Tennessee is one of the best states for asset protection trusts, many of which are available to people who aren’t even residents of the state. One of the more unique ones is the TIST, the Tennessee Investments Services Trust. Note, for our Florida clients, there’s a very similar asset protection trust in Florida as well, and the language of the Florida Statute effectively mirrors the language in the Tennessee Code, so we can offer this to our clients confidently in both states.
Who Is a TIST or Tennessee Investment Services Trust For?
People who want to protect their assets from future creditors can use a TIST to protect those assets and make them unreachable for creditor claims that arise a certain period of time after the trust is established. A TIST is what’s called a “self-settled” trust, meaning that the person who creates the trust and who deposits the assets into the trust relinquishes ownership of those assets (but not necessarily control of them.) Self-Settled trusts are also sometimes called Spendthrift trusts. They’re created so that the funds legally are no longer owned by the grantor (they are owned by this trust) and so creditors cannot access those funds to settle debts.
What Can I Put in a TIST?
People can put many types of assets into a Tennessee Investment Services Trust (TIST); for example, real estate, business assets, personal property, and securities are all eligible. Once the assets have been in the TIST for the required period of time, creditors cannot claim them or access them in a judgment against the TIST beneficiary.
How Long Must Assets Be in a TIST before They are Fully Protected From Creditors?
Assets put in a TIST will not be fully protected until the TIST is in place for 18 months. That period can be shortened in certain circumstances to as few as 6 months if the creditor is put on actual notice of the assets being put into the TIST. The sooner the TIST is put in place, the better off the Grantor (person putting assets into the TIST) will be, because this 18-month clock starts ticking on the date the TIST is created.
What are the Limitations of the TIST?
- This TIST is an irrevocable trust, which means the language of the trust cannot be changed, and the Grantor can never have these assets in his or her name again. The Grantor can, however, continue to get distributions from the assets and control the investments and interests of the assets.
- The TIST cannot protect a person from child support or alimony obligations.
- Fraudulent transfers will not be protected from creditors. Fraudulent transfers are when a person puts assets in the trust knowing they are trying to avoid a particular debt that is already in place or that they plan to put in place and avoid in the future.
- It’s only effective for debts that have not yet been created, or in the situation where the debt existed before the TIST is created, there’s an 18 month period where the assets will be vulnerable to claims of creditors (or 6 months in the event the creditor is put on notice that the TIST has been put in place.)
- The assets inside the TIST will still likely be part of the grantor’s taxable estate, so the TIST is not a vehicle for lowering estate taxes.
- Successor trustees cannot be related to the grantor and must not be under the grantor’s control.
- Bankruptcy claims can look back for up to 10 years, and the TIST will not protect assets subject to bankruptcy court claims.
- At least one of the trustees must be a resident of Tennessee and must materially participate in the administration of the TIST.
Who Can Create a TIST?
In 2021, the Tennessee legislature made several changes to the statutes as they related to TISTs. One of them was defining very clearly who can create a TIST. As of June 2021, a TIST may be created by individuals, LLCs, corporations and joint ventures to a business trust, estate, or any other commercial enterprise. This means that a business can place assets in a TIST, and any creditor that extends credit to that business 18 months later or further into the future will not be able to file a claim against those assets in the TIST. The same goes for individuals.
Will I Lose Control of the Assets in the TIST?
The TIST is an irrevocable trust, which means you can’t cancel it later, change the terms inside it, or take title back to those assets or put them in another name. However, as the beneficiary of the TIST, you still maintain much of the benefit of ownership of those assets. For example, you can still enjoy:
- The right to control the investment decisions related to those assets,
- The power to decide how the assets will be distributed to your beneficiaries after your death,
- The right to receive distributions from the trust; for example, interest and principal at the trustee’s discretion,
- Each year, you are entitled to 5% of either the trust’s initial value, or the trust’s value as determined annually by the trust’s provisions,
- The power to veto proposed distributions to other trust beneficiaries, and
- The right to remove a trustee and appoint a successor trustee.
Who Can Help Create a TIST?
Generally speaking, a TIST should be put together with an Estate Planning Attorney who is licensed in Tennessee. Leigh Cowden PLLC is a law firm that works in Estate Planning and Business Law, specifically working with clients in asset management and protection. If you believe a TIST might be a good part of your estate plan, you are invited to contact us to have a conversation about it. A TIST is usually part of a comprehensive estate plan for individuals, couples, and businesses and requires a good team of professionals to ensure it’s done correctly. We are available at (865) 233-3353 or via our INTAKE FORM on our website at www.LeighCowdenPLLC.com.