Side-by-side comparison of dynasty trust laws
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Get Personalized Results →| Criteria | Delaware | Tennessee |
|---|---|---|
Dynasty Duration How long can a trust last in this jurisdiction? States that have abolished the Rule Against Perpetui... | 100 Perpetual Higher | 84 360 years |
State Income Tax Does the state impose income tax on trust income? States with no income tax or favorable trust taxat... | 85 No tax with conditions | 100 No state income tax Higher |
Asset Protection How strong are the state's Domestic Asset Protection Trust (DAPT) laws? Key factors include statute ... | 88 Strong DAPT with 4-year statute of limitations Higher | 78 DAPT with 4-year statute of limitations |
Directed Trust & Trust Protector Does the state have robust statutes for directed trusts (separating investment and distribution duti... | 100 Most comprehensive directed trust statutes in the US Higher | 95 Comprehensive Uniform Directed Trust Act (2020) |
Decanting Flexibility How easily can trust terms be modified through decanting? Broader decanting powers allow for greater... | 95 Broad decanting powers with 60-day notice Higher | 92 Full Uniform Trust Decanting Act (2016) |
Delaware abolished the Rule Against Perpetuities for interests in trust property effective July 1, 1995. Trusts can continue indefinitely with no durational limit, making Delaware one of the premier dynasty trust jurisdictions.
Tennessee modified (but did not abolish) the Rule Against Perpetuities in 2007, extending the permissible trust duration to 360 years. While substantial, this is shorter than perpetual jurisdictions like South Dakota, Nevada, and Delaware.
Delaware does not tax trust income if: (1) all current beneficiaries are non-Delaware residents, (2) there is no Delaware-source income, and (3) trustee location alone does not create tax nexus. Delaware statutory trustees/directed trustees do not create income tax liability by themselves.
Tennessee fully repealed the Hall Income Tax effective January 1, 2021. Tennessee now has no state income tax on trust income, interest, dividends, or capital gains. This makes Tennessee equivalent to other no-income-tax states for trust purposes.
Delaware's DAPT statute requires creditors to prove fraudulent transfer by 'clear and convincing evidence' - a higher standard than typical civil cases. The 4-year statute of limitations (or 1 year from discovery, whichever is later) provides strong protection after seasoning.
Tennessee has DAPT legislation through the Tennessee Investment Services Trust Act. The statute of limitations is 4 years from transfer or 1 year from discovery, whichever is later. Tennessee's DAPT statute is newer than South Dakota or Alaska with less established case law.
Delaware is widely recognized as having the most sophisticated directed trust statute in the nation. The statute allows complete separation of administrative, investment, and distribution functions with explicit liability protection. Trust protectors can be granted broad powers and are not fiduciaries unless the trust instrument provides otherwise.
Tennessee adopted the Uniform Directed Trust Act effective July 1, 2020, providing comprehensive, modern directed trust and trust protector provisions. The statute allows separation of trustee duties with explicit liability protection for directed trustees following proper directions.
Delaware's decanting statute is one of the most permissive in the nation. Trustees with discretionary distribution authority can decant to new trusts with modified terms, extend trust duration (perpetual in Delaware), and change situs. No court approval required.
Tennessee adopted the full Uniform Trust Decanting Act effective July 1, 2016. The statute provides broad powers to modify beneficial interests, extend trust terms, change situs, and update administrative provisions. No court approval generally required.
Delaware is clearly better. It has superior case law and no tort exception weakness. Tennessee only wins if you have strong local ties.
You need sophisticated case law and expect your trust to face legal challenges.
You have Tennessee connections and tax savings (not asset protection) is your only goal.
If you're comparing these two, you're probably looking for tax efficiency. But Delaware's income tax trap is real. Consider SD or NV instead.