustee of a DAPT. (One requirement is residency in Tennessee, and an asset protection attorney can review more.) DAPT assets may be vulnerable to bankruptcy creditors if within a 10-year statute of limitations. Learn more about asset protection in Tennessee.