By: Eric R. Kaplan, Esq.
A “self-settled spendthrift trust” is a trust created by an individual (the “settlor”), who then transfers assets to a third-party trustee, with such transferred assets held by the trustee (who retains legal ownership over the assets) for the benefit of the settlor and other individuals (who retain beneficial ownership over the assets). The weight of authority is that self-settled spendthrift trusts are indeed valid trusts; however, depending on the applicable law, they may or may not afford protection against the settlor’s creditors. Currently, 19 states statutorily recognize the validity of the self-settled spendthrift trust. Tennessee’s self-settled spendthrift trust legislation, more commonly known as the “Tennessee Investment Services Act” has been in effect since July 1, 2007.
On May 12, 2021, Governor Bill Lee signed into law House Bill No. 1186 (hereinafter referred to as the “Act”), which amended and strengthened the Tennessee Investment Services Act and the Tennessee Uniform Trust Code. Effective July 1, 2021, the Act favorably amends Tennessee’s trust laws, which should raise Tennessee’s rankings among the 19 states that currently have similar types of legislation.
First, the Act generously expands Tennessee’s prior 90-year maximum trust period to allow for 360-year dynasty trusts (i.e., long-term trusts created to pass wealth from generation to generation without incurring transfer taxes for as long as assets remain in the trust).
The next issue pertains to Tennessee’s law governing the immunity from claims of creditors of property owned by spouses. The law currently provides that property owned by spouses as tenants by the entirety
 that is subsequently conveyed from the spouses to a trust loses such joint ownership classification. The Act revises this particular law to provide that after a conveyance from spouses to a trust, the property will thereafter remain as property owned by the spouses as tenants by the entirety.  This revision to Tennessee’s classification of tenancy by the entirety is extremely beneficial for a debtor-spouse as a creditor of one spouse may not attempt to seize upon property owned in a tenancy by the entirety.
Next, current law requires a transferor of assets to a Tennessee asset protection trust to execute a “qualified affidavit,” which means that the transferor must sign a sworn affidavit before transferring assets into a trust.
 The qualified affidavit is required to state that: (a) the transferor has full right, title and authority to transfer the assets to the trust; (b) the transfer of assets to the trust will not render the transferor insolvent; (c) the transferor does not intend to defraud a creditor by transferring the assets to the trust; (d) the transferor does not have any pending or threatened court actions against the transferor, except for those court actions identified by the transferor on an attachment to the affidavit; (e) the transferor is not involved in any administrative proceedings, except for those administrative proceedings identified on an attachment to the affidavit; (f) the transferor does not contemplate filing for relief under the federal bankruptcy code; and (g) the assets being transferred to the trust were not derived from unlawful activities. 
The Act removes the strict requirement that a qualified affidavit be signed by the transferor with respect to each transfer. Further, the Act inserts a new provision whereby a transferor’s execution of a qualified affidavit “creates a rebuttable presumption that the assets disclosed in the affidavit were transferred to the trust on the date of execution of the affidavit. The transferor bears the burden of proving by a preponderance of the evidence the date of transfer of any asset that is not listed on a qualified affidavit.”
Another debtor-friendly provision inserted by the Act includes that the statute of limitations period for a creditor’s claim against a transferor must be made within the later of “eighteen (18) months after the qualified disposition is made or six (6) months after the person discovers or reasonably should have discovered the qualified disposition.”
 This 18 month period reduces the current creditor claim period of two years. When it becomes effective, Tennessee’s 18 month period ties Ohio as the state with the shortest statute of limitations period with respect to potential future creditors of a transferor.
Finally, the Act amends some of Tennessee’s decanting statutes in the Tennessee Uniform Trust Code. As a brief review, “decanting” is the process of transferring the assets of one irrevocable trust into a second irrevocable trust with more beneficial terms and provisions. After the settlor’s death, the Act authorizes trustees to accelerate the beneficial interest of a future beneficiary.
 This means that the trustee has the discretion to make a future beneficiary (meaning a beneficiary who is not currently eligible to receive distributions at the current time) eligible to receive distributions of income or principal at a date earlier than the date upon which the beneficiary would otherwise be eligible to receive distributions from the trust.
Overall, the Act enhances Tennessee’s trust laws and should make this a more favorable jurisdiction for asset-preservation minded individuals to consider settling a Tennessee self-settled spendthrift trust.
 Tennessee Code Annotated Section 35-15-409(1).
 Although the definition of a tenancy by the entirety varies from state to state, some features are more or less constant. Tenancy by the entirety is a form of joint ownership similar to a joint tenancy with right of survivorship, but can exist only between spouses as tenants. Upon the death of either spouse, the deceased spouse’s interest is automatically transferred to and becomes vested wholly in the surviving spouse, by operation of law. During the life of both spouses, they as a unit have the right to the current use and enjoyment of the property.
 Tennessee Code Annotated Section 35-15-510(i).
 Id. at 35-16-102(11).
 Id. at 35-16-103.
 Id. at 35-16-104(c).
 Id. at 35-16-104(b)(1).
 Id. at 35-15-816(c)(2).