By Derek Church, President & COO, Pendleton Square Trust Company, LLC
Tennessee’s reputation as a trust friendly jurisdiction is getting out. With the complete elimination of the Hall income tax at the end of 2020 and with annual trust code updates signed into law by Governor Bill Lee on May 12, 2021, the state of Tennessee continues to gain notice as a top jurisdiction for estate planners. More and more, estate planning attorneys and advisors across the country, and even overseas, are looking to jurisdictions such as Tennessee as a situs for maintaining wealth. This is good news for our state.
Families and their advisors often choose a jurisdiction to situs “or locate” family wealth based on a few significant factors, including:
1. A trust code that allows for flexibility, longevity, asset protection and privacy.
2. A stable and expert judiciary to interpret and enforce trust laws.
3. Thoughtful and proactive executive and legislative branches of government interested in business-friendly regulation and economic development.
4. A deep and robust ecosystem of professional advisors to effectuate estate plans.
5. A diversified economy and low tax environment.
Tennessee hits the mark in all these categories.
Our trust code continues to be highly ranked in national surveys that are often focused on dynasty trusts—360 years in Tennessee—asset protection and taxation. In addition, it is quickly becoming a destination for directed trust structures, where a corporate trustee handles the administrative functions of the trust while the family’s investment advisor manages the trust assets. Tennessee’s trust laws are flexible enough to accommodate such structures without court involvement, using tools in the trust code such as decanting, a non-judicial settlement agreement or a non-judicial modification.
Tennessee’s system of government facilitates growth in the trust industry, and its judiciary is well-respected and independent. It has a long tradition of chancery courts and well-established probate courts, resulting in well-researched and reasoned decisions in areas such as trusts and estates. Executive administrations and legislatures over the past two decades have been very supportive, promoting a friendly regulatory environment and helping pass legislation advocated by the industry. All this in a state that is financially secure, continually receiving AAA bond ratings from all three major credit rating agencies.
There is also a wide network of professional advisors across the state who are available to service the wealth that is located here. Law firms and investment firms attract talent from the state’s many universities as well as out-of-state talent drawn to Tennessee by its relatively low cost of living, low taxes (including no personal or trust income tax), rich culture and history, central geographic location and favorable climate.
While Tennessee currently has the traits of a great situs for family wealth, the TBA’s Trust Committee is doing its part to ensure the trust code component remains competitive. Each year, the Trust Committee meets to review the state’s trust laws and propose changes. This Committee is made of representatives from Tennessee’s trust companies and banks as well as private practice estate planning lawyers. Its proposals have consistently found legislative success, most recently in May. That legislation made several improvements to the trust code, including to the asset protection trust and decanting statutes, by adding a registration option for domestic and international trusts, confirming the use of electronic signatures in trust-related documents, and others. The Committee has already met to discuss legislation for 2022 and offered several good ideas.
The state’s unique characteristics and efforts by the TBA have clearly had success in drawing new trust business to the state, especially over the last decade. In 2010, there were just nine state-chartered trust companies managing about $12 billion in assets. As of June 2020, the number grew to 16 trust companies managing over $55 billion in assets. These companies, and their partners in the banking, legal and investment communities, are more and more serving not just clients in Tennessee and the Southeast, but also the rest of the country and even globally. The trust industry and its efforts to improve and market our state are clearly having a positive impact on the Tennessee economy that cannot be overstated.
Derek Church is president & COO of Pendleton Square Trust Company, LLC, a Tennessee state-chartered independent trust company. Church is also the current chairman of the TBA’s Trust Committee. He can be reached at firstname.lastname@example.org.
TBA’s Trust and Wealth Management Conference will take place in Nashville at the TBA Barrettt Training Center on Oct. 14 & 15. Register now at TNBankers.org/trust.