You want your assets far out of the reach of third parties to be left for your loved ones and other beneficiaries.
For two hundred years, an incredibly popular type of fortification in Europe was the Motte and Bailey Castle. These castles were basic in design and successfully kept attackers at bay. Think of asset protection in such a way. You want your assets far out of the reach of third parties to be left for your loved ones and other beneficiaries. Common asset protection techniques include naming a spouse or child as the beneficiary for various assets, such as life insurance or retirement accounts, creating a limited liability company or corporation, purchasing additional insurance of various types, and establishing a Tennessee Investment Services Trust (TIST).
The TIST is a self-settled trust that permits its maker some control over assets transferred to the TIST. Before the 2007 law, an individual could not create a trust to protect assets from his or her creditors and still control those assets. In order to create a valid TIST, great care must be taken to follow statutory requirements, among them:
· Drafted as an irrevocable trust governed by Tennessee law;
· Requiring a portion of trust assets must be administered in Tennessee;
· Inclusion of a spendthrift clause;
· Have as its trustee a Tennessee resident, or a corporate trustee authorized under Tennessee law; and
· The Transferor of the TIST executes an affidavit stating that: (a) it has the right to transfer assets to the TIST; (b) such transfer will not render it insolvent; (c) such transfer is not made in contemplation of defrauding a creditor or filing for relief under the federal bankruptcy code; (d) there are no pending or threatened court actions, or administrative proceedings, against it; and (f) that any assets transferred to the TIST were not derived from unlawful activities.
Any such lawsuit, pending or threatened, or administrative hearing must be identified on an attachment affixed to the affidavit. As you can see, if a lawsuit has already been filed against you, then it is too late.
Once two years (or ten years, for certain types of bankruptcy cases) have passed from the date of the transfer of any assets to the TIST, those assets can never be seized by creditors seeking to satisfy claims against the party making the trust. Having said that, TISTs do not protect against certain creditors or judgments, such as those for past due child support or spousal support, or agreements regarding the division of marital assets in a divorce proceeding. It is quite common for certain clients to create TISTs prior to marriage, in lieu of entering into a prenuptial agreement.
The maker of the trust retains a great deal of control over the trust assets, even though he or she cannot serve as trustee. Some of those rights include the authority to veto distributions proposed by the trustee; the right to manage trust assets as the trust’s Investment Adviser; and the right to remove and replace any then-serving trustee. Any such substitute trustee cannot be “related or subordinate” to the creator(s) of the TIST.
The TIST is a special solution for those who want to control and make use of their assets while ensuring their eventual and permanent protection from unknown and future creditors.
Get in touch
We know that finding the right attorney to represent you is a choice not to be taken lightly. That’s why we offer free consultations to walk you through your needs, the scope of your goals, and your budget.