Tennessee's Marital Asset Protection ('MAP') Trust

by Michael R. Crowder, Esq.

In Tennessee, when a married couple owns an asset together, they are presumed to own it as "tenants by the entirety." This type of ownership provides several advantages:

1. The asset automatically passes at the first spouse’s death to the surviving spouse, avoiding probate.
2. While both spouses live, there is creditor protection as an individual spouse's creditor cannot seize that spouse's interest in assets held as tenants by the entirety. The creditor of an individual spouse’s only remedy is to attach, which is to seize property to satisfy a judgment, that spouse’s survivorship interest in the asset. Only a creditor of both spouses may attach the asset while both spouses are living.

Tennessee Code Annotated § 35-15-510 enables married clients to transfer property to a joint trust—the Marital Asset Protection Trust (MAP Trust)—and obtain the same asset protection as property held as tenancy by the entirety. This was previously unavailable with the use of revocable trusts.

The MAP Trust protects any assets that a married couple owned as tenants by the entirety before they were transferred to the trust, if it meets the following requirements:

1. Must be revocable by either spouse acting alone or both spouses acting together;
2. Both spouses must be permissible current beneficiaries while living;
3. The trust instrument, deed, or instrument of conveyance must reference the statute as applying to the property and its proceeds.

Specifically, the statute provides that while the spouses are married, the trust assets “shall have the same immunity from the claims of their separate creditors as would exist if the husband and wife had continued to hold the property or its proceeds as tenants by the entirety.” This means that even if a creditor gets a judgement on one spouse, the creditor’s only remedy is to attach that spouse’s survivorship rights in his or her half of the trust. Note that this protection only applies while the parties are married and does not apply to their joint creditors. For example, if both spouses have signed a bank loan, the assets will not be exempt from that bank.

The benefit of a MAP Trust over traditional tenants by the entirety ownership is that upon the first spouse’s death, the assets in a MAP Trust can remain protected from creditors if left in the trust and if the surviving spouse does not have the power to unilaterally withdraw the assets from the trust. Without such a trust, the creditor protection provided by traditional tenants by the entirety ownership is lost at the first spouse’s death, leaving the surviving spouse more vulnerable to creditors.

If you have any questions about Tennessee’s MAP Trust, or estate planning in general, please contact us.