As of July 1, 2014, Mississippi became the fifteenth state to allow the creation of a “self-settled asset protection trust.” The full text of the legislation may be found in Mississippi House Bill 846, the “Mississippi Qualified Disposition in Trust Act,” signed by Mississippi Governor Bryant on April 23, 2014. The legislation was effective July 1, 2014 and is codified as Sections 91-9-701 et seq. of the Mississippi Code of 1972. The Mississippi Qualified Disposition in Trust Act (“MQDTA”) is modeled after the Delaware Qualified Disposition in Trust Act and Tennessee Investment Services Trust Act.
MQDTA requires that a “qualified disposition” in trust be made pursuant to an irrevocable, written trust instrument that incorporates Mississippi law with respect to the validity, construction and administration of the trust. The trust instrument must contain a “spendthrift” provision that provides that the interest of the transferor or other beneficiary in trust property or income may not be transferred, assigned, pledged or mortgaged, voluntarily or involuntarily, prior to the distribution of trust property or income to the beneficiary. In addition, the transfer of property to the trust must not violate the Mississippi Uniform Fraudulent Transfer Act.
To comply with MQDTA, the trust requires a “qualified trustee.” In the case of a natural person, the qualified trustee must be a Mississippi resident. For a trustee other than a natural person, the trustee must be authorized by Mississippi law to act as a trustee and be subject to supervision by the Mississippi Department of Banking and Consumer Finance, Federal Deposit Insurance Corporation, Comptroller of the Currency or Office of Thrift Supervision. The qualified trustee may not be the transferor and must maintain or arrange for some or all of the property subject to the “qualified disposition” to remain in Mississippi, maintain records for the trust, prepare or arrange preparation of income tax returns for the trust and otherwise materially participate in the administration of the trust.
A “qualified disposition” under MQDTA is a disposition from a transferor to a qualified trustee by means of a qualified disposition trust after the transferor executes a “qualified affidavit.” The qualified affidavit must state the transferor has full right, title and authority to transfer assets to the trust; the transfer of assets to the trust will not render the transferor insolvent; the transferor does not intend to defend creditors; the transferor has no pending or threatened court actions except those identified on an attachment to the affidavit; the transferor is not involved in any administrative proceedings except those identified on an attachment to the affidavit; the transferor does not anticipate filing for bankruptcy; the transferred assets do not derive from illegal activities; and, the transferor is the named insured of a general liability insurance policy and, if applicable, of a professional liability insurance policy, with a limit of at least $1,000,000 for each respective policy.
MQDTA contains exceptions for court-ordered support or alimony of the transferor’s spouse, former spouse or children, or a division or distribution of property to the transferor’s spouse or former spouse; any person suffering death, personal injury or property damage prior to the qualified disposition; the State of Mississippi or any of its subdivisions; and any creditor, in an amount not to exceed $1,500,000, if the transferor failed to maintain liability insurance.
The transferor is allowed to retain certain powers and rights, but only those conferred by the qualified disposition trust. The conferred powers and rights are personal and may not be exercised by a creditor or any other person.
MQDTA provides that no action may be brought for attachment against property subject to a qualified disposition, or to avoid a qualified disposition unless the action is brought pursuant to the Mississippi Uniform Fraudulent Transfer Act. For claims after a qualified disposition, the creditor must show actual intent to defraud the creditor. A creditor claim is extinguished for a creditor existing at the time of a qualified disposition unless a claim is commenced within the later of 2 years after a qualified disposition, or 6 months after the person discovers or reasonably should have discovered the qualified disposition. For creditors existing after a qualified disposition, an action must be commenced within 2 years after the qualified disposition.