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Tennessee is a leader in progressive trust legislation and one of the top states to establish and maintain a trust.*

Pendleton Square can serve as trustee of your trusts to take advantage of these laws even if you are not a Tennessee resident.

Tax Friendly Environment and Trust Strategies in Tennessee

  • No state estate or inheritance tax
  • No state income tax or capital gains tax on non-residents; and no state income tax for residents beginning in January 1, 2021 (no capital gains tax now)
  • Community Property Trust is a special joint trust for married couples only.  100% step up in basis at the death of the first spouse.  A second 100% step up in basis at the second death.
  • Tennessee Incomplete-gift Non-Grantor Trust (“TING”) is an irrevocable trust established in Tennessee by an out-of-state resident from a state with an income tax and/or a capital gains tax.  The trust will still pay federal taxes but may avoid taxes at the state level.

Asset Protection

  • Tennessee has some of the strongest Spendthrift Trust language in the country. This allows a grantor to establish a trust for his or her heirs knowing that the funds are protected from “creditors and predators”.
  • The Tennessee Investment Services Trust (“TIST”) is among the best self-settled domestic asset protection trusts in the nation. Under the terms of this statute, a grantor can establish an irrevocable trust with asset protection for his or her own benefit.
  • Tenancy by the Entireties Trusts allow both resident and non-resident married couples to create a trust for credit protection for joint property during their lifetimes and continuing after the death of the first spouse.

Modification of Existing Irrevocable Trusts

  • If the grantor is still alive, nonjudicial modifications can be used.
  • After the death of the grantor, nonjudicial settlement agreements (NJSAs), executed by all the trust’s qualified beneficiaries, may also accomplish these goals.
  • Under the terms of the Tennessee statute, a Trustee can decant an existing trust into a new trust that can correct or address issues in the existing trust.

Progressive Trust Laws

  • Dynasty Trusts in Tennessee can last up to 360 years to allow your legacy to continue into multiple generations of your family.
  • Trusts that require mandatory distributions of income can be modified into total return trusts (Unitrusts) allowing broader investment options for the current income beneficiaries while thinking ahead to the remainder beneficiaries.
  • At the direction of a trust grantor, a trust can be designated a silent trust and withhold the trust document and statements to beneficiaries.
  • Tennessee has very strong language covering the liability of Excluded Fiduciaries (investment advisors, trust protectors, distribution committees, etc.) in Directed Trusts.
  • Tennessee allows for the creation of special purpose trusts (pet trusts, art collections, monument preservation, etc.)
  • The Tennessee legislature has passed legislation to improve its trust laws multiple times since 2001, and the executive branch of our government is proactively seeking opportunities to further improve its trust laws to attract more trust business to Tennessee.

*Source:  Oshins Trust State Rankings, 2018