New Law Impacts Trust Grantors’ and Beneficiaries’ Rights
by Michael Crowder, Esq.
On April 14, 2022, Tennessee SB 2166/HB 2353 was signed into law, making some changes concerning administration of trusts in Tennessee. Notably, T.C.A. § 35-15-817 was completely revamped to give trustees another option under Tennessee law to be discharged of fiduciary liability.
Previously, if a trustee sought to be discharged of fiduciary liability under Tennessee law, the trustee could (i) obtain a formal release from the court, or (ii) obtain written consent from every beneficiary.
Under the revised T.C.A. § 35-15-817, Tennessee law now allows trustees a “streamlined” method for obtaining a release from liability by allowing the trustee, upon such trustee's removal or resignation, or upon the full or partial termination of the trust, to simply send a notice.
If the notice includes the information required under T.C.A. § 35-15-817(c) (including a statement of the fair market value of the trust's assets and liabilities; fees and expenses paid, taxes paid, and distributions made over a certain time period; and the trustee’s contact information), and if the notice is sent to the persons listed in T.C.A. § 35-15-817(d) (including the grantor, if living, and each qualified beneficiary), then the person receiving the notice has 45 days to notify the trustee of an objection to the notice. If a person does not object within 45 days, the trustee is relieved from any liability for the time period covered by the notice, and that person is generally barred from contesting the validity of the trust, bringing a claim of breach of trust against the trustee, or bringing a claim of breach of fiduciary duty against a co-trustee, trust advisor, or trust protector for failure to object to the trustee's notice. If a person does object within 45 days, the trustee must default to one of the other two options for obtaining a release.
Importantly, the notice is presumed to have been received 10 business days after the date of mailing. T.C.A. § 35-15-817(k). Conceivably, this means a beneficiary or grantor could be time barred from contesting the validity of a trust or bringing a claim of breach of trust against a fiduciary 55 days after the trustee sends the notice to that person, regardless of whether that person actually received the notice.
In light of this new law, if you are a beneficiary or grantor of a trust, it is important to ensure the trustee has your current contact information on file. Additionally, if you receive a notice like the one described here, you should immediately seek counsel on whether a response is warranted, lest your rights be time barred.
As Tennessee continues its pursuit of being a leading trust jurisdiction in the country, beneficiaries and grantors of trusts need to remain cognizant that their rights are subject to change. Please contact us if you wish to discuss further.