Recent Changes to Trust and Estate Laws in Tennessee
July 30th, 2019 | Michael R. Crowder, Esq.
In May, Governor Lee signed two new bills which made several changes to Tennessee law in the
areas of wills, estates, and trusts. Some key changes are outlined below.
For years, Tennessee has allowed for the creation of “directed” trusts, meaning that the grantor of a
Tennessee trust can appoint a person as a “trust protector”--also known as a “trust advisor”--with the
power to “direct” the trustee. Powers commonly granted to trust protectors include the power to direct
investment and distribution decisions, to review and approve a trustee’s accounting, and to remove
and replace a trustee. Grantors establishing Tennessee trusts often utilize the office of trust protector
by appointing a family member to oversee the actions of a corporate trustee.
Special Purpose Entity
As of Governor Lee’s signing, new legislation
now allows a “special purpose entity”—either an
LLC or corporation—to act as trust protector of a
trust where a Tennessee corporation serves as
trustee. This new law could allow a trust to avoid
taxation by states that tax trusts based on the
residency of the trust fiduciary. For example, if the
grantor of a trust with a Tennessee corporate
trustee wants to appoint an out-of-state family
member as trust protector, they may avoid
taxation in that family member’s state of
residence by establishing an LLC as a special
purpose entity in Tennessee. The out-of-state
family member would be the sole member of the
LLC, and the grantor would appoint the LLC as
the trust protector instead of the family member.
Another benefit of this new law is that it provides
liability protection to those persons interested in
serving as trust protector. Since the special
purpose entity is organized as either an LLC or a
corporation, the members, owners, or officers of
the entity will be granted the same general
liability protection from the entity’s operations as
is otherwise the case with LLCs and
New Tennessee Trust and Estate Laws
Other new laws that Governor Lee signed into effect include:
1. A law exempting from recording taxthose deeds that effectuate the distribution of real property
to trust beneficiaries bythe trustee of a testamentarytrust or revocable living trust.
2. A law allowing the grantor of a trust to direct the disposition of tangible personal property by
separate memorandum (a practice commonly employed, but never codified).
3. A law providing that the modification of an irrevocable trust by a court or by consent of the
beneficiaries is not prohibited by a spendthrift clause or provision in the trust that prohibits
amendment or revocation of the trust.
If you have any questions or concerns about how these recent changes may impact your estate plan, or
about estate planning generally, please contact us at (865) 546-7311
A Note: this article was originally published in our Summer 2019 Newsletter
. Want more content like this? Don't forget to sign-up for our newsletter