Hawaii has become the 13th state to allow an individual to set up a trust for his or her benefit which is protected from the individual’s creditors. Unlike Tennessee, Hawaii’s law has limits on how much you can transfer to the trust and what kind of assets you can place in the trust. In addition to these restrictions, anyone who establishes such a trust must pay a tax to the state equal to 1% of the assets transferred to the trust. Hawaii is the only state that charges a tax to establish such a trust.
Because of this tax, it is unlikely that anyone other than a resident of Hawaii would use a Hawaii trust rather than a trust in one of the other 12 states. Tennessee’s asset protection trust law compares very favorably to the other asset protection trust states. The Tennessee legislature made several improvements to our law this spring in order to keep our law at the forefront. Tennessee is still the only Southeastern state that permits self-settled asset protection trusts. See the enclosed map for the other states.