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Key takeaways: Tennessee is one of a minority of states permitting a self-settled spendthrift trust, known as a Tennessee Investment Services Trust and created under the Tennessee Investment Services Act at Tenn. Code § 35-16-101 and following. It lets a settlor be a discretionary beneficiary of their own irrevocable trust while placing the assets beyond most future creditors. It requires a qualified Tennessee trustee, an irrevocable trust with a spendthrift clause, and a sworn solvency affidavit at each transfer. Existing creditors generally have a limited window, commonly two years, to bring a claim. It does not defeat child support, alimony, or certain pre-existing tort claims, and a transfer made to escape a known claim is a fraudulent transfer, not planning.
Why Tennessee is different
The traditional rule everywhere was simple: you cannot put your own assets in a trust, keep benefiting from them, and hide them from your creditors. A self-settled spendthrift trust was void against creditors, full stop.
Tennessee changed that. Under the Tennessee Investment Services Act, codified at Tenn. Code § 35-16-101 and following, a properly constituted trust can make the settlor a discretionary beneficiary while shielding the assets from most future creditors. That puts Tennessee in a small group of domestic asset protection states, and it is a genuine advantage for residents, and for non-residents willing to use a Tennessee trustee.
It is worth saying plainly what this is not. It is not a way to escape a creditor already at the door. Asset protection is something you do when nothing is wrong. Done in the shadow of a claim, it is a fraudulent transfer, it will be unwound, and it will make the underlying case considerably worse for you.
The statutory requirements
A TIST works only if it meets each requirement, and each of them is a genuine condition rather than a formality.
A qualified trustee. At least one trustee must be a Tennessee resident individual, or a bank or trust company authorised in Tennessee, and that trustee must maintain trust records and administer some part of the trust in the state.
Irrevocability and a spendthrift clause. The instrument must be irrevocable and must state expressly that the settlor’s interest is subject to a spendthrift provision.
A solvency affidavit. At the time of each qualified disposition the settlor swears that they have full right and authority to transfer the assets, that the transfer will not render them insolvent, that they do not intend to defraud any creditor, that there are no pending or threatened court actions against them other than those disclosed, and that the assets are not derived from unlawful activities. This affidavit is the backbone of the structure, and a careless one destroys it.
What the settlor may and may not keep
Tennessee permits the settlor to retain more than families expect. You may keep a discretionary interest, the power to veto a distribution, a testamentary special power of appointment, the right to receive income, and the ability to remove and replace a trustee.
What you cannot keep is the power to compel a distribution to yourself. The trustee’s discretion has to be genuine. A settlor who can demand the money has not really transferred anything, and a court will treat the arrangement accordingly.
That is the same trade described in our guidance on estate planning structures: protection is bought with control, and there is no version where you keep both.
The creditor window and its exceptions
The protection is not instantaneous. A creditor whose claim arose before the transfer generally has a limited period, commonly two years from the transfer, or six months from when the transfer was or reasonably could have been discovered, to attack it. A creditor whose claim arises after the transfer is in a materially weaker position.
Certain claims are excepted by statute and are not barred: child support, alimony, and claims for death, personal injury or property damage arising from an act of the settlor on or before the date of the transfer. This is deliberate. The legislature protected the planner, not the person trying to walk away from a specific obligation.
Who a TIST actually suits
The honest answer is that most families do not need one. A TIST is worth considering for physicians, surgeons and other professionals carrying persistent liability exposure; for business owners who personally guarantee obligations; for people entering a marriage with substantial separate property; and for those with concentrated wealth who want a structure in place long before anything goes wrong.
For a retired couple with a house and a retirement account, it is the wrong tool. Their protection comes from homestead rules, retirement account exemptions, adequate insurance and a well-drafted revocable trust. Recommending a TIST to them would be selling complexity.
Note too that a TIST is not a Medicaid planning tool by default. The two regimes ask different questions, and a trust built for creditor protection does not automatically satisfy the five-year look-back analysis described in our Medicaid crisis planning guidance. TennCare applies its own transfer rules and pursues estate recovery independently of anything a creditor could do. Where both goals matter, the trust has to be drafted for both from the start.
Frequently asked questions
Do I have to live in Tennessee to use a TIST?
No. Non-residents may create one, provided a qualified Tennessee trustee is appointed and the statutory requirements are met. Tennessee’s lack of a state income tax on most investment income adds to the appeal.
Does a TIST protect against a lawsuit I already know about?
No, and attempting it is counterproductive. The solvency affidavit requires disclosure of pending or threatened actions, and a transfer made to defeat a known claim is a fraudulent transfer.
Can I be my own trustee?
Not as the qualified trustee. You may serve as an investment advisor to the trust and retain certain powers, but a qualified Tennessee trustee must hold the trustee role.
How much does it take to be worth it?
There is no statutory minimum, but the ongoing trustee and compliance cost means it rarely makes sense below a substantial asset base. We will tell you when it does not.
Is this the same as an offshore trust?
No. A TIST is a domestic trust governed by Tennessee law and administered in Tennessee, without the reporting burden and scrutiny that accompany offshore structures. For most people it achieves the realistic goal at a fraction of the friction.
If you carry professional liability exposure and want to know whether a Tennessee trust is worth building, start a conversation while nothing is wrong. That is the only time this planning works.
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