Estate planning rules in Tennessee
Key takeaway
Tennessee's Uniform Trust Code applies to charitable and noncharitable express trusts and to certain trusts created by statute, judgment, or a decree. Tennessee's common law of trusts and principles of equity supplement the Tennessee Uniform Trust Code except where the code or another Tennessee statute modifies them.
Trust creation and terms
Tennessee trust terms generally prevail over the Uniform Trust Code. Tennessee exceptions include the conditions for creating a trust and the trustee's duty to act in accordance with the trust's purposes.
Tennessee applies the capacity standard for making a will to creating, amending, revoking or funding a revocable trust and directing its trustee.
Trustee duties and compensation
Tennessee imposes a duty of impartiality on a trustee managing a trust with two or more beneficiaries. Tennessee applies that duty to investing, managing and distributing trust property, with due regard to each beneficiary's interests.
Tennessee imposes a duty to use special skills or expertise on trustees who possess them or were named in reliance on claimed expertise.
Tennessee subjects broad trustee discretion to good faith and consistency with trust terms, purposes and beneficiaries' interests. Tennessee applies that standard even to discretion described as absolute, sole or uncontrolled.
Tennessee trustee compensation factors include trust size, assets, income, time and expertise. Tennessee compensation factors also include management of real property or closely held businesses and involvement in litigation.
Tennessee presumes a corporate trustee's published fee schedule reasonable unless the trust terms provide otherwise, subject to the court's authority over compensation.
Trust administration and representation
Tennessee permits a trustee to combine or divide trusts after notice to qualified beneficiaries, conditioned on beneficiaries' rights remaining unimpaired and trust purposes remaining unaffected adversely.
Tennessee bars delegation to a cotrustee of a function the settlor reasonably expected the trustees to perform jointly. Tennessee permits revocation of a revocable delegation.
Tennessee permits a person with a substantially identical interest to represent and bind a minor, incapacitated, unborn or unknown person if no conflict of interest exists.
Tennessee permits the holder of a general testamentary power of appointment to represent and bind permissible appointees and takers in default, provided no conflict of interest exists.
Tennessee permits a beneficiary to waive trustee reports or information. Tennessee permits withdrawal of that waiver for future reports.
Beneficiary interests and distributions
Tennessee defines a spendthrift provision as a trust term restraining voluntary and involuntary transfers of a beneficiary's interest.
Tennessee permits a court to allow a creditor or assignee to reach present or future distributions when a beneficiary's interest lacks a spendthrift provision. Tennessee permits attachment or other means, with relief limited as appropriate.
Tennessee permits a beneficiary's creditor to reach a mandatory distribution unpaid within a reasonable time after its distribution date, even with a spendthrift provision.
Tennessee permits trustees to distribute divided or undivided interests and allocate assets disproportionately upon distribution, division or termination.
Tennessee permits a trustee to make loans from trust property.
Tennessee passes a failed residuary devisee's share to the other residuary devisees in proportion to their respective interests in the remaining residue.
Thresholds and rates change. Check the state's own current figures.
Common questions
How does Tennessee address valuation during trust distributions?
Tennessee's Uniform Trust Code permits a trustee, upon distribution, division or termination, to value trust property and make adjustments for differences in property valuation and income tax basis among the assets.
What terms apply to a Tennessee trust loan to a beneficiary?
Tennessee permits a trust loan to a beneficiary on terms the trustee regards as fair and reasonable, with a lien on the beneficiary's future distributions from the trust for repayment of the loan.