by Michael Crowder, Esq.
Tennessee’s General Assembly continues its efforts to make Tennessee a leading jurisdiction for trusts and estates, with changes now being made to Tennessee’s trust and estate laws nearly every year. In 2023 several changes became effective, notably including the following:
- Tenn. Code Ann. Section 35-15-411 previously only allowed for termination of a noncharitable irrevocable trust with court approval. As of April 17, 2023, the unanimous agreement of the trustee and all qualified beneficiaries that termination does not violate a material purpose of the trust is sufficient to terminate a trust without court approval.
- For years, non-judicial settlement agreements have been important tools in helping Tennessee trustees and beneficiaries effectively administer trusts without court involvement, allowing for agreement on a wide range of trust matters. As of April 17, 2023, the concept of non-judicial settlement agreements now applies to Tennessee probate estates. Under new Tenn. Code Ann. § 30-2-615, the Personal Representative of an estate and “all persons whose consent is required to reach a binding settlement to be approved by the court” may enter into a binding nonjudicial settlement agreement regarding any matter involving estate administration, so long as the agreement does not violate a material purpose or intention of the testator, includes terms and conditions that could be properly approved by a court, and does not cause the disqualification or loss of certain federal tax qualifications.
Examples of matters that may be resolved by a nonjudicial settlement agreement include: (1) The interpretation or construction of the terms of a will; (2) Liability of a Personal Representative for an action relating to the administration of the estate; (3) Approval of attorney and Personal Representative fees; and (4) Directing the decedent's real property to be administered as part of the estate that is subject to the control of the Personal Representative.
Entering into a nonjudicial settlement agreement does not constitute a violation of a “no contest” clause contained in a will. If a party has a question regarding whether the nonjudicial settlement agreement is valid, that party may request the court approve the agreement.
- New Tenn. Code Ann. § 35-15-716 provides that the power to appoint a successor trustee under a trust includes the power to appoint multiple successor trustees, and a presently exercisable power to remove and replace a trustee under a trust includes the power to appoint additional trustees to serve with the current trustee. Such power includes the power to allocate various trustee powers, including the power to direct or prevent certain actions of the trustees, exclusively to one or more of the trustees serving from time to time.
- New Tenn. Code Ann. § 35-15-1015 clarifies that a beneficiary of a trust is not personally liable for the liabilities of third persons incurred in or arising from the administration of the trust, including liabilities arising from contracts made by the trustee or torts committed by the trustee during the administration of the trust.
- Other changes include expanding the categories of virtual representation under Tenn. Code Ann. 35-15-303 and revamping the process for probate of small estates (value not exceeding $50,000.00).
If you have any questions or concerns about how these changes may impact your estate plan or probate administration, or about trust and estates generally, please contact us.