Side-by-side comparison of dynasty trust laws
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Get Personalized Results →| Criteria | South Dakota | 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... | 100 No state income tax | 100 No state income tax |
Asset Protection How strong are the state's Domestic Asset Protection Trust (DAPT) laws? Key factors include statute ... | 95 Strong DAPT with 2-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 Comprehensive directed trust and trust protector statutes 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 Higher | 92 Full Uniform Trust Decanting Act (2016) |
South Dakota abolished the Rule Against Perpetuities in 1983, allowing trusts to last indefinitely. South Dakota was one of the first states to abolish the RAP and remains a leader in dynasty trust planning.
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.
South Dakota's constitution prohibits a state income tax. This applies to all income including trust income, making it one of the most favorable states for accumulating wealth within a trust.
Tennessee fully repealed the Hall Income Tax effective January 1, 2021.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.
South Dakota enacted its Domestic Asset Protection Trust legislation in 1997. The statute features a 2-year statute of limitations for fraudulent transfer claims, one of the shortest in the nation. Self-settled spendthrift trusts are permitted.
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.
South Dakota is widely recognized as having the most comprehensive directed trust statutes in the nation. The state allows complete separation of investment and distribution responsibilities with explicit liability protection for directed trustees. Trust protector statutes are equally robust.
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.
South Dakota permits broad decanting with minimal court involvement. Trustees with discretionary distribution authority can decant to new trusts with modified terms, including changes to beneficial interests, administrative provisions, and trust protector powers.
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.
South Dakota wins clearly. Tennessee has a major weakness: the tort creditor exception destroys its asset protection. SD has no such hole.
You have Tennessee connections and asset protection genuinely isn't important to you.
You want actual asset protection, or you have no specific Tennessee ties.
Tennessee talks a good game but the tort exception is a dealbreaker for serious asset protection. If someone sues you for a car accident, your Tennessee trust won't help.