Official Summary Text
APPOINTMENT
OF PUBLIC TRUSTEE
If a person entitled to serve as trustee under an inter vivos or testamentary instrument dies, declines to serve, or resigns and (i) there is no individual or corporate successor or substitute trustee designated by the instrument who i
s willing and qualified to serve, (ii) the instrument does not contain provisions for the appointment of a successor or substitute and no adult income beneficiary or vested remainderman petitions for the appointment of a successor or substitute trustee wi
t
hin three months after there is a vacancy in office or all sooner waive this right, or (iii) the court, in its discretion, in a proceeding to modify or terminate an uneconomic trust determines that a small trust should not be terminated but a successor tr
u
stee should be appointed, then present law authorizes the court to appoint a public trustee who must be granted letters of trusteeship and immediately enter into the administration of the trust if the market value of the trust estate does not exceed $100,0
00. This bill revises this provision in the following ways:
Makes this provision also applicable to persons currently serving as trustees who die, decline to serve, or resign.
Removes the requirement that the market value of the trust estate does not exceed $100,000.
Revises (ii) above to, instead, provide that the instrument does not contain provisions for the appointment of a successor or substitute, or such provision is unable to be implemented, and the then-serving trustee does not, or an adult income beneficiary or vested remainderman do not, petition for the appointment of a successor or substitute trustee within three months after there is a vacancy in office or all sooner waive this right.
TENNESSEE UNIFORM TRUST CODE
Knowledge of Facts Involv
ing a Trust
Present law provides that an organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust
, or would have been brought to the employee's attention if the organization had exercised reasonable diligence. A person has knowledge of a fact if the person (i) has actual knowledge of it, (ii) has received a notice or notification of it, or (iii) fro
m
all the facts and circumstances known to the person at the time in question, has reason to know of it.
This bill adds that a person also has knowledge of a fact if the person has reason to know of it because the fact is accessible by the person throug
h electronic means, such person provided consent to receive information by electronic means in a record and such consent has not been revoked. Such information is deemed to be accessible by the person through electronic means if the information was avail
a
ble through electronic means for at least 60 days and if (i) the means of electronic access were provided in the record or (ii) it can be shown that the electronic access was actually utilized at any time.
Methods and Waiver of Notice
The Tennessee
Uniform Trust Code requires notice to a person, or the sending of a document to a person, to be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or document. Permissible methods of notice,
or for sending a document, include first-class mail, personal delivery, delivery to the person's last known place of residence or place of business, or a properly directed electronic message.
This bill adds, as an additional permissible method of notice,
providing the notice or document through electronic means when such person provided consent to receive information by electronic means in a record and such consent has not been revoked. A notice or document is deemed to be accessible by the person throu
g
h electronic means if the means of electronic access were provided in the record or it can be shown that the electronic access was actually utilized at any time.
Judicial Proceeding
Present law authorizes a person to commence a judicial proceeding to c
ontest the validity of a trust that was revocable immediately preceding the settlor's death within the earlier of the two years after the settlor's death or 120 days after the trustee sent the person a copy of the trust instrument and a notice informing t
h
e person of the trust's existence, the trustee's name and address, and the time allowed for commencing a proceeding to contest the validity of the trust. This bill removes this provision.
This bill, instead, authorizes a judicial proceeding to contest w
hether a revocable trust or any amendment thereto, or an irrevocable trust was validly created to be commenced at any time following its execution but prohibits it from being commenced later than the first to occur of the following dates:
Two years after the date of the settlor's death.
120 days after the date that the trustee notified in writing the person who is contesting the trust of the trust's existence, of the trustee's name and address, of whether such person is a beneficiary, and of the time allowed under this bill for commencing a proceeding to contest the validity of the trust. However, a trustee does not have any liability under the trust instrument or to any third party or otherwise for failure to provide any such written notice. For the purposes of this bill, notice has been given when sent to the person to whom notice was given. Absent evidence to the contrary, it is presumed that notice was received by the person seven days after it was sent to such person in accordance with present law.
The date the person's right to contest was precluded by adjudication, consent, or other limitation.
Representation
This bill authorizes notice, information, accountings, or reports given to a person who may represent and bind another person under the
representation provisions of the Tennessee Uniform Trust Code to serve as a substitute for, and have the same effect as, providing notice, information, accountings, or reports directly to the person being represented.
Requirements for Valid Lifetime Trus
t
Present law provides that a lifetime trust is valid as to any assets held by the trust to the extent the assets have been transferred to the trust. Assets capable of registration, such as real estate, stocks, bonds, bank and brokerage accounts, and th
e like, are transferred to the trust through the recording of the deed or the completion of registration of the asset in the name of the trust or trustee. Assets that are capable of registration are not transferred to the trust through only a recital of
a
ssignment, holding, or receipt in the trust instrument and assets not capable of registration, are transferred to the trust through a recital of assignment describing the asset with particularity in the trust instrument. This bill revises the last provis
i
on to, instead, provide that the recital of assignment must still describe the asset but not with particularity.
This bill adds that tangible personal property other than money, an evidence of indebtedness, a document of title, a security, and property u
sed in a trade or business may be assigned to a trust, either during the grantor's life or after the grantor's death, by delivery of a written instrument that is signed by the transferor, identifies the tangible personal property in general terms, and spe
c
ifically identifies the trust.
This bill provides that all of the above provisions apply to such tangible personal property that is owned when such written instrument is signed, and to property that is subsequently acquired by the transferor.
Reimbursement of Expenses
Present law provides that an advance of money for the protection of the trust, either by the trustee, trust advisor, or trust protector, or by a person named as a trustee without accepting the trusteeship, gives rise to a lien a
gainst trust property to secure reimbursement with reasonable interest. This bill does not require the advance to be for the protection of the trust.
Present law provides that a trustee, trust advisor, or trust protector is entitled to be reimbursed o
ut of the trust property, with interest as appropriate, for (i) expenses that were properly incurred in the administration of the trust; and (ii) to the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred i
n
the administration of the trust. This bill adds that failure to pay to or reimburse a trustee for expenses incurred pursuant to such provision gives rise to a lien against all trust property for the payment of all sums due or to become due for services,
expenses, advances, and the costs and expenses of enforcing such payment or reimbursement.
Duties and Powers of Trustee
Unless the terms of a trust instrument expressly provide that a settlor must not be reimbursed by a trust for the settlor's personal
income tax liability attributable to the trust, if the settlor of a trust is treated under federal law as the owner of all or part of the trust, then this bill provides that a disinterested trustee, in the disinterested trustee's sole discretion, or anot
h
er trustee at the direction of a trust advisor or trust protector who would be treated as a disinterested trustee and otherwise has the power to direct discretionary distributions under the trust instrument, may reimburse the settlor for any amount of the
settlor's personal federal, state, local, foreign, or other income tax liability that is attributable to the inclusion of the trust's income, capital gains, deductions, and credits in the calculation of the settlor's taxable income under principals of fed
e
ral law. The trustee may pay such amount to the settlor directly, or may pay the amount to an appropriate taxing authority on the settlor's behalf, as the trustee determines in the trustee's sole discretion. This power must, in all cases, be exercised i
n
the sole and absolute discretion of a disinterested trustee or trust advisor or protector who would be treated as a disinterested trustee, and a settlor or other person must not compel the exercise of this power or enter into an express or implied agreem
e
nt or understanding regarding the exercise of such power. A policy of insurance on the settlor's life held in the trust or the cash value of any such policy, or the proceeds of any loan secured by an interest in the policy must not be used to reimburse t
h
e settlor or to pay an appropriate taxing authority on the settlor's behalf. Neither the trustee's power to make payments to, or for the benefit of, the settlor under this bill, nor the trustee's decision to exercise such power in favor of the settlor, c
a
uses the settlor to be treated as a beneficiary of the trust for any purpose.
This bill clarifies that the above provisions do not apply if its application would disqualify a trust for, or reduce the amount of, a marital deduction, a charitable deduction
, or another specific tax benefit otherwise available to any person for state or federal income, gift, estate, or generation-skipping transfer tax purposes.
Breach of Trust
For present law provisions regarding limitations of actions for breach of trust
against a trustee, former trustee, trust advisor, or protector, this bill clarifies that a person is deemed to have actual knowledge of information that is accessible by the person through electronic means if the person provided consent to receive inform
a
tion by electronic means in a record and such consent has not been revoked. The information is deemed to be accessible by the person if the means of electronic access were provided in the record or it can be shown that the electronic access was actually
u
tilized at any time.
Electronic Records and Signatures
Present law provides that the Tennessee Uniform Trust Code governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or perfor
med with the use of such records or signatures, conform to the requirements of federal law, and supersede, modify, and limit the requirements of federal law. However, the execution of a modification, termination, or settlement agreement is considered a t
r
ansaction for purposes of determining if it falls within the scope of the Uniform Electronic Transactions Act. This bill adds that the execution of an inter vivos trust instrument, a document to transfer an asset to or from a trust, or a consent, release,
or ratification, is also considered such a transaction.
Trust Advisors as Fiduciaries
Present law provides that a trust advisor or trust protector, other than a beneficiary, is a fiduciary with respect to each power granted to such trust advisor or tr
ust protector. In exercising any power or refraining from exercising any power, a trust advisor or trust protector must act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. This bill revise
s
this provision to, instead, require a trust advisor or protector, who is acting as a fiduciary, to comply with such good faith requirements.
Present law provides that a trust advisor or trust protector is an excluded fiduciary with respect to each power
granted or reserved exclusively to any one or more other trustees, trust advisors, or trust protectors. This bill revises this provision to, instead, provide that a trust advisor or protector is an excluded fiduciary regardless of whether the trust advi
s
or or trust protector is serving in a fiduciary capacity.
This bill authorizes a trust advisor or trust protector to serve in a nonfiduciary capacity when specifically appointed in such capacity, and, when acting in such capacity, is liable only for acti
ng in bad faith or with reckless indifference.
ON MARCH 3, 2025, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 817, AS AMENDED.
AMENDMENT #1 makes the following changes:
Removes the provisions that authorized a judicial proceeding to contest whether a revocable trust or any amendment thereto, or an irrevocable trust was validly created at any time following its execution and, instead, keeps in place present law provisions authorizing a
person
to
commence a judicial proceeding to contest the validity of a trust that was revocable immediately preceding the settlor's
death.
For purposes of a
lifetime trust
being
valid as to any assets held by the trust to the extent the assets have been transferred to the trust
, revises the provision relative to tangible personal property being assigned to a trust by clarifying that (i)
such assignment is subject to revocation or amendment pursuant to a written instrument delivered by the transferor to the trustee, either during the transferor's life or following the transferor's death, including pursuant to the terms of the transferor's last will and testament
and (ii) that
i
f such revocation or amendment is not delivered to the trustee within six months of transferor's death, then the trustee may presume that such revocation or amendment does not exist.
With regard to a disinterested trustee's power to
direct discretionary distributions under the trust instrument
and to
reimburse the settlor for any amount of the settlor's personal federal, state, local, foreign, or other income tax liability that is attributable to the inclusion of the trust's income, capital gains, deductions, and credits in the calculation of the settlor's taxable income
, clarifies that (i) such power becomes exercisable on and after December 31, 2025, and applies to trusts existing before, on, and after such date; (ii) t
he person otherwise having
the
power to exercise
such
discretion may at any time renounce the power in writing and, unless otherwise limited, such renouncement applies permanently with respect to the trust as a whole, such that a person does not have this power with respect to the trust at any time after the renunciation
; and (iii) a
person is not liable for exercising or failing to exercise
such
power, or for exercising or failing to exercise the ability to renounce such power.
Current Bill Text
Read the full stored bill text
SENATE BILL 534
By Stevens
HOUSE BILL 817
By Garrett
HB0817
000657
- 1 -
AN ACT to amend Tennessee Code Annotated, Title 30
and Title 35, relative to trusts.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 30-1-404(b), is amended by deleting
the language "Should any person entitled to serve as trustee" and substituting "Should any
person entitled to serve or currently serving as trustee", and by deleting the language ",
provided that the then market value of the trust estate does not exceed one hundred thousand
dollars ($100,000)".
SECTION 2. Tennessee Code Annotated, Section 30-1-404(b)(2), is amended by
deleting the subdivision and substituting:
(2) The instrument does not contain provisions for the appointment of a
successor or substitute, or such provision is unable to be implemented, and the then-
serving trustee does not, or an adult income beneficiary or vested remainderman do not
petition for the appointment of a successor or substitute trustee within three (3) months
after there is a vacancy in office or all sooner waive this right; or
SECTION 3. Tennessee Code Annotated, Section 35-15-104(a), is amended by adding
the following new subdivision:
(4) Has reason to know of it because the fact is accessible by the person
through electronic means, such person provided consent to receive information by
electronic means in a record, as defined in § 47-10-102, and such consent has not been
revoked. Such information is deemed to be accessible by the person through electronic
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means if the information was available through electronic means for at least sixty (60)
days and if:
(A) The means of electronic access were provided in the record; or
(B) It can be shown that the electronic access was actually utilized at any
time.
SECTION 4. Tennessee Code Annotated, Section 35-15-109(a), is amended by
deleting the subsection and substituting:
(a)
(1) Notice to a person under this chapter or the sending of a document to
a person under this chapter must be accomplished in a manner reasonably
suitable under the circumstances and likely to result in receipt of the notice or
document.
(2) Permissible methods of notice or for sending a document include:
(A) First-class mail;
(B) Personal delivery;
(C) Delivery to the person's last known place of residence or
place of business;
(D) A properly directed electronic message; or
(E) Providing the notice or document through electronic means
when such person provided consent to receive information by electronic
means in a record, as defined in § 47-10-102, and such consent has not
been revoked. A notice or document is deemed to be accessible by the
person through electronic means if:
(i) The means of electronic access were provided in the
record; or
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(ii) It can be shown that the electronic access was actually
utilized at any time.
SECTION 5. Tennessee Code Annotated, Title 35, Chapter 15, Part 2, is amended by
adding the following as a new section:
35-15-206.
(a) A judicial proceeding to contest whether a revocable trust or any amendment
thereto, or an irrevocable trust was validly created may be commenced at any time
following its execution, but shall not be commenced later than the first to occur of:
(1) Two (2) years after the date of the settlor's death;
(2) One hundred twenty (120) days after the date that the trustee notified
in writing the person who is contesting the trust of the trust's existence, of the
trustee's name and address, of whether such person is a beneficiary, and of the
time allowed under this section for commencing a proceeding to contest the
validity of the trust. However, a trustee does not have any liability under the trust
instrument or to any third party or otherwise for failure to provide any such written
notice. For purposes of this subdivision (a)(2), notice has been given when sent
to the person to whom notice was given. Absent evidence to the contrary, it is
presumed that notice was received by the person seven (7) days after it was sent
to such person in accordance with § 35-15-109; or
(3) The date the person's right to contest was precluded by adjudication,
consent, or other limitation.
(b) In the event a trust or trust provision is adjudged to be invalid, or if a
distribution is adjudged to have been made in error, by the final judgment of a court
having jurisdiction, which judgment is subject to no further appeal, any beneficiary
having received an improper distribution shall, upon receipt of a copy of such order,
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return the improper distribution to the court. If the beneficiary fails to return the improper
distribution to the court, then the beneficiary is liable for costs, including reasonable
attorney fees, incurred to recover the improper distribution from the beneficiary.
SECTION 6. Tennessee Code Annotated, Section 35-15-817(h)(1), is amended by
deleting "§ 35-15-604" and substituting "§ 35-15-206".
SECTION 7. Tennessee Code Annotated, Section 35-15-301, is amended by adding
the following new subsection:
(e) Notice, information, accountings, or reports given to a person who may
represent and bind another person under this chapter may serve as a substitute for and
have the same effect as providing notice, information, accountings, or reports directly to
the person being represented.
SECTION 8. Tennessee Code Annotated, Section 35-15-402(d), is amended by
deleting the word "and" immediately following the semicolon at the end of subdivision (1), by
deleting the language "describing the asset with particularity in the trust instrument." from
subdivision (2) and substituting "describing the asset; and", and by adding the following new
subdivision:
(3) Tangible personal property other than money, an evidence of indebtedness,
a document of title, a security, and property used in a trade or business may be
assigned to a trust, either during the grantor's life or after the grantor's death, by delivery
of a written instrument that:
(A) Is signed by the transferor;
(B) Identifies the tangible personal property in general terms; and
(C) Specifically identifies the trust.
SECTION 9. Tennessee Code Annotated, Section 35-15-402, is amended by
designating subsection (d) as subdivision (d)(1) and adding the following as subdivision (d)(2):
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(2) Subdivision (d)(1) applies to such tangible personal property that is owned
when such written instrument is signed, and to property that is subsequently acquired by
the transferor.
SECTION 10. Tennessee Code Annotated, Section 35-15-604, is amended by deleting
subsections (a) and (c).
SECTION 11. Tennessee Code Annotated, Section 35-15-709(b), is amended by
deleting the subsection and substituting:
(b) An advance, either by the trustee, trust advisor, or trust protector or by a
person named in § 35-15-701(c)(1), of money gives rise to a lien against trust property to
secure reimbursement with reasonable interest. Failure to pay to or reimburse a trustee
for expenses incurred pursuant to subsection (a) gives rise to a lien against all trust
property for the payment of all sums due or to become due for services, expenses,
advances, and the costs and expenses of enforcing such payment or reimbursement.
SECTION 12. Tennessee Code Annotated, Title 35, Chapter 15, Part 8, is amended by
adding the following as a new section:
(a) Unless the terms of a trust instrument expressly provide that a settlor shall
not be reimbursed by a trust for the settlor's personal income tax liability attributable to
the trust, if the settlor of a trust is treated under 26 U.S.C. § 671 et seq. as the owner of
all or part of the trust, then a disinterested trustee, in the disinterested trustee's sole
discretion, or another trustee at the direction of a trust advisor or trust protector who
would be treated as a disinterested trustee and otherwise has the power to direct
discretionary distributions under the trust instrument, may reimburse the settlor for any
amount of the settlor's personal federal, state, local, foreign, or other income tax liability
that is attributable to the inclusion of the trust's income, capital gains, deductions, and
credits in the calculation of the settlor's taxable income under principals of 26 U.S.C. §
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671 et seq. The trustee may pay such amount to the settlor directly, or may pay the
amount to an appropriate taxing authority on the settlor's behalf, as the trustee
determines in the trustee's sole discretion. This power shall in all cases be exercised in
the sole and absolute discretion of a disinterested trustee or trust advisor or protector
who would be treated as a disinterested trustee, and no settlor or other person may
compel the exercise of this power or enter into an express or implied agreement or
understanding regarding the exercise of such power. No policy of insurance on the
settlor's life held in the trust nor the cash value of any such policy, nor the proceeds of
any loan secured by an interest in the policy may be used to reimburse the settlor or to
pay an appropriate taxing authority on the settlor's behalf. Neither the trustee's power to
make payments to, or for the benefit of, the settlor under this section, nor the trustee's
decision to exercise such power in favor of the settlor, causes the settlor to be treated as
a beneficiary of the trust for any purpose.
(b) This section does not apply if the application of this section would disqualify a
trust for, or reduce the amount of, a marital deduction, a charitable deduction, or another
specific tax benefit otherwise available to any person for state or federal income, gift,
estate, or generation-skipping transfer tax purposes.
SECTION 13. Tennessee Code Annotated, Section 35-15-1005, is amended by adding
the following new subsection:
(f) For purposes of this section, a person is deemed to have actual knowledge of
information that is accessible by the person through electronic means if the person
provided consent to receive information by electronic means in a record, as defined in §
47-10-102, and such consent has not been revoked. The information is deemed to be
accessible by the person if:
(1) The means of electronic access were provided in the record; or
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(2) It can be shown that the electronic access was actually utilized at any
time.
SECTION 14. Tennessee Code Annotated, Section 35-15-1102, is amended by deleting
the last sentence and substituting "However, the execution of an inter vivos trust instrument, a
document to transfer an asset to or from a trust, or a consent, release, ratification, modification,
termination, or settlement agreement pursuant to § 35-15-109, § 35-15-111, § 35-15-411, or §
35-15-412 is considered a transaction for purposes of § 47-10-103.".
SECTION 15. Tennessee Code Annotated, Section 35-15-1202, is amended by deleting
the section and substituting:
(a) A trust advisor or trust protector, other than a beneficiary, is a fiduciary with
respect to each power granted to such trust advisor or trust protector. In exercising a
power or refraining from exercising a power, a trust advisor or trust protector acting as a
fiduciary shall act in good faith and in accordance with the terms and purposes of the
trust and the interests of the beneficiaries.
(b) A trust advisor or trust protector is an excluded fiduciary, regardless of
whether the trust advisor or trust protector is serving in a fiduciary capacity, with respect
to each power granted or reserved exclusively to any one (1) or more other trustees,
trust advisors, or trust protectors.
(c) Notwithstanding subsection (a), a trust advisor or trust protector may serve in
a nonfiduciary capacity when specifically appointed in such capacity, and when acting in
such capacity is liable only for acting in bad faith or with reckless indifference.
SECTION 16. The Tennessee Code Commission is requested to publish in Tennessee
Code Annotated the revisions required to conform to the current state of the law the official
comments for Chapter 1 of Title 30 and Chapter 15 of Title 35 that are filed with the executive
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secretary of the Tennessee Code Commission by May 19, 2025, by duly authorized
representatives of the Trust Committee of the Tennessee Bankers Association.
SECTION 17. This act takes effect July 1, 2025, the public welfare requiring it.