Tennessee Emerges as a New and Important Trust State

When we think of trust-friendly states, the first ones that typically come to mind are South Dakota, Delaware, or even Nevada.

But there’s another state emerging as one of the top few states for trust formation and services: TENNESSEE.

In the past, states like Tennessee stipulated that a trustee could only administer the trust as it was written, with courts being the only recourse for change.

However, exciting newer laws have empowered trustees based on Tennessee with far greater flexibility and advantages in trust administration.

As you’re about to discover, these shifts put Tennessee firmly in the top few trust states.

Which means that if you’re an advisor looking to partner with a trust company in a win-win relationship, Tennessee could be the most ideal state for your clients’ trust needs.

Why Tennessee Matters for Advisors

Adding high-level trust and estate management services to your suite of client offerings is one of the best ways to increase your AUM, for several reasons:

  1. Nearly 3 out of 4 affluent investors use trusts.  And with at least $10 trillion in NEW assets flowing into trusts by 2025, you want to be prepared to capture more of this wealth.

  1. The ability to maintain your asset custodian of choice (through a trust advisory role) can help formalize your involvement with the client—and thereby extend your relationship for decades, or even beyond death.

Bottom line: if you believe you’re the best person to serve your client, then you want to be the one helping them in this critical area.

Unfortunately, most advisors begin getting interested in trust services AFTER a client passes away and they lose the account. Or worse, they wait until a big bank steals away a client or interferes with the client relationship in some way.

But why wait to address these potential issues?

Of course, all advisors are busy, yet so many nightmares for clients could be avoided by being more proactive about trust management and estate planning. All this points to the need for partnership with the right firm/team in the most trust friendly possible state.

And for many, Tennessee makes the most sense.

Reasons Why Tennessee Is
Emerging as a New Leader

Tennessee brings a host of new advantages to advisors looking maximize trust service offerings and benefits for their clients. These include:

Formation/Modification Advantages

The Uniform Trust Code, which improves the efficiency and ease by which trusts can be formed in Tennessee. Situations that formerly required courts to resolve can now be resolved by two beneficiaries coming to an agreement.

Multi-Participant Trust legislation greatly assists the trust management process, by encouraging the use of trust advisors and trust protectors. Thanks to this piece of legislation, the top advisors of the creator of the trust can be involved in the trust management.

Tax Advantages/Community Property Trust Benefits

Tennessee trusts avoid state income tax on retained interest and capital gains — thanks to legislation stating that beneficiaries of Tennessee trusts are not subject to tax on dividends and interest.

Tennessee Community Property Trusts enable spouses to transfer highly appreciated property into a trust.  Once transferred, the assets become community property – which includes equal ownership of property and the sharing of appreciation and income. When the first spouse dies, the asset basis is fully stepped up.  This can save a tremendous amount of money by avoiding capital gains, especially after the death of one spouse.

Domestic Asset Protection Trusts

This permits the creation of “self-settled” asset protection trusts (“APTs”), which are designed to protect client assets from creditors. Out-of-state residents can select Tennessee as the jurisdiction for their APTs. APTs are irrevocable, however, certain rights and privileges (such as receiving distributions) can be retained by the grantor.

Ultimately, what this means is the most favorable asset protection (creditor is barred from reaching the assets within the later of two years after transfer or six months after the creditor knows or reasonably knows of the transfer)  

Further Advantages

Like other top trust states, Tennessee offers the flexibility to structure a dynasty trust as long as 360 years.

There is also a “decanting statute” that allows a trustee to make changes to the trust as warranted such as change of situs.

And finally, Tennessee offers flexibility in choosing non fiduciary advisors such as investment manager, distribution advisor, trust protector.  

It’s for all these reasons and more—renowned lawyer Steve Oshins ranked Tennessee among the top three in the nation, in order of best laws and advantages.

Why Picking the Right Tennessee
Partner Is So Essential  

With the Tennessee increasingly becoming a “hot” state for trust services and formation, there are an increasing number of options for potential partners. Here are some questions that can help guide your search:

  1. Does the company view this as a long-term relationship and you as a partner? You want to work with a partner who sees this as more than a mere financial transaction, and rather, as a long-term relationship where you work together to serve the client’s best interests.

  1. Does your prospective trust partner specialize in the unique advantages that Tennessee now delivers? Because this is a changing landscape, you want a partner who is privy to every possible advantage and benefit that Tennessee offers. What you learned here is only the start.

  1. Do they allow you to “private label” the trust services, and more easily maintain ownership of the client relationship? Because the trust company legally owns the account, you want to make sure to make sure that you as the advisor maintains ownership of the client. This is critical to keeping your clients long term and the family across generations.

These are just a few of the considerations that led us to discover one of the top new Tennessee-based trust firms available today.


Counsel Trust - the Leader in
Tennessee Trust Services

Counsel Trust was founded in 2002 to provide trust services as a compliment offered to the investment management offered by ECA Investment Group. By 2016, ECA merged into Counsel Trust and now oversees about $1.6 billion in total assets.

As the firm’s directed trust services began getting traction, it became clear that Pennsylvania’s ‘delegated trust’ laws were not suited to Counsel’s new business plan.

It was also evident that just a handful of states were offering the most updated, flexible and advanced trust statutes. And upon deeper research, it became increasingly evident that of all the states, Tennessee offered the ‘best in class’ laws and regulations of the group of trust friendly ‘directed trust’ states.  

The Counsel team also recognized that the Tennessee trust regulators (Tennessee Department of Financial Institutions or TDFI) was — in addition to being very thorough and careful with granting charters — quite business friendly.

This past August, the company opened a new office in Nashville, Tennessee, after converting its trust charter from Pennsylvania to Tennessee, one of the few “trust-friendly” states in America.

Counsel offers directed trust administration services, powered by SEI’s trust back office accounting system. They also work directly with advisory firms to provide private label trust services, with stellar levels of support and guidance.

They are rapidly emerging leader in Tennessee-chartered trust services.

It’s a much deeper dive into every possible benefit of Tennessee trust formation, from several of the greatest experts in this exciting new niche.

Edward S. Crooks and his son, Brandon E. Crooks — the current CEO of Counsel Trust — will be present with Steve as they help you get ready to take advantage of Tennessee’s trust-friendly laws and statutes.

If you’re at all curious about leveraging Tennessee for future trusts, or just in getting started offering trust services in general — no stone will be left unturned. You’ll even be able to expert the expert hosts anything about Tennessee trust formation or services.

 

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