Title 35 Fiduciaries And Trust Estates

Chapter 1 Appointment and Removal of Trustees

§ 35-1-101. Real property — Documents to be recorded — Trust property.

(a) When real estate is held as a part of the trust property, the court order accepting the resignation or ordering the removal of a trustee and appointing a successor, or an acknowledged memorandum of the order, shall be recorded in the county where any real estate is located, identifying each parcel of real estate held by the trust.
(b)
1. (1) When real estate is held as part of the trust property and a trustee has resigned or been removed without order of a court, the resigning or removed trustee shall execute and record an instrument that:
  1. (A) Recites the resignation or removal of the trustee;
  2. (B) Gives the name and address of the successor trustee, if any; and
  3. (C) Identifies each parcel of real estate held by the trust.
2. (2) A successor trustee, or a remaining trustee if there is no successor, shall execute and record the instrument described in subdivision (b)(1) if the resigning or removed trustee fails to record the required instrument within thirty (30) days after resigning or being removed.

§ 35-1-102. Appointment of public trustee.

In addition to the other provisions for the appointment of trustees in this chapter, a public trustee may be appointed by the court pursuant to title 30, chapter 1, part 4.

Chapter 2 Uniform Fiduciaries Act

§ 35-2-101. Short title.

This chapter shall be known and may be cited as the “Uniform Fiduciaries Act.”

§ 35-2-102. Chapter definitions.

(a) In this chapter, unless the context otherwise requires:
1. (1) “Bank” includes any person or association of persons, whether incorporated or not, carrying on the business of banking;
2. (2) “Fiduciary” includes a trustee under any trust, expressed, implied, resulting or constructive, executor, administrator, personal representative, guardian, conservator, curator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer, or any other person acting in a fiduciary capacity for any person, trust or estate;
3. (3) “Person” includes a corporation, partnership, or other association, or two (2) or more persons having a joint or common interest;
4. (4) “Principal” includes any person to whom a fiduciary as such owes an obligation; and
5. (5) “Savings institution” includes a federal or state savings and loan association or savings bank.
(b) A thing is done “in good faith,” within the meaning of this chapter, when it is in fact done honestly, whether it is done negligently or not.

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§ 35-2-103. Application of payments made to fiduciaries — Validity of right or title acquired.

A person who in good faith pays or transfers to a fiduciary any money or other property, which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof by the fiduciary, and any right or title acquired from the fiduciary in consideration of such payment or transfer is not invalid in consequence of a misapplication by the fiduciary.

§ 35-2-104. Transfer of negotiable instrument by fiduciary.

If any negotiable instrument payable or endorsed to a fiduciary as such is endorsed by the fiduciary, or if any negotiable instrument payable or endorsed to the principal is endorsed by a fiduciary empowered to endorse such instrument on behalf of the principal, the endorsee is not bound to inquire whether the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in endorsing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of the obligation as fiduciary unless the endorsee takes the instrument with actual knowledge of such breach or with knowledge of such facts that the action in taking the instrument amounts to bad faith. If, however, such instrument is transferred by the fiduciary in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor, or is transferred in any transaction known by the transferee to be for the personal benefit of the fiduciary, the creditor or other transferee is liable to the principal if the fiduciary in fact commits a breach of the obligation as fiduciary in transferring the instrument.

§ 35-2-105. Check drawn by fiduciary payable to third person.

If a check or other bill of exchange is drawn by a fiduciary as such, or in the name of the principal by a fiduciary empowered to draw such instrument in the name of the principal, the payee is not bound to inquire whether the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in drawing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of the obligation as fiduciary unless the payee takes the instrument with actual knowledge of such breach or with knowledge of such facts that the action in taking the instrument amounts to bad faith. If, however, such instrument is payable to a personal creditor of the fiduciary and delivered to the creditor in payment of or as security for a personal debt of the fiduciary to the actual knowledge of the creditor, or is drawn and delivered in any transaction known by the payee to be for the personal benefit of the fiduciary, the creditor or other payee is liable to the principal if the fiduciary in fact commits a breach of the obligation as fiduciary in drawing or delivering the instrument.

§ 35-2-106. Check drawn by and payable to fiduciary — Uniform Veterans' Guardianship Act unaffected.

(a) If a check or other bill of exchange is drawn by a fiduciary as such or in the name of the principal by a fiduciary empowered to draw such instrument in the name of the principal, payable to the fiduciary personally, or payable to a third person and by the third person transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in transferring the instrument, and is not chargeable with notice that the fiduciary is committing a breach of the obligation as fiduciary unless the transferee takes the instrument with actual knowledge of such breach or with knowledge of such facts that the action in taking the instrument amounts to bad faith, except and provided that title 34, chapter 5, being the Uniform Veterans' Guardianship Act, is not by this chapter amended.
(b) This chapter shall not apply in any situation governed by the Uniform Veterans' Guardianship Act.

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35-2-107

§ 35-2-107. Deposit in name of fiduciary as such — Drawing check.

If a deposit is made in a bank or savings institution to the credit of a fiduciary as such, the bank or savings institution is authorized to pay the amount of the deposit or any part thereof upon the check of the fiduciary, signed with the name in which such deposit is entered, without being liable to the principal, unless the bank or savings institution pays the check with actual knowledge that the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in drawing the check or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank or savings institution and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank or savings institution is liable to the principal if the fiduciary in fact commits a breach of the obligation as fiduciary in drawing or delivering the check except as provided in § 35-2-106.

§ 35-2-108. Deposit in name of principal — Drawing checks.

If a check is drawn upon the account of the principal in a bank or savings institution by a fiduciary who is empowered to draw checks upon the principal's account, the bank or savings institution is authorized to pay such check without being liable to the principal, unless the bank or savings institution pays the check with actual knowledge that the fiduciary is committing a breach of the fiduciary's obligation as fiduciary in drawing such check, or with knowledge of such facts that its action in paying the check amounts to bad faith. If, however, such a check is payable to the drawee bank or savings institution and is delivered to it in payment of or as security for a personal debt of the fiduciary to it, the bank or savings institution is liable to the principal if the fiduciary in fact commits a breach of the obligation as fiduciary in drawing or delivering the check.

§ 35-2-109. Deposit in fiduciary's personal account — Drawing checks.

If a fiduciary makes a deposit in a bank or savings institution to the fiduciary's personal credit of checks drawn by the fiduciary upon an account in the fiduciary's own name as fiduciary, or of checks payable to the fiduciary as fiduciary, or of checks drawn by the fiduciary upon an account in the name of the principal if the fiduciary is empowered to draw checks thereon, or of checks payable to the principal and endorsed by the fiduciary, if the fiduciary is empowered to endorse such checks, or if the fiduciary otherwise makes a deposit of funds held by the fiduciary as fiduciary, the bank or savings institution receiving such deposit is not bound to inquire whether the fiduciary is committing thereby a breach of the obligation as fiduciary. The bank or savings institution is authorized to pay the amount of the deposit or any part thereof upon the personal check of the fiduciary without being liable to the principal unless the bank or savings institution receives the deposit or pays the check with actual knowledge that the fiduciary is committing a breach of the obligation as fiduciary in making such deposit or in drawing such check or with knowledge of such facts that its action in receiving the deposit or paying the check amounts to bad faith.

§ 35-2-110. Deposit in names of two (2) or more trustees — Drawing checks.

When a deposit is made in a bank or savings institution in the name of two (2) or more persons as fiduciaries and a check is drawn upon the fiduciary account by any fiduciary or fiduciaries authorized by the other fiduciary or fiduciaries to draw checks upon the fiduciary account, neither the payee nor other holder nor the bank or savings institution is bound to inquire whether it is a breach of trust to authorize such fiduciary or fiduciaries to draw checks upon the fiduciary account, and is not liable unless the circumstances be such that the action of the payee or other holder or the bank or savings institution amounts to bad faith.

§ 35-2-111. Applicability of chapter — Cases not provided for.

(a) This chapter is applicable to state and federal savings and loan associations and savings banks. In the event of a conflict between this chapter and a law on the same subject relating specifically to state or federal savings and loan associations or savings banks, the specific law shall be controlling.
(b) In any case not provided for in this chapter, the rules of law and equity, including the law merchant and those rules of law and equity relating to trusts, agency, negotiable instruments and banking, shall continue to apply.
(c)
1. (1) Knowledge on the part of the bank or savings institution of the existence of a fiduciary relationship or the terms of the relationship shall not impose any duty or liability on the bank or savings institution for any action of the fiduciary.
2. (2) A bank or savings institution has no duty to establish an account for a fiduciary or to limit transactions in an account so established unless, in its discretion, it contracts in writing with the fiduciary to establish or limit transactions with respect to such an account; provided, that this shall not preclude a court from temporarily enjoining or restraining the removal of funds from an existing account by a bank or savings institution over which the court exercises personal jurisdiction.

§ 35-2-112. Uniformity of interpretation.

This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states which enact it.

Chapter 3 Investment of Trust Funds

§ 35-3-101. Authority of court.

The court is authorized to have the money and funds in the hands of clerks and receivers, or trustees, in litigation or under the control of the court, invested under such rules and orders in each case as may be legal and just.

§ 35-3-102. Authorized investments.

All trustees, guardians and other fiduciaries in this state, unless prohibited, or another mode of investment is prescribed by the will or deed of the testator or other person establishing the trust, may invest all funds in their hands in securities specified in §§ 35-3-103 — 35-3-111, and may also invest funds in income-producing commercial or residential property.

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§ 35-3-103. Federal and state securities.

(a) Investments may be made in bonds, notes and stock of the United States and any state and territory of the United States.
(b) In the absence of an express provision to the contrary, if an indenture or other governing instrument directs, requires, authorizes or permits investment in United States government obligations, a bank, trust company, trust department or other fiduciary may invest in the obligations, either directly or in the form of securities or other interests in any open end or closed end management type investment company or investment trust registered under the federal Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.), if the portfolio of the investment company or investment trust is limited to United States government obligations and to repurchase agreements fully collateralized by the obligations and if the investment company or investment trust actually takes delivery of the collateral, either directly or through an authorized custodian.

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35-3-102

§ 35-3-104. Securities of foreign governments.

Investments may be made in bonds, notes and stock issued or guaranteed by any foreign government with which the United States is at the time of sale or offer of sale of the bonds, notes or stock maintaining diplomatic relations and which foreign government has not, for at least thirty (30) years prior to the making of the investment, defaulted for more than thirty (30) days in the payment of any part either of principal or interest of any bond, note, stock or other evidence of indebtedness issued by it; provided, that if the foreign government has not been in existence for as much as thirty (30) years, but has been in existence for not less than ten (10) years, then the investment may be made in securities issued or guaranteed by it, if it has not defaulted in the payment of any part either of principal or interest of any bond, note, stock or other evidence of indebtedness issued by it since it has been in existence.

§ 35-3-105. Bonds of counties — “Net revenue” defined.

(a) Investments may be made in bonds of any county in the state and bonds of any city or town in the state having a population of not less than two thousand (2,000) by the last federal census preceding the investment, regardless of whether the bonds are payable from taxes levied on property in the county, city or town, or are payable solely from revenues of the waterworks system, electric distribution system or both owned and operated by the issuing county, city or town, or are payable from both taxes and revenues; provided, that the county, city or town has not defaulted within fifteen (15) years preceding the investment, for more than ninety (90) days, in the payment of any part of either principal or interest on any bond, note or other evidence of valid indebtedness.
(b) Before any funds may be invested in bonds payable solely from waterworks, electric revenue or both, there shall be furnished with the bonds a certified copy of an operating statement issued by the official in charge of the operations of the waterworks or electric distribution systems, showing that the net revenue from the system or systems pledged to and available for the principal of and interest on all outstanding bonds payable from that revenue, covering a period of twelve (12) consecutive months out of the fifteen (15) months preceding the investment, have been at least one and one-third (1⅓) times the highest combined principal and interest requirements for any one (1) year on all bonds then outstanding that are payable from the pledged revenues of the system or systems.
(c) “Net revenue” means total revenue less operating expenses incurred in connection with the operation of the system or systems.

§ 35-3-106. Municipal bonds.

Investments may be made in bonds and notes of any county, city or town in any state or territory of the United States that has a population, as shown by the last federal census next preceding the investment, of not less than forty-five thousand (45,000) and has not defaulted within twenty-five (25) years next preceding the investment, for more than thirty (30) days, in the payment of any part of either principal or interest of any bond, note or other evidence of indebtedness.

§ 35-3-107. Real estate bonds and notes.

Investments may be made in bonds and notes secured by first mortgage or deed of trust on real estate located in this state; provided, that:
1. (1) The face or principal amount of the bonds or notes does not exceed one-half (½) the actual value of the real estate as appraised by one (1) or more licensed real estate dealers acting for unincorporated trustees, guardians or other fiduciaries, and in case of incorporated trustees, guardians or other fiduciaries, the appraisal shall be made by an agent or committee composed of or selected by the board of directors or executive committee of the incorporated trustee, guardian or other fiduciary;
2. (2) The trustee, guardian or other fiduciary or any institution controlled by that entity or person has not received any commission from the borrower or issuer in the making of the mortgage or deed of trust or the underwriting of the securities secured by the mortgage or deed of trust, unless the commission charged the borrower or issuer does not exceed one percent (1%) per annum of the aggregate principal amount of the bonds or notes; and
3. (3) Any probate or chancery court of the county where the fiduciary is located, upon the application of any beneficiary of the trust or of any person connected with any beneficiary, by consanguinity or affinity, within the sixth degree as computed by the civil law, may, at any time, either restrain the making of any such proposed investment, if the investment is not consummated, or if consummated, require the fiduciary promptly to dispose of the bonds or notes at the best price then obtainable and otherwise reinvest the funds, and the court may exercise such power to restrain or compel disposal in all cases in which the court may find that action to be necessary to protect the interest of any beneficiary.

§ 35-3-108. Railroad obligations.

(a) Investments may be made in the following railroad obligations:
1. (1) Obligations issued, assumed or guaranteed as to principal and interest by endorsement, or so guaranteed, which guaranty has been assumed;
2. (2) Obligations for the payment of the principal and interest of which a railroad corporation such as is described in this section is obligated under the terms of a lease made or assumed; or
3. (3) Equipment trust obligations in respect of which liability has been incurred by a railroad corporation incorporated under the laws of the United States, or any state of the United States, and owning and operating within the United States not less than five hundred (500) miles of standard-gauge railroad line, exclusive of sidings, or if the mileage so owned is less than five hundred (500) miles, the railroad operating revenues from the operation of all railroads operated by it, including the revenues from the operation of all railroads controlled through ownership of all, except directors' qualifying shares, of the voting stock of the owning corporation, was not less than ten million dollars ($10,000,000) each year for at least five (5) of the six (6) fiscal years next preceding the investment.
(b) Provided, that:
1. (1) In each year for at least five (5) of the six (6) fiscal years and in the last fiscal year next preceding the investment, the amount of income of such railroad corporation available for its fixed charges, as defined in subsection (c), was not less than one and one-half (1½) times its fixed charges, as defined in subsection (c);
2. (2) In each year for at least five (5) of the six (6) fiscal years next preceding the investment, the railroad corporation has paid dividends in cash upon its capital stock equivalent to at least one-fourth (¼) of its fixed charges, or if the railroad corporation has not paid such dividends, that the amount of income available for its fixed charges was not less than one and one-half (1½) times its fixed charges for at least nine (9) of the ten (10) fiscal years and in the last fiscal year next preceding the investment;
3. (3) At no time within the period of six (6) years has the railroad corporation failed regularly and punctually to pay the matured principal and interest of all its mortgage indebtedness; and
4. (4) The security, if any, for the obligations shall be property wholly or in part within the United States and the obligations shall be:
  1. (A) Fixed interest-bearing bonds secured by direct mortgage on railroad owned or operated by the railroad corporation;
  2. (B) Bonds secured by first mortgage upon terminal, depot or tunnel property, including lands, buildings and appurtenances, used in the service of transportation by one (1) or more railroad corporations; provided, that the bonds are the direct obligation of, or that payment of principal and interest of the bonds are guaranteed by, endorsement by or guaranteed by endorsement, which guaranty has been assumed by, one (1) or more railroad corporations;
  3. (C) Equipment trust obligations, comprising bonds, notes and certificates, issued in connection with the purchase for use on railroads of new standard-gauge rolling stock through the medium of an equipment trust agreement, and which obligations, so long as any of them are outstanding and unpaid or unprovided for, shall be secured by an instrument:
    1. (i) Vesting title to the equipment in a trustee free of encumbrance; or
    2. (ii) Creating a first lien on the equipment, or, pending the vesting of title, by the deposit of cash in trust to an amount equal to the face amount of the obligations issued in respect of the equipment, title to which is not yet so vested; provided, that the maximum amount of the obligations so issuable shall not exceed eighty percent (80%) of the cost of the equipment; and provided further, that the owner, purchaser or lessee, or the owners, purchasers or lessees, of the equipment shall be obligated by the terms of the obligations or of the instrument to:
      1. (a) Maintain the equipment in proper repair;
      2. (b) Replace any of the equipment that may be destroyed or released with other equipment of equal value, or, if released in connection with a sale of the equipment, to deposit the proceeds of the sale in trust for the benefit of the holders of the obligations pending replacement of the equipment;
      3. (c) Pay any and all taxes or other governmental charges that may be required by law to be paid upon the equipment;
      4. (d) Pay, in accordance with the provisions of the obligations or of the instrument, to holders, or to the trustee for the benefit of holders, of the obligations the amount of interest due on the obligations or of the dividends payable in respect of the obligations; and
      5. (e) Pay the amount of the entire issue of the obligations in annual or semiannual installments each year throughout a period of not exceeding fifteen (15) years from the first date of issue of any of the obligations that the amount of the respective unmatured installments at any time outstanding shall be approximately equal; provided, that unless the owner, purchaser or lessee of the equipment, or one (1) or more of the owners, purchasers or lessees shall be a railroad corporation as is described in and meets the requirements of this section preceding subdivision (b)(4)(A), the obligations shall be guaranteed by endorsements as to principal and as to interest or dividends by the railroad corporation;
  4. (D) Bonds of the railroad corporation secured by irrevocable pledge as collateral under a trust agreement of other railroad bonds that are legal investment for fiduciaries under this section, have a maturity not earlier than the bonds that they secure and of a total face amount not less than the total face amount of the bonds that they secure; or
  5. (E) Fixed interest-bearing mortgage bonds other than those described in subdivisions (b)(4)(A) and (B), income mortgage bonds, collateral trust bonds or obligations other than those described in subdivision (b)(4)(D), or unsecured bonds or obligations, issued, assumed or guaranteed as to principal and interest by endorsement by, or so guaranteed, which guaranty has been assumed by, the railroad corporation; provided, that in each year for at least five (5) of the six (6) fiscal years and in the last fiscal year next preceding the investment:
    1. (i) The amount of income of the railroad corporation available for its fixed charges, as defined in subsection (c), was not less than twice the sum of:
      1. (a) Its fixed charges, as defined in subsection (c); and
      2. (b) Full interest on the income mortgage bonds, if any;
    2. (ii) The net income of which after deductions was not less than ten thousand dollars ($10,000); and
    3. (iii) The railroad corporation has made the dividend and principal and interest payments required by subdivisions (b)(4)(C)(ii)(d) and (e).
(c) The amount of income available for fixed charges shall be the amount obtained by deducting from gross income all items deductible in ascertaining net income other than contingent income interest and those constituting fixed charges. Fixed charges shall be rent for leased roads, miscellaneous rents, fixed interest on funded debt, interest on unfunded debt and amortization of discount on funded debt.
(d) Accounting terms used in this section shall be deemed to refer to those used in the accounting reports prescribed by the accounting regulations for common carriers subject to the Interstate Commerce Act (U.S.C. Title 49). If the interstate commerce commission prescribes accounting regulations in which are defined the terms “income available for fixed charges” and “fixed charges,” the definitions of those terms as so prescribed shall be taken and used in lieu of the definitions set forth in subsection (c) for all purposes.
(e) For purposes of this section, the revenues, earnings, income and fixed charges of, and dividends paid by, any railroad corporation, all or substantially all of the railroad lines of which have been acquired through merger, consolidations, conveyance or lease by another railroad corporation and remain in its possession, shall be deemed to be revenues, earnings, income and fixed charges of, and dividends paid by, the latter corporation.
(f) Not more than twenty-five percent (25%) of the assets of any trust shall be loaned or invested in the bonds, notes and certificates in this section defined, and not more than ten percent (10%) of the assets shall be invested in such bonds, notes and certificates for which any one (1) railroad corporation shall be obligated.

§ 35-3-109. Public utility bonds.

(a) Investments may be made in the bonds of any corporation that at the time of the investment is incorporated under the laws of the United States or any state of the United States, or the District of Columbia, and transacting the business of supplying electrical energy or artificial gas or both for light, heat, power and other purposes; provided, that at least seventy-five percent (75%) of the gross operating revenues of any such corporation are derived from that business, and not more than fifteen percent (15%) of the gross operating revenues, are derived from any one (1) kind of business other than supplying electricity and gas; and provided further, that corporation is subject to regulation by the Tennessee public utility commission or a public utility commission, or other similar regulatory body duly established by the laws of the United States or the states in which such corporation operates, subject to the following conditions:
1. (1) The corporation has all franchises necessary to operate in territory in which at least seventy-five percent (75%) of its gross income is earned, which franchises shall either be indeterminate permits or agreements with or subject to the jurisdiction of the Tennessee public utility commission, or other duly constituted regulatory body, or extend at least five (5) years beyond the maturity of the bonds;
2. (2) The outstanding full paid capital stock of the corporation is equal to at least two-thirds (⅔) of the total debt secured by mortgage lien on any part or all of its property; provided, that in case of a corporation having nonpar value shares, the amount of capital that such shares represent is the capital as shown by the books of the corporation;
3. (3) The corporation has been in existence for a period of not less than eight (8) fiscal years and at no time within the period of eight (8) fiscal years next preceding the date of the investment has the corporation failed to pay promptly and regularly the matured principal and interest of all its indebtedness direct, assumed or guaranteed, but the period of life of the corporation, together with the period of life of any predecessor corporation or corporations from which a major portion of its property was acquired by consolidation, merger or purchase shall be considered together in determining the required period;
4. (4) For a period of five (5) fiscal years next preceding the investment the net earnings of the corporation have averaged per year not less than twice the average annual interest charges on its total funded debt applicable to that period, and for the last fiscal year preceding the investment its net earnings have been not less than twice the interest charges for a full year on its total funded debt outstanding at the time of the investment, and for that period the gross operating revenues of any such corporation have averaged per year not less than one million dollars ($1,000,000), and the corporation has for each year either earned an amount available for dividends or paid in dividends an amount equal to four percent (4%) upon a sum equivalent to two-thirds (⅔) of its funded debt;
5. (5) The bonds must be part of an issue of not less than one million dollars ($1,000,000) and must be mortgage bonds secured by a first or refunding mortgage secured by property owned and operated by the corporation issuing or assuming them, or must be underlying mortgage bonds secured by property owned and operated by the corporations issuing or assuming them. The bonds are to be refunded by a junior mortgage providing for their retirement; provided, that the bonds under the junior mortgage comply with the requirements of this section and that the underlying mortgage is either a closed mortgage or remains open solely for the issue of additional bonds which are to be pledged under the junior mortgage. The aggregate principal amount of bonds secured by the first or refunding mortgage plus the principal amount of all the underlying outstanding bonds shall not exceed sixty percent (60%) of the value of the physical property owned as shown by the books of the corporation and subject to the lien of the mortgage or mortgages securing the total mortgage debt; and provided further, that, if a refunding mortgage, it must provide for the retirement on or before the date of their maturity of all bonds secured by prior liens on the property; and
6. (6) Not more than twenty-five percent (25%) of the assets of any trust shall be loaned on or invested in bonds of electric and gas corporations, and not more than ten percent (10%) of the assets of any trust shall be invested in the bonds of any one such corporation, as authorized by this section.
(b) In determining the qualifications of any bond under this section where a corporation has acquired its property or any substantial part thereof within five (5) years immediately preceding the date of the investment by consolidation or merger, or by the purchase of all or a substantial portion of the property of any other corporation or corporations, the gross operating revenues, net earnings and interest charges of the several predecessor or constituent corporations shall be consolidated and adjusted so as to ascertain whether there has been compliance with the requirements of subdivision (a)(4).
(c)
1. (1) The gross operating revenues and expenses of a corporation, for the purposes of this section, shall be, respectively, the total amount earned from the operation of, and the total expense of maintaining and operating all property owned and operated by or leased and operated by the corporation, as determined by the system of accounts prescribed by the Tennessee public utility commission, public utility commission or other similar regulatory body having jurisdiction in the matter. The gross operating revenues and expenses, as defined in this subdivision (c)(1), of subsidiary companies may be included; provided, that all the mortgage bonds and a controlling interest in stock or stocks of the subsidiary companies are pledged as part security for the mortgage debt of the principal company.
2. (2) The net earnings of any corporation, for the purpose of this section, shall be the balance obtained by deducting from its gross operating revenues, its operating and maintenance expenses, taxes other than federal and state income taxes, rentals and provision for renewals and retirements of the physical assets of the corporation, and by adding to the balance its income from securities and miscellaneous sources, but not, however, to exceed fifteen percent (15%) of the balance.

§ 35-3-110. Telephone corporation bonds.

(a) Investments may be made in the bonds of any corporation that at the time of the investment is incorporated under the laws of the United States or any state of the United States, or the District of Columbia, and is authorized to engage and is engaging in the business of furnishing telephone service in the United States, and provided the corporation is subject to regulation by the interstate commerce commission or a regulatory authority, or public utility commission or other similar federal or state regulatory body duly established by the laws of the United States or the states in which the corporation operates, subject to the following conditions:
1. (1) The corporation has been in existence for a period of not less than eight (8) fiscal years and at no time within that period of eight (8) fiscal years next preceding the date of the investment has the corporation failed to pay promptly and regularly the matured principal and interest of all its indebtedness direct, assumed or guaranteed, but the period of life of the corporation, together with the period of life of any predecessor corporation or corporations from which a major portion of its property was acquired by consolidation, merger or purchase, shall be considered together in determining the required period;
2. (2) The outstanding full paid capital stock of the corporation is at the time of the investment equal to at least two-thirds (⅔) of the total debt secured by all mortgage liens on any part or all of its property;
3. (3) For a period of five (5) fiscal years next preceding the investment, the net earnings of the corporation have averaged per year not less than twice the average annual interest charges on its total funded debt applicable to that period, and for the last fiscal year preceding the investment, the net earnings have been not less than twice the interest charges for a full year on its total funded debt outstanding at the time of the investment, and for that period, the gross operating revenues of the corporation have averaged per year not less than five million dollars ($5,000,000), and the corporation has for each of those years either earned an amount available for dividends or paid in dividends an amount equal to four percent (4%) upon all of its outstanding capital stock; and
4. (4) The bonds must be part of an issue of not less than five million dollars ($5,000,000) and must be secured by a first or refunding mortgage, and the aggregate principal amount of bonds secured by the first or refunding mortgage, plus the principal amount of all underlying outstanding bonds, shall not exceed sixty percent (60%) of the value of the property, real and personal, owned absolutely and subject to the lien of the mortgage; provided, that, if a refunding mortgage, it must provide for the retirement of all bonds secured by prior liens on the property. Not more than thirty-three and one-third percent (33⅓%) of the property constituting the specific security for the bonds may consist of stock or unsecured obligations of affiliated or other telephone companies, or both.
(b) In determining the qualification of any bond under this section, where a corporation has acquired its property or any substantial part of its property within five (5) years immediately preceding the date of the investment by consolidation or merger or by the purchase of all or a substantial portion of the property of any other corporation or corporations, the gross operating revenues, net earnings and interest charges of the several predecessor or constituent corporations shall be consolidated and adjusted so as to ascertain whether there has been compliance with the requirements of subdivision (a)(3).
(c) The gross operating revenues and expenses of a corporation, for the purpose of this section, shall be respectively the total amount earned from the operation of, and the total expense of maintaining and operating, all property owned and operated by or leased and operated by the corporation, as determined by the system of accounts prescribed by the interstate commerce commission or the Tennessee public utility commission, or public utility commission, or other similar federal or state regulatory body having jurisdiction in the matter.
(d) The net earnings of any corporation, for the purpose of this section, shall be the balance obtained by deducting from its gross operating revenues its operating and maintenance expenses, provision for depreciation of the physical assets of the corporation, taxes other than federal and state income taxes, rentals and miscellaneous charges, and by adding to the balance its income from securities and miscellaneous sources, but not, however, to exceed fifteen percent (15%) of the balance. “Funded debt” means all interest bearing debts maturing more than one (1) year from date of issue.
(e) Not more than twenty-five percent (25%) of the assets of any trust shall be loaned on or invested in bonds of telephone corporations, and not more than ten percent (10%) of the assets of any trust shall be invested in the bonds of any one (1) telephone corporation, as authorized by this section.

§ 35-3-111. Obligations of certain federal agencies.

Trustees, guardians and other fiduciaries may also invest in or lend on the following obligations issued by the following authorized federal agencies:
1. (1) Bonds and/or debentures issued by a federal home loan bank organized under the “Federal Home Loan Bank Act” (47 Stat. 725, 12 U.S.C. § 1421 et seq.);
2. (2) Stock of federal savings and loan associations organized under the “Home Owner's Loan Act of 1933” (48 Stat. 128, 12 U.S.C. § 1461 et seq.), and amendments to that act, and/or building and loan associations, licensed to do business in Tennessee, where the stock of the associations is insured by the federal savings and loan insurance corporation;
3. (3) Notes, bonds, debentures or other obligations issued under title IV of the act of congress of the United States entitled “National Housing Act,” approved June 27, 1934 (48 Stat. 1246, 12 U.S.C. § 1701 et seq.), and any amendments thereto; and
4. (4) Mortgages guaranteed or insured under title III of the act of congress of the United States, entitled “Servicemen's Readjustment Act of 1944,” approved June 22, 1944 (58 Stat. 284, 38 U.S.C. § 1801 et seq. [repealed]), and any amendments thereto.

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§ 35-3-112. State and federal bond issues — Reports.

Guardians, executors, administrators and trustees shall also be authorized and empowered to invest money and funds in their hands in the bonds of the state, of the United States, or obligations issued separately or collectively by or for federal land banks, federal intermediate credit banks and banks for cooperatives under the act of congress known as the Farm Credit Act of 1971 (85 Stat. 583, 12 U.S.C. § 2001 et seq.) and amendments to that act, or in obligations issued under the Home Owner's Loan Act of congress (12 U.S.C. § 1461 et seq.), or notes or bonds secured by mortgage or trust deed insured by the federal housing administrator, or bonds and/or debentures issued by national mortgage associations; also to lend on the security of any such bonds to the extent of eighty-five percent (85%) of their face value; and, in either case, make report thereof to the court where the guardian, executor, administrator or trustee is qualified, unless another mode of investment is required by will or deed of the testator or another person who has established the funds.

§ 35-3-113. Life, endowment or annuity contracts of life insurance companies.

(a) Executors, trustees and guardians are authorized, with the approval of a probate court or other court of competent jurisdiction, to invest out of income or principal of funds in their custody, in single or annual premium life, endowment or annuity contracts of legal reserve life insurance companies duly licensed and qualified to transact business within the state.
(b) Such contracts may be issued on the life or lives of any beneficiary, cestui que trust or ward, who may have a vested or contingent interest in the estate, or on the life or lives of any parent, trustor or other person in whom any beneficiary, cestui que trust or ward may have an insurable interest, and shall such be so drawn that the legal title of the policy or contract shall be in and the proceeds or avails of the proceeds payable to and in the control of the fiduciary making the investment, and may be retained and shall be subject to transfer, assignment and conveyance by the fiduciary as other personal property held in the account.

§ 35-3-114. Certificates of deposit and savings accounts.

All trustees and guardians in this state, unless prohibited, or another mode of investment is prescribed, by the will or deed of the testator or other person establishing the trust, may invest trust funds in their hands, in addition to the investments heretofore authorized, in certificates of deposit of, and savings accounts in, any national or state bank in the United States, including itself if such trustee or guardian is a national or state bank in the United States otherwise qualified, whose deposits are insured by the federal deposit insurance corporation, at the prevailing rate of interest of such certificates or savings accounts. No trustee or guardian shall invest in such certificates of deposit of, or savings accounts in any one (1) bank, an amount from any one (1) fund in the trustee's or guardian's care in excess of such amount as is fully insured as a deposit in the bank by the federal deposit insurance corporation, unless the investment is first approved by a court of competent jurisdiction.

§ 35-3-115. Public housing authority obligations.

Notwithstanding any restrictions on investments contained in any laws of this state, the state and all public officers, municipal corporations, political subdivisions, and public bodies, all banks, bankers, trust companies, savings banks and institutions, building and loan associations, savings and loan associations, investment companies, and other persons carrying on a banking business, all insurance companies, insurance associations and other persons carrying on an insurance business, and all executors, administrators, guardians, trustees and other fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any bonds or other obligations issued by a housing authority pursuant to the Housing Authorities Law, compiled in title 13, chapter 20, and any amendments to that law, or issued pursuant to the Memphis Housing Authority Law, chapter 615 of the Private Acts of 1935, as amended by chapter 900 of the Private Acts of 1937, and any amendments to that law, or issued by any public housing authority or agency in the United States, when the bonds or other obligations are secured by a pledge of annual contributions to be paid by the United States government or any agency of the United States government. The bonds and other obligations shall be authorized security for all public deposits, it being the purpose of this section to authorize any persons, firms, corporations, associations, political subdivisions, bodies and officers, public or private, to use any funds owned or controlled by them, including, but not limited to, sinking, insurance, investment, retirement, compensation, pension and trust funds, and funds held on deposit, for the purchase of any such bonds or other obligations; provided, that nothing contained in this section shall be construed as relieving any person, firm or corporation from any duty of exercising reasonable care in selecting securities.

§ 35-3-116. Courts empowered to authorize retention of original investments.

(a) Any guardian, personal representative, trustee or other fiduciary may make, in the county in which appointed, application to the chancery court, or to any other court therein having concurrent jurisdiction, for permission to retain and hold in unchanged form any security or investment originally forming a part of the estate, and the court shall have the authority and power to authorize the guardian, personal representative, trustee or other fiduciary, to retain and hold in unchanged form any security or investment originally forming a part of the estate, upon it being made to appear to the court that retention of the security or investment is to the manifest interest of the estate. The authority to retain securities or investments, when granted to the fiduciary by the instrument under which the fiduciary is acting, is not affected by the foregoing provisions.
(b) The application in every such case shall be made by bill or petition, and the beneficiaries be made the defendants and served with process, and the cause shall be conducted and heard in the same manner as other suits in chancery.
(c) A guardian ad litem shall be appointed for all defendants under disability, and the decree of the court authorizing the retention of the securities or investments shall set out fully the reasons and object moving the court in granting to the fiduciary the authority so to do.
(d) It is not intended to impose upon a fiduciary any duty or obligation in addition to those arising under previously existing law, nor is it intended to change, modify or alter any investment statute of the state, except insofar as variations from those statutes may be made through proceedings authorized by this section.

§ 35-3-117. Investment in securities of management investment company or investment trust by bank or trust company — Fiduciary liability — Abuse of fiduciary discretion.

(a) Notwithstanding any other law, a bank or trust company, to the extent it acts at the direction of another person authorized to direct investment of funds held by the bank or trust company, or to the extent that it exercises investment discretion as a fiduciary, custodian, managing agent, or otherwise with respect to the investment and reinvestment of assets that it maintains in its trust department, may invest and reinvest the assets, subject to the standard contained in this section, in the securities of any open-end or closed-end management investment company or investment trust registered under the Investment Company Act of 1940 (15 U.S.C. §§ 80a-1 — 80a-64). The fact that the bank or trust company, or any affiliate of the bank or trust company, is providing services to the investment company or trust as investment advisor, sponsor, distributor, custodian, transfer agent, registrar or otherwise, and receiving reasonable remuneration for the services, does not preclude the bank or trust company from investing in the securities of the investment company or trust.
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(b) In the absence of express provisions to the contrary in the governing instrument, a fiduciary will not be liable to the beneficiaries or to the trust with respect to a decision regarding the allocation and nature of investments of trust assets unless the court determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused its discretion merely because the court would not have exercised the discretion in the same manner.
(c) If a court determines that a fiduciary has abused its discretion regarding the allocation and nature of investments of trust assets, the remedy is to restore the income and remainder beneficiaries to the positions they would have occupied if the fiduciary had not abused its discretion, according to the following rules:
1. (1) To the extent that the abuse of discretion has resulted in no distribution to a beneficiary or a distribution that is too small, the court shall require a distribution from the trust to the beneficiary in an amount that the court determines will restore the beneficiary, in whole or in part, to the beneficiary's appropriate position, taking into account all prior distributions to the beneficiary;
2. (2) To the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court shall restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions, taking into account all prior distributions, by requiring the fiduciary to withhold an amount from one (1) or more future distributions to the beneficiary who received the distribution that was too large or requiring that beneficiary to return some or all of the distribution to the trust;
3. (3) To the extent that the court is unable, after applying subdivisions (c)(1) and (2), to restore the beneficiaries, the trust, or both, to the position they would have occupied if the fiduciary had not abused its discretion, the court may require the fiduciary to pay an appropriate amount from its own funds to one (1) or more of the beneficiaries or the trust or both.
(d) Upon a petition by the fiduciary, the court having jurisdiction over the trust or agency account shall determine whether a proposed plan of investment by the fiduciary will result in an abuse of the fiduciary's discretion. If the position describes the proposed plan of investment and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the proposed plan of investment, a beneficiary who challenges the proposed plan of investment has the burden of establishing that it will result in an abuse of discretion.
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§ 35-3-118. Stocks or bonds held by fiduciary in nominee's name.

(a) Trustees, guardians and other fiduciaries owning stocks or registered bonds may hold them in the name of a nominee without mention of the fiduciary relationship in the stock certificates, stock registration books, or registered bond or bond registry; provided, that:
1. (1) The records and all reports and accounts rendered by the fiduciary clearly show the ownership of the stock or bond by the fiduciary, and the facts regarding its holding; and
2. (2) The nominee deposits with the fiduciary a signed statement showing the fiduciary ownership, either endorses the stock certificate or registered bond in blank, or signs a transfer power in blank, and attach it to the certificate or bond, and does not have possession of or access to the stock certificate or bond, except under the immediate supervision of the fiduciary.
(b) The fiduciary shall be personally liable for any loss resulting from any act of the nominee in connection with the securities so held.
(c) This section shall apply to all such fiduciary relationships.

§ 35-3-119. Tennessee Valley authority obligations.

Notwithstanding any restrictions on investments contained in any laws of this state, the state and all public officers, municipal corporations, political subdivisions, and public bodies, all banks, bankers, trust companies, savings banks and institutions, building and loan associations, savings and loan associations, investment companies, and other persons carrying on a banking business, all insurance companies, insurance associations and other persons carrying on an insurance business, and all executors, administrators, guardians, trustees and other fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any bonds or other obligations issued by the Tennessee Valley authority pursuant to the Tennessee Valley Authority Act of 1933 (16 U.S.C. § 831), and any amendment to that act, and the bonds and other obligations shall be authorized security for all public deposits, it being the purpose of this section to authorize any persons, firms, corporations, associations, political subdivisions, bodies and officers, public or private, to use any funds owned or controlled by them, including, but not limited to, sinking, insurance, investment, retirement, compensation, pension and trust funds, and funds held on deposit, for the purchase of any such bonds or other obligations. Nothing contained in this section shall be construed as relieving any person, firm or corporation from any duty of exercising reasonable care in selecting securities.

§ 35-3-120. Federally guaranteed loans and investments.

(a) Banks, trust companies, insurance companies, building and loan associations, credit unions, trustees and others acting in a fiduciary capacity, trust funds, pension and profit-sharing funds, real estate investment trusts, and other financial institutions, originating mortgagee institutions, and other institutions approved as mortgagees and otherwise meeting the requirements of the federal housing administration or veterans administration to act as mortgagees under the programs of these agencies may:
1. (1) Make loans and advances of credit and purchases of obligations representing loans and advances of credit that are eligible for credit insurance by the federal housing commissioner, and may obtain that insurance;
2. (2) Make loans secured by real property or leasehold, that the federal housing commissioner insures or makes a commitment to insure, and may obtain that insurance;
3. (3) Invest their funds, eligible for investment, in notes or bonds secured by mortgage or trust deed insured by the federal housing commissioner, and in debentures issued by the federal housing commissioner, and also in securities issued by the Federal National Mortgage Association; and
4. (4) Make any loans and advances of credit and purchases of obligations representing loans and advances of credit that are eligible to be guaranteed or insured in whole or in part by the veterans administration or administrator of veterans affairs, or secured by real property or leasehold as the administrator of veterans affairs makes a commitment to guarantee or insure.
(b) No law of this state, requiring security upon which loans or investments may be made, or prescribing the nature, amount or form of the security, or prescribing or limiting interest rates upon loans or investments, or limiting investments of capital or deposits, or prescribing or limiting the period for which loans or investments may be made, shall apply to loans or investments made pursuant to this section.

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§ 35-3-121. Investments in securities by banks or trust companies.

Unless the governing instrument, court order, or a statute specifically directs otherwise, a bank or trust company serving as trustee, guardian, agent, or in any other fiduciary capacity may invest in any security authorized by this chapter even if that fiduciary or an affiliate of that fiduciary, as defined in [former] § 35-3-117(d) [repealed], participates or has participated as a member of a syndicate underwriting the security, if:
1. (1) The fiduciary does not purchase the security from itself or its affiliate; and
2. (2) The fiduciary does not purchase the security from another syndicate member or an affiliate, pursuant to an implied or express agreement between the fiduciary or its affiliate and a selling member or its affiliate, to purchase all or part of each other's underwriting commitments.

§ 35-3-122. Liability of fiduciaries for losses.

Whenever an instrument under which a fiduciary is acting reserves to the settlor or vests an advisory or investment committee or in any other person or persons including one (1) or more other fiduciaries, to the exclusion of the fiduciary or to the exclusion of one (1) or more of several fiduciaries, authority to direct the making or retention of any investment, or to perform any other act in the management or administration of the fiduciary account, the excluded fiduciary or fiduciaries shall not be liable, either individually or as a fiduciary, for any loss resulting from the making or retention of any investment or other act pursuant to that direction.

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§ 35-3-123. Trustee liability — Action upon written directions.

(a) A trustee of a revocable, irrevocable or testamentary trust is not liable to any beneficiary for any act performed or omitted pursuant to written directions from the person holding the power to revoke, terminate or amend the trust.
(b) A trustee of a revocable, irrevocable or testamentary trust is not liable for any investment action performed or omitted pursuant to written directions from the person to whom the power to direct the investment or management of the account is delegated by the trustor.

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§ 35-3-124. Investment in tuition units.

Notwithstanding any other law to the contrary, trustees and others acting in a fiduciary capacity, including governmental agencies such as court clerks, may invest funds held in trust for a minor through the purchase of tuition units on behalf of the minor under the Tennessee College Savings Trust Act, compiled in title 49, chapter 7, part 8.

Chapter 4 Uniform Common Trust Fund Act

§ 35-4-101. Short title.

This chapter shall be known and may be cited as the “Uniform Common Trust Fund Act.”

§ 35-4-102. Bank or trust company establishing common trust funds — Investing in trust funds.

Any bank or trust company qualified to act as fiduciary in this state may establish common trust funds for the purpose of furnishing investments to itself as fiduciary, or to itself and others as cofiduciaries, or to another bank or trust company which may, as such fiduciary or cofiduciary, invest funds that it lawfully holds for investment in interests in the common trust funds, if this investment is not prohibited by the instrument, judgment, decree or order creating the fiduciary relationship, and if, in the case of cofiduciaries, the bank or trust company procures the consent of its cofiduciaries to the investment.

§ 35-4-103. Accounting for trust funds — Chancery court approval.

(a) Unless ordered by a court of competent jurisdiction, the bank or trust company operating the common trust funds is not required to render a court accounting with regard to the funds, but it may, by application to the chancery court, secure approval of such an accounting on such conditions as the court may establish.
(b) When an accounting of a common trust fund is presented to a court for approval, the court shall assign a date and place for hearing and order notice thereof by:
1. (1) Publication once a week for three (3) weeks, the first publication to be not less than twenty (20) days prior to the date of hearing, of a notice in a newspaper having a circulation in the county in which the bank or trust company or branch thereof operating the common trust fund is located;
2. (2) Mailing not less than fourteen (14) days prior to the date of the hearing a copy of the notice to all beneficiaries of the trusts participating in the common trust fund whose names are known to the bank or trust company from the records kept by it in the regular course of business in the administration of the trusts, directed to them at the addresses shown by those records; and
3. (3) Such further notice if any as the court may order.

§ 35-4-104. Uniformity of construction and interpretation.

This chapter shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it.

§ 35-4-105. Fiduciary relationships to which chapter applicable.

This chapter applies to fiduciary relationships in existence on April 8, 1953, or established after that date.

Chapter 5 Judicial or Trust Sales

§ 35-5-101. Twenty days' notice by publication.

(a) In any sale of land to foreclose a deed of trust, mortgage or other lien securing the payment of money or other thing of value or under judicial orders or process, advertisement of the sale shall be made at least three (3) different times in some newspaper published in the county where the sale is to be made.
(b) The first publication shall be at least twenty (20) days previous to the sale.
(c) This section shall not apply where the amount of indebtedness for the payment of which the property being sold does not amount to more than two hundred dollars ($200), in which event the owner of the property may order that advertisement be made by written notices posted as provided in § 35-5-103, instead of by notices published in a newspaper.
(d) Nothing in this section shall be construed as applying to any notice published in accordance with any contract entered into heretofore, and expressed in a mortgage, deed of trust or other legal instruments.
(e) In any sale of land to foreclose a deed of trust, mortgage, or other lien securing the payment of money or other thing of value or under judicial orders of process, the trustee or other party that sells the property shall send to the debtor and any co-debtor a copy of the notice required in § 35-5-104. The notice shall be sent on or before the first date of publication provided in subsection (b) by registered or certified mail, return receipt requested. The notice shall be sent to the following:
1. (1) If to the debtor, addressed to the debtor at:
  1. (A) The mailing address of the property, if any; and
  2. (B) The last known mailing address of the debtor or any other mailing address of the debtor specifically designated for purposes of receiving notices provided at least thirty (30) days prior to the first publication date in written correspondence or written notice in accordance with the loan agreement from the debtor to the creditor, but only if the last known mailing address of the debtor or other mailing address designated by the debtor is different from the mailing address of the property; and
2. (2) If to a co-debtor, addressed to the co-debtor at the last known mailing address of the co-debtor or any other mailing address of the co-debtor specifically designated for purposes of receiving notices provided at least thirty (30) days prior to the first publication date in written correspondence or written notice in accordance with the loan agreement from the co-debtor to the creditor, but only if the last known mailing address of the co-debtor or other mailing address designated by the co-debtor is both different from the mailing address of the property and different from the mailing address of the debtor determined as provided in subdivision (e)(1)(B).
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(f) Unless postponement or adjournment is contractually prohibited, any sale hereunder may be adjourned and rescheduled one (1) or more times without additional newspaper publication, upon compliance with the following provisions:
1. (1) The sale must be held within one (1) year of the originally scheduled date;
2. (2) Each postponement or adjournment must be to a specified date and time, and must be announced at the date, time and location of each scheduled sale date;
3. (3) If the postponement or adjournment is for more than thirty (30) days, notice of the new date, time, and location must be mailed no less than (10) calendar days prior to the sale date via regular mail to the debtor and co-debtor; and
4. (4) Notice of the right to postpone or adjourn without additional newspaper publication shall not be required to be published in any newspaper publication.

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§ 35-5-102. Notice in newspaper not required.

If no newspaper is published in the county in which the land is to be sold, the advertisement in a newspaper is dispensed with, unless ordered by court.

§ 35-5-103. Posting written notices.

Whenever the advertisement cannot be made in a newspaper, the officer shall make publication of the sale for thirty (30) days by written notices posted in at least five (5) of the most public places in the county, one (1) of which shall be the courthouse door, and another in the neighborhood of the defendant; if of realty, in the civil district where the land lies.

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§ 35-5-104. Contents of advertisement or notice — Contents of deed memorializing sale.

(a) The advertisement or notice shall:
1. (1) Give the names of the plaintiff and defendant, or parties interested;
2. (2) Give a concise description of the land; such description shall include a legal description, which means a reference to the deed book and page that contains the complete legal description of the property, and common description, which means, if available, the street address and map and parcel number of the property. In the event no street address exists, a subdivision, lot or tract number may be used. A metes and bounds description may be, but is not required to be, included in the description of the land;
3. (3) Mention the time and place of sale;
4. (4)
  1. (A) Identify each and every lien or claimed lien of the United States with respect to which 26 U.S.C. § 7425(b) requires notice to be given to the United States in order for the sale of the land thus advertised not to be subject to the lien or claim of lien of the United States;
  2. (B) For every lien or claim of lien of the United States so identified, affirmatively state that the notice required by 26 U.S.C. § 7425(b) to be given to the United States has been timely given;
  3. (C) For every lien or claim of lien of the United States so identified, state that the sale of the land thus advertised will be subject to the right of the United States to redeem the land as provided for in 26 U.S.C. § 7425(d)(1);
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5. (5)
  1. (A) Identify each and every lien or claimed lien of the state with respect to which § 67-1-1433(b)(1) requires notice to be given to the state in order for the sale of the land thus advertised not to be subject to the lien or claim of lien of the state;
  2. (B) For every lien or claim of lien of the state so identified, affirmatively state that the notice required by § 67-1-1433(b)(1) to be given to the state has been timely given; and
  3. (C) For every lien or claim of lien of the state so identified, state that the sale of the land thus advertised will be subject to the right of the state to redeem the land as provided for in § 67-1-1433(c)(1); and
6. (6) For each concise description of land, provide the corresponding names of the parties interested.
(b) The deed memorializing the sale shall, in addition to any other requirements as may now or hereafter exist under the laws of the state with respect to the proper form of deeds, in order that they might qualify for recording in the various offices of registers of counties in this state, whenever subsection (a) has required notice to be given to the United States and/or to this state, state that the land described therein is conveyed subject to the rights of the United States to redeem the land as provided for in 26 U.S.C. § 7425(d)(1) and/or is subject to the right of this state to redeem the land as provided for in § 67-1-1433(c)(1), as appropriate, shall have attached to it, as exhibits, a copy of the notice thus provided to the United States, a copy of the written response of the United States to the notice thus provided, if any, a copy of the notice thus provided to the state, and a copy of the written response of the state to the notice thus provided, if any, as appropriate.
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(c) Nothing in this section shall be construed to require inclusion of a street address if it does not exist or is not in common use. Also, utilization of the street address, if any, which appears in the records of the assessor of property with respect to the property involved shall be conclusively presumed to be in compliance with this section.
(d) For the purposes of this section, “parties interested” includes, without limitation, the record holders of any mortgage, deed of trust, or other lien that will be extinguished or adversely affected by the sale and which mortgage, deed of trust, or lien, or notice or evidence thereof, was recorded more than ten (10) days prior to the first advertisement or notice in the register's office of the county in which the real property is located. “Parties interested” also includes a person or entity named as nominee or agent of the owner of the obligation that is secured by the deed of trust and that is identifiable from information provided in the deed of trust, which shall include a mailing address or post office box of the nominee or agent.

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§ 35-5-105. Notice in writing if printer refuses.

If the printer will not make the publication for the rates provided in § 8-21-1301, the officer or person conducting the sale shall make publication by written notices as provided in §§ 35-5-103 and 35-5-104.

§ 35-5-106. Sale without advertisement is not void.

Should the officer, or other person making the sale, proceed to sell without pursuing the provisions of this chapter, the sale shall not, on that account, be either void or voidable.

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35-5-107

§ 35-5-107. Effect of noncompliance with chapter.

Any officer, or other person, referenced in § 35-5-106 who fails to comply with this chapter commits a Class C misdemeanor and is, moreover, liable to the party injured by the noncompliance, for all damages resulting from the failure.

§ 35-5-108. Plan of division of land — Sale of portion of land.

At any time before ten o'clock a.m. (10:00 a.m.) on the day of sale, the defendant or other person whose property is to be sold may deliver to the officer or person making the sale, a plan of division of the lands to be sold, subscribed by the defendant or other person, bearing a date subsequent to the date of advertisement, in which case so much of the land as may be necessary to satisfy the debt and costs, and no more, shall be sold according to the plan furnished. If no such plan is furnished, the land may be sold without division.

§ 35-5-109. Published ending time and published start time for auctions.

The published ending time for auctions conducted under this chapter on an internet-based bidding platform and the published start time for an in-person auction must be between the hours of nine o'clock a.m. (9:00 a.m.) and seven o'clock p.m. (7:00 p.m.) of the day fixed in the notice or advertisement. The day fixed may be any day Monday through Saturday, but must not be fixed on a state or federal legal holiday. However, this section does not apply to sales of parcels pursuant to title 67, chapter 5.

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13-6-106(j)(1)

§ 35-5-110. Bidding on land sales may be reopened by clerks — Court's power not abridged.

In all sales of land made under orders, and decrees of the circuit, probate, chancery, appeals and supreme courts where an advance bid of as much as ten percent (10%) of the original bid is made, the clerk, or clerk and master, of the court is empowered, at no additional fee, commission or cost, to accept the advance bid and reopen the biddings on the sale, and to receive additional bids, and to hold the sale open for advance bids to some day by the officer designated, and give the purchaser and the parties, or their attorneys of record, notice of the reopening of the biddings, and to report this action to the court for confirmation without any order or decree of the court authorizing the reopening first being had, unless the court's order or decree for the sale of the land specifically prohibits the acceptance of an advance bid; provided, that nothing in this section shall be construed as abridging the rights and jurisdiction of the court to reopen the biddings on such terms as the court may deem right.

§ 35-5-111. State may bid at execution or judicial sales.

Whenever the state is interested in the proceeds of any execution sale or any judicial sale, to any extent whatsoever, the state, acting through its attorney general and reporter, may bid on and buy in property either real or personal, at that sale, to the same extent as any natural person might do. Any sums due and payable on behalf of the state, as costs of sale or as a part of the purchase price of the property so bid in and paid by the state, shall be paid out of the general fund of the state treasury upon the warrant of the governor.

§ 35-5-112. Auctioneer services and fee — Manner and method of sale of real property at discretion of court.

(a) Whenever real or personal property is to be sold at public sale under any order or decree of any court in this state, the court, judge or chancellor under whose jurisdiction the sale is to be made has the discretionary authority to secure the services of an auctioneer licensed in this state to conduct the public sale and to fix the auctioneer's fee, the fee to be not more than eight percent (8%) of the sale price on sales of real property and not more than ten percent (10%) of the sale price on sales of personal property, these fees not to include the expenses of sales, and to order the fee to be paid out of the proceeds of the sale.
(b) Whenever real property is sold at a public sale conducted by an auctioneer, the manner and method of sale is at the discretion of the court. As used in this section, “public sale” includes auctions on internet-based bidding platforms, in-person, on-site, or off-site auctions, and other accepted auction methods, so long as the auctions are open for participation by the public at large. The court, in its discretion, may impose additional conditions or procedures upon the sale of property as are reasonably necessary.
(c) If the clerk of the court or clerk and master is also a licensed auctioneer, then the clerk or clerk and master shall receive fees in that person's capacity as clerk, or clerk and master, or special commissioner, and shall not receive any extra fee as a licensed auctioneer.

§ 35-5-113. Auction sales in divorce proceedings.

The provisions and procedures of this chapter apply to all auction sales of property ordered by a court pursuant to § 36-4-121, to accomplish the equitable division of property in divorce cases. The court, in its discretion, may impose any additional conditions or procedures upon the sale of property in divorce cases as are reasonably designed to ensure that the property is sold for its fair market value.

§ 35-5-114. Trustee's attendance at foreclosure — Successor trustee.

(a) In any sale of land to foreclose a deed of trust, mortgage, or other lien securing the payment of money or other thing of value, the trustee or person or entity holding a similar position may attend the foreclosure either in person or by an agent. If the trustee attends by an agent, the agent may receive bids and conduct the sale on behalf of the trustee. The trustee shall execute any applicable trustee's deed or similar conveyance instrument. The appointment of an agent by a trustee need not be by written instrument, nor is there any recording required relative to the appointment.
(b)
1. (1) The beneficiary may, unless the deed of trust contains specific language to the contrary, appoint a successor trustee at any time by filing a substitution of trustee for record with the register of deeds of the county in which the property is situated.
2. (2) The substitute trustee or its delegate shall succeed to all the power, duties, authority and title of the original trustee and any previous successor trustee or delegatee.
3. (3)
  1. (A) In the event the substitution of trustee is not recorded prior to the first date of publication by the substitute trustee, the beneficiary shall include in the substitution of trustee instrument, which shall be recorded prior to the deed evidencing sale, the following statement:
    1. Beneficiary has appointed the substitute trustee prior to the first notice of publication as required by T.C.A. § 35-5-101 and ratifies and confirms all actions taken by the substitute trustee subsequent to the date of substitution and prior to the recording of this substitution.
  2. (B) Once a substitution of trustee instrument containing the statement set forth in subdivision (b)(3)(A) is timely recorded, it shall act as conclusive proof as a matter of law that the substitute trustee has been timely appointed and has acted with authority of the beneficiary.
(c) A substitution of trustee shall be recorded prior to any sale, and no action may be instituted against any person who, acting in good faith without knowledge to the contrary, relies upon the validity of the substitution of trustee or written statements by the beneficiary or substitute trustee as to the authority of the substitute trustee.
(d) If the name of the substitute trustee is not included in the first publication, then, not less than ten (10) business days prior to the sale date, the substitute trustee shall send notice by registered or certified mail to the debtor or any co-debtor, as provided in § 35-5-101, and to any interested parties, giving the name and address of the substitute trustee. If the trustee is not a resident of this state, the notice shall include the name and address of a registered agent of the substitute trustee who is located in the state. Record notice of the mailing provided in this subsection (d) shall be evidenced by the substitute trustee's recordation of an affidavit recorded prior to the deed evidencing the sale or by recitation on the substitute trustee's deed.

§ 35-5-115. Discovery proceedings for nonresidents.

(a)
1. (1) IF a nonresident creditor holds indebtedness secured by residential real property that is located in this state and owned by a state resident, OR
2. (2) IF a nonresident trustee or agent is involved in foreclosure proceedings relative to residential real property that is located in this state and owned by a resident,
3. (3) THEN all discovery proceedings, including, but not limited to, the production of requested documents and the deposition of witnesses, shall be conducted in the county in which the residential real estate is located or in which the litigation is pending.
(b) The court in which such litigation is pending may make orders consistent with the purposes of this section to prevent undue burden on any party.

§ 35-5-116. Trustee as necessary party.

(a) Any trustee named in a suit or proceeding, as related to a sale of real property under a trust deed or mortgage, may plead in the answer that the trustee is not a necessary party by a verified denial, stating the basis for the trustee's reasonable belief that the trustee was named as a party solely in the capacity as a trustee under a deed of trust, contract lien, or security instrument.
(b) Within thirty (30) days after the filing of the trustee's verified denial, a verified response is due from all parties to the suit or proceeding setting forth all matters, whether in law or fact, that rebut the trustee's verified denial.
(c) If a party has no objection or fails to file a timely verified response to the trustee's verified denial, the trustee shall be dismissed from the suit or proceeding without prejudice.
(d) If a respondent files a timely verified response to the trustee's verified denial, the matter shall be set for hearing. The court shall dismiss the trustee from the suit or proceeding without prejudice, if the court determines that the trustee is not a necessary party.
(e) A dismissal of the trustee pursuant to subsections (c) and (d) shall not prejudice a party's right to seek injunctive relief to prevent the trustee from proceeding with a foreclosure sale.
(f) A trustee shall not be liable for any good faith error resulting from reliance on any information in law or fact provided by the borrower or secured party or their respective attorney, agent, or representative or other third party.

§ 35-5-117. Deficiency judgment sufficient to fully satisfy indebtedness on real property after trustee's or foreclosure sale.

(a) In an action brought by a creditor to recover a balance still owing on an indebtedness after a trustee's or foreclosure sale of real property secured by a deed of trust or mortgage, the creditor shall be entitled to a deficiency judgment in an amount sufficient to satisfy fully the indebtedness.
(b) In all such actions, absent a showing of fraud, collusion, misconduct, or irregularity in the sale process, the deficiency judgment shall be for the total amount of indebtedness prior to the sale plus the costs of the foreclosure and sale, less the fair market value of the property at the time of the sale. The creditor shall be entitled to a rebuttable prima facie presumption that the sale price of the property is equal to the fair market value of the property at the time of the sale.
(c) To overcome the presumption set forth in subsection (b), the debtor must prove by a preponderance of the evidence that the property sold for an amount materially less than the fair market value of property at the time of the foreclosure sale. If the debtor overcomes the presumption, the deficiency shall be the total amount of the indebtedness prior to the sale plus the costs of the foreclosure and sale, less the fair market value of the property at the time of the sale as determined by the court.
(d)
1. (1) Any action for a deficiency judgment under this section shall be brought not later than the earlier of:
  1. (A) Two (2) years after the date of the trustee's or foreclosure sale, exclusive of any period of time in which a petition for bankruptcy is pending; or
  2. (B) The time for enforcing the indebtedness as provided for under §§ 28-1-102 and 28-2-111.
2. (2) Nothing contained in this section shall be construed as limiting a person entitled to bring such action from electing to sue on an indebtedness in lieu of, prior to, or contemporaneously with enforcement of a deed of trust or mortgage.

§ 35-5-118. Applicability of §§ 35-5-101(e), 35-5-104(a)(4) and (5), and 35-5-104(b).

The requirements of §§ 35-5-101(e), 35-5-104(a)(4) and (5), and 35-5-104(b) shall not be applicable to sales of parcels pursuant to title 67, chapter 5.

Chapter 6 Uniform Principal and Income Act

Part 1 Definitions and Fiduciary Duties

§ 35-6-101. Short title.

This chapter shall be known and may be cited as the “Uniform Principal and Income Act”.

§ 35-6-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Accounting period” means a calendar year unless another twelve-month period is selected by a fiduciary. The term includes a portion of a calendar year or other twelve-month period that begins when an income interest begins or ends when an income interest ends;
2. (2) “Beneficiary” includes, in the case of a decedent's estate, an heir, legatee, and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary;
3. (3) “Fiduciary” means a personal representative or a trustee. The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function;
4. (4) “Income” means money or property that a fiduciary receives as current return from a principal asset. The term includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in part 4 of this chapter;
5. (5) “Income beneficiary” means a person to whom net income of a trust is or may be payable;
6. (6) “Income interest” means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion;
7. (7) “Mandatory income interest” means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute;
8. (8) “Net income” means the total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under this chapter to or from income during the period;
9. (9) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation, or any other legal or commercial entity;
10. (10) “Principal” means property held in trust for distribution to a remainder beneficiary when the trust terminates;
11. (11) “Remainder beneficiary” means a person entitled to receive principal when an income interest ends;
12. (12) “Terms of a trust” means the manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct;
13. (13) “Trustee” includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.

§ 35-6-103. Fiduciary duties — General principles.

(a) In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of title 35, chapter 6, a fiduciary:
1. (1) Shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in this chapter;
2. (2) May administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this chapter;
3. (3) Shall administer a trust or estate in accordance with this chapter if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and
4. (4) Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this chapter do not provide a rule for allocating the receipt or disbursement to or between principal and income.
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(b) In exercising the power to adjust under § 35-6-104(a) or a discretionary power of administration regarding a matter within the scope of this chapter, whether granted by the terms of a trust, or will or this chapter, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, considering any terms of the trust or the will manifesting the trustors' or testators' intention that the fiduciary shall or may favor one (1) or more of the beneficiaries. A determination in accordance with this chapter is presumed to be fair and reasonable to all of the beneficiaries.
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§ 35-6-104. Trustee's power to adjust.

(a) A trustee may adjust between principal and income to the extent the trustee considers necessary if:
1. (1) The trustee invests and manages trust assets as a prudent investor;
2. (2) The terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust's income; and
3. (3) The trustee determines, after applying the rules in § 35-6-103(a), that the trustee is unable to comply with § 35-6-103(b).
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(b) In deciding whether and to what extent to exercise the power to make adjustments under this section, the trustee may consider, but is not limited to, any of the following:
1. (1) The nature, purpose, and expected duration of the trust;
2. (2) The intent of the settlor;
3. (3) The identity and circumstances of the beneficiaries;
4. (4) The needs for liquidity, regularity of income, and preservation and appreciation of capital;
5. (5) The assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor;
6. (6) The net amount allocated to income under the other sections of this chapter and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;
7. (7) Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;
8. (8) The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation; and
9. (9) The anticipated tax consequences of an adjustment.
(c) A trustee may not make an adjustment:
1. (1) That disqualifies the trust for an estate tax or gift tax marital or charitable deduction that would be allowed, in whole or in part, if the trustee did not have the power to make the adjustment;
2. (2) That reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion;
3. (3) That changes the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;
4. (4) From any amount that is permanently set aside for charitable purposes under a will or the terms of a trust unless both income and principal are so set aside;
5. (5) If possessing or exercising the power to make an adjustment causes an individual to be treated as the owner of all or part of the trust for income tax purposes, and the individual would not be treated as the owner if the trustee did not possess the power to make an adjustment;
6. (6) If possessing or exercising the power to make an adjustment causes all or part of the trust assets to be included for estate tax purposes in the estate of an individual who has the power to remove a trustee or appoint a trustee, or both, and the assets would not be included in the estate of the individual if the trustee did not possess the power to make an adjustment;
7. (7) If the trustee is a beneficiary of the trust; or
8. (8) If the trustee is not a beneficiary, but the adjustment would benefit the trustee directly or indirectly.
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(d) If subdivision (c)(5), (c)(6), (c)(7), or (c)(8) applies to a trustee and there is more than one (1) trustee, a cotrustee to whom the provision does not apply may make the adjustment unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust.
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(e) A trustee may release the entire power conferred by subsection (a) or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in subdivision (c)(1)-(6) or (c)(8), or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in subsection (c). The release may be permanent or for a specified period, including a period measured by the life of an individual.
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(f) Terms of a trust that limit the power of a trustee to make an adjustment between principal and income do not affect the application of this section unless it is clear from the terms of the trust that the terms are intended to deny the trustee the power of adjustment conferred by subsection (a).
(g) Nothing in this section or in this chapter is intended to create or imply a duty to make an adjustment, and a trustee is not liable for not considering whether to make an adjustment or for choosing not to make an adjustment.

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35-6-413(a)

§ 35-6-105. Optional notice.

(a) A trustee may, but is not required to, give a notice of proposed action regarding a matter governed by this chapter as provided in this section. For the purpose of this section, a proposed action includes:
1. (1) An individual action;
2. (2) A course of action; or
3. (3) A decision not to take action.
(b) If the trustee decides to give notice, the trustee shall mail notice of the proposed action to all adult beneficiaries who are receiving, or are entitled to receive, income under the trust or to receive a distribution of principal if the trust were terminated at the time the notice is given.
(c) Notice of proposed action need not be given to any person who consents in writing to the proposed action. The consent may be executed at any time before or after the proposed action is taken.
(d) The notice of proposed action shall state that it is given pursuant to this section and shall state all of the following:
1. (1) The name and mailing address of the trustee;
2. (2) The name and telephone number of a person who may be contacted for additional information;
3. (3) A description of the action proposed to be taken and an explanation of the reasons for the action;
4. (4) The time within which objections to the proposed action can be made, which shall be at least sixty (60) days from the mailing of the notice of proposed action; and
5. (5) The date on or after which the proposed action may be taken or is effective.
(e) A beneficiary may object to the proposed action by mailing a written objection to the trustee at the address stated in the notice of proposed action within the time period specified in the notice of proposed action.
(f) A trustee is not liable to a beneficiary for an action regarding a matter governed by this chapter if the trustee does not receive a written objection to the proposed action from the beneficiary within the applicable period and the other requirements of this section are satisfied. If no beneficiary entitled to notice objects under this section, the trustee is not liable to any current or future beneficiary with respect to the proposed action.
(g) If the trustee receives a written objection within the applicable period, either the trustee or a beneficiary may petition the court to have the proposed action taken as proposed, taken with modifications, or denied. In the proceeding, a beneficiary objecting to the proposed action has the burden of proving that the trustee's proposed action should not be taken. A beneficiary who has not objected is not estopped from opposing the proposed action in the proceeding. If the trustee decides not to implement the proposed action, the trustee shall notify the beneficiaries of the decision not to take the action and the reasons for the decision, and the trustee's decision not to implement the proposed action does not itself give rise to liability to any current or future beneficiary. A beneficiary may petition the court to have the action taken, and has the burden of proving that it should be taken.

§ 35-6-106. Remedy.

With respect to a trustee's exercise or nonexercise of the power to make an adjustment under § 35-5-104, the sole remedy is to direct, deny, or revise an adjustment between principal and income.

§ 35-6-107. Records.

A trustee who elects to exercise any power or not to exercise any power under this chapter shall maintain only such records that may be necessary or appropriate in the discretion of the trustee to support such determination at the time the determination is made and shall not be required to maintain records not necessary for the administration of the trust.

§ 35-6-108. Total return unitrusts.

(a) In this section:
1. (1) “Disinterested person” means a person who is not a “related or subordinate party,” as defined in 26 U.S.C. § 672(c), with respect to the person then acting as trustee of the trust and excludes the trustor of the trust and any interested trustee;
2. (2) “Income trust” means a trust, created by either an inter vivos or a testamentary instrument, which directs or permits the trustee to distribute the net income of the trust to one (1) or more persons, either in fixed proportions or in amounts or proportions determined by the trustee and regardless of whether the trust directs or permits the trustee to distribute the principal of the trust to one (1) or more such persons;
3. (3) “Interested distributee” means a person to whom distributions of income or principal can currently be made who has the power to remove the existing trustee and designate as successor a person who may be a “related or subordinate party,” as defined in 26 U.S.C. § 672(c), with respect to such distributee;
4. (4) “Interested trustee” means an individual trustee who is a qualified beneficiary or any trustee who may be removed and replaced by an interested distributee, or an individual trustee whose legal obligation to support a beneficiary may be satisfied by distributions of income and principal of the trust;
5. (5) “Internal Revenue Code” refers to the Internal Revenue Code of 1986, as amended from time to time, and any references to a section of such shall include any successor, substituted, or amended section of the Internal Revenue Code;
6. (6) “Qualified beneficiaries” means those beneficiaries of a trust specified in § 35-15-103(24);
7. (7) “Total return unitrust” means an income trust that has been converted under this section or the laws of any other jurisdiction that permits an income trust to be converted to a trust in which a unitrust amount is treated as the net income of the trust;
8. (8) “Trustee” means all persons acting as trustee of the trust, except where expressly noted otherwise, whether acting in their discretion or on the direction of one (1) or more persons acting in a fiduciary capacity;
9. (9) “Trustor” means an individual who created an inter vivos or a testamentary trust; and
10. (10) “Unitrust amount” means an amount computed as a percentage of the fair market value of the trust.
(b) A trustee, other than an interested trustee, or where two (2) or more persons are acting as trustee, a majority of the trustees who are not an interested trustee, in either case hereafter “trustee”, may, in its sole discretion and without court approval:
1. (1) Convert an income trust to a total return unitrust;
2. (2) In the case of a total return unitrust converted under this section or the laws of any other jurisdiction, reconvert a total return unitrust to an income trust; or
3. (3) In the case of a total return unitrust converted under this section or the laws of any other jurisdiction, change the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust if all of the following apply:
  1. (A) The trustee adopts a written policy for the trust providing:
    1. (i) In the case of a trust being administered as an income trust, that future distributions from the trust will be unitrust amounts rather than net income;
    2. (ii) In the case of a trust being administered as a total return unitrust, that future distributions from the trust will be net income rather than unitrust amounts; or
    3. (iii) That the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust will be changed as stated in the policy;
  2. (B) The trustee sends written notice of its intention to take such action, along with copies of such written policy and this section, to the trustor of the trust, if living, and to all qualified beneficiaries of the trust;
  3. (C) At least one (1) person receiving notice under subdivision (b)(3)(B) is legally competent; and
  4. (D) No person receiving such notice objects, by written instrument delivered to the trustee, to the proposed action of the trustee within thirty (30) days of receipt of such notice.
(c) If there is no trustee of the trust other than an interested trustee, the interested trustee or, where two (2) or more persons are acting as trustee and are interested trustees, a majority of such interested trustees may, in its sole discretion and without court approval:
1. (1) Convert an income trust to a total return unitrust;
2. (2) Reconvert a total return unitrust to an income trust; or
3. (3) Change the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust if all of the following apply:
  1. (A) The trustee adopts a written policy for the trust providing:
    1. (i) In the case of a trust being administered as an income trust, that future distributions from the trust will be unitrust amounts rather than net income;
    2. (ii) In the case of a trust being administered as a total return unitrust, that future distributions from the trust will be net income rather than unitrust amounts; or
    3. (iii) That the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust will be changed as stated in the policy;
  2. (B) The trustee appoints a disinterested person who, in its sole discretion but acting in a fiduciary capacity, determines for the trustee:
    1. (i) The percentage to be used to calculate the unitrust amount;
    2. (ii) The method to be used in determining the fair market value of the trust; and
    3. (iii) Which assets, if any, are to be excluded in determining the unitrust amount;
  3. (C) The trustee sends written notice of its intention to take such action, along with copies of such written policy and this section, and the determinations of the disinterested person to the trustor of the trust, if living, and to all qualified beneficiaries of the trust;
  4. (D) At least one (1) person receiving notice under subdivision (c)(3)(C), of this section is legally competent; and
  5. (E) No person receiving such notice objects, by written instrument delivered to the trustee, to the proposed action or the determinations of the disinterested person within thirty (30) days of receipt of such notice.
(d) If any trustee desires to convert an income trust to a total return unitrust, reconvert a total return unitrust to an income trust, or change the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust but does not have the ability to or elects not to do it under subsection (b) or (c), the trustee may petition the court for such order as the trustee deems appropriate. In the event, however, there is only one (1) trustee of such trust and such trustee is an interested trustee or in the event there are two (2) or more trustees of such trust and a majority of them are interested trustees, the court, in its own discretion or on the petition of such trustee or trustees or any person interested in the trust, may appoint a disinterested person who, acting in a fiduciary capacity, shall present such information to the court as shall be necessary to enable the court to make its determinations hereunder.
(e) The fair market value of the trust shall be determined at least annually, using such valuation date or dates or averages of valuation dates as are deemed appropriate. Assets for which a fair market value cannot be readily ascertained shall be valued using such valuation methods as are deemed reasonable and appropriate. Assets used by a trust beneficiary, such as a residence property or tangible personal property, may be excluded from fair market value for computing the unitrust amount.
(f) The percentage to be used in determining the unitrust amount shall be a reasonable current return from the trust, in any event not less than three percent (3%) nor more than five percent (5%), taking into account the intentions of the trustor of the trust as expressed in the governing instrument, the needs of the beneficiaries, general economic conditions, projected current earnings and appreciation for the trust, and projected inflation and its impact on the trust.
(g) Following the conversion of an income trust to a total return unitrust, the trustee:
1. (1) Shall consider the unitrust amount as paid from net accounting income determined as if the trust were not a unitrust;
2. (2) Shall then consider the unitrust amount as paid from ordinary income not allocable to net accounting income;
3. (3) After calculating the trust's capital gain net income described in 26 U.S.C. § 1222(9), may consider the unitrust amount as paid from net short-term capital gain described in 26 U.S.C. § 1222(5) and then from net long-term capital gain described in 26 U.S.C. § 1222(7); and
4. (4) Shall then consider the unitrust amount as coming from the principal of the trust.
(h) In administering a total return unitrust, the trustee may, in its sole discretion but subject to the governing instrument, determine:
1. (1) The effective date of the conversion;
2. (2) The timing of distributions, including, but not limited to, provisions for prorating a distribution for a short year in which a beneficiary's right to payments commences or ceases;
3. (3) Whether distributions are to be made in cash or in kind or partly in cash and partly in kind;
4. (4) If the trust is reconverted to an income trust, the effective date of such reconversion; and
5. (5) Such other administrative issues as may be necessary or appropriate to carry out the purposes of this section.
(i) Conversion to a total return unitrust under this section shall not affect any other provision of the governing instrument, if any, regarding distributions of principal.
(j) In the case of a trust for which a marital deduction has been taken for federal tax purposes under 26 U.S.C. § 2056 or § 2523, the spouse otherwise entitled to receive the net income of the trust shall have the right, by written instrument delivered to the trustee, to compel the reconversion during that spouse's lifetime of the trust from a total return unitrust to an income trust, notwithstanding anything in this section to the contrary.
(k)
1. (1) This section shall be construed as pertaining to the administration of a trust and shall be available to any trust including a trust initially converted to a total return unitrust under the laws of another jurisdiction that is administered in Tennessee under Tennessee law or to any trust, regardless of its place of administration, whose governing instrument provides that Tennessee law governs matters of construction or administration unless:
  1. (A) The governing instrument reflects an intention that the current beneficiary or beneficiaries are to receive an amount other than a reasonable current return from the trust;
  2. (B) The trust is a pooled income fund described in 26 U.S.C. § 642(c)(5) or a charitable-remainder trust described in 26 U.S.C. § 664(d); and
  3. (C) The governing instrument expressly prohibits use of this section by specific reference to the section or expressly states the trustor's intent that net income not be calculated as a unitrust amount.
2. (2) Any of the following statements in the governing instrument, or words similar to such statements, shall be sufficient to preclude the use of this section:
  1. The provisions of § 35-6-109, as amended, or any corresponding provision of future law, shall not be used in the administration of this trust; or
  2. My trustee shall not determine the distributions to the income beneficiary as a unitrust amount.
(l) Any trustee or disinterested person who in good faith takes or fails to take any action under this section shall not be liable to any person affected by such action or inaction, regardless of whether such person received written notice as provided in this section and regardless of whether such person was under a legal disability at the time of the delivery of such notice. Such person's exclusive remedy shall be to obtain an order of the court directing the trustee to convert an income trust to a total return unitrust, to reconvert from a total return unitrust to an income trust or to change the percentage used to calculate the unitrust amount.
(m) This section shall be available to trusts in existence on July 1, 2010, or created thereafter.

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§ 35-6-109. Express total return unitrusts.

(a) This section shall apply to a trust that, by its governing instrument, requires or permits the distribution, at least annually, of a unitrust amount equal to a fixed percentage of not less than three percent (3%) nor more than five percent (5%) per year of the fair market value of the trust's assets, valued at least annually, such trust to be referred to in this section as an “express total return unitrust”.
(b) The unitrust amount for an express total return unitrust may be determined by reference to the fair market value of the trust's assets in one (1) year or more than one (1) year.
(c) Distribution of such a fixed percentage unitrust amount is considered a distribution of all of the income of the express total return unitrust.
(d) An express total return unitrust may or may not provide a mechanism for changing the unitrust percentage similar to the mechanism provided under § 35-6-108, based upon the factors noted therein, and may or may not provide for a conversion from a unitrust to an income trust and/or a reconversion of an income trust to a unitrust similar to the mechanism under § 35-6-108.
(e) If an express total return unitrust does not specifically or by reference to § 35-6-108 deny a power to change the unitrust percentage or to convert to an income trust, then the trustee shall have such power and the express total return unitrust shall be deemed to be a “total return unitrust” within the meaning of § 35-6-108 for purposes of applying § 35-6-108 to the trust.
(f) The distribution of a fixed percentage of not less than three percent (3%) nor more than five percent (5%) reasonably apportions the total return of an express total return unitrust.
(g) The trust instrument may grant discretion to the trustee to adopt a consistent practice of treating capital gains as part of the unitrust distribution, to the extent that the unitrust distribution exceeds the net accounting income, or it may specify the ordering of such classes of income.
(h) Unless the terms of the trust specifically provide otherwise, a distribution of the unitrust amount from an express total return unitrust shall be considered to have been made from the following sources in order of priority:
1. (1) From net accounting income determined as if the trust were not a unitrust;
2. (2) From ordinary income not allocable to net accounting income;
3. (3) After calculating the trust's capital gain net income as described in 26 U.S.C. § 1222(9), from net realized short-term capital gain as described in 26 U.S.C. § 1222(5) and then from net realized long-term capital gain described in 26 U.S.C. § 1222(7); and
4. (4) From the principal of the trust.
(i) The trust instrument may provide that assets:
1. (1) For which a fair market value cannot be readily ascertained shall be valued using such valuation methods as are deemed reasonable and appropriate; and
2. (2) Used by a trust beneficiary, such as a residence property or tangible personal property, may be excluded from the net fair market value for computing the unitrust amount.
(j) In this section, “Internal Revenue Code” refers to the Internal Revenue Code of 1986 (U.S.C. title 26), and any references to a section thereof shall include any successor, substituted, or amended section of the Internal Revenue Code.

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35-6-108(k)(2)

Part 2 Decedent's Estate or Terminating Income Interest

§ 35-6-201. Determination and distribution of net income.

After a decedent dies, in the case of an estate, or after an income interest in a trust ends, the following rules apply:
1. (1) A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under the rules in parts 3-5 of this chapter which apply to trustees and the rules in subdivision (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property;
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2. (2) A fiduciary shall determine the remaining net income of a decedent's estate or a terminating income interest under the rules in parts 3-5 of this chapter which apply to trustees and by:
  1. (A) Including in net income all income from property used to discharge liabilities;
  2. (B) Paying from income or principal, in the fiduciary's discretion, fees of attorneys, accountants, and fiduciaries; court costs and other expenses of administration; and interest on death taxes; but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction; and
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    35-6-501
  3. (C) Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent's estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust, or applicable law;
3. (3) A fiduciary shall distribute to a beneficiary who receives a pecuniary amount outright the interest or any other amount provided by the will, the terms of the trust, or applicable law from net income determined under subdivision (2) or from principal to the extent that net income is insufficient. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends and no interest or other amount is provided for by the terms of the trust or applicable law, the fiduciary shall distribute the interest or other amount to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will;
4. (4) A fiduciary shall distribute the net income remaining after distributions required by subdivision (3) of this section in the manner described in § 35-6-202 to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust;
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5. (5) A fiduciary may not reduce principal or income receipts from property described in subdivision (1) of this section because of a payment described in §§ 35-6-501 or 35-6-502 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent's death or an income interest's terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.

§ 35-6-202. Distribution to residuary and remainder beneficiaries.

(a) Each beneficiary described in § 35-6-201(4) is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one (1) distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date.
(b) In determining a beneficiary's share of net income, the following rules apply:
1. (1) The beneficiary is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations;
2. (2) The beneficiary's fractional interest in the undistributed principal assets must be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust;
3. (3) The beneficiary's fractional interest in the undistributed principal assets must be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any unpaid principal obligation;
4. (4) The distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.
(c) If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income.
(d) A fiduciary may apply the rules in this section, to the extent that the fiduciary considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset.

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35-6-201(4)

Part 3 Apportionment at Beginning and End of Income Interest

§ 35-6-301. When right to income begins and ends.

(a) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.
(b) An asset becomes subject to a trust:
1. (1) On the date it is transferred to the trust in the case of an asset that is transferred to a trust during the transferor's life;
2. (2) On the date of a testator's death in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the testator's estate; or
3. (3) On the date of an individual's death in the case of an asset that is transferred to a fiduciary by a third party because of the individual's death.
(c) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under subsection (d), even if there is an intervening period of administration to wind up the preceding income interest.
(d) An income interest ends on the day before an income beneficiary dies or another terminating event occurs, or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income.

§ 35-6-302. Apportionment of receipts and disbursements when decedent dies or income interest begins.

(a) A trustee shall allocate an income receipt or disbursement other than one to which § 35-6-201(1) applies to principal if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest.
(b) A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement must be treated as accruing from day to day if its due date is not periodic or it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins must be allocated to principal and the balance must be allocated to income.
(c) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of this chapter. Distributions to shareholders or other owners from an entity to which § 35-6-401 applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.

§ 35-6-303. Apportionment when income interest ends.

(a) In this section, “undistributed income” means net income received before the date on which an income interest ends. Undistributed income does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.
(b) When a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary's share of the undistributed income that is not disposed of under the terms of the trust unless the beneficiary has an unqualified power to revoke more than five percent (5%) of the trust immediately before the income interest ends. In the latter case, the undistributed income from the portion of the trust that may be revoked must be added to principal.
(c) When a trustee's obligation to pay a fixed annuity or a fixed fraction of the value of the trust's assets ends, the trustee shall prorate the final payment if and to the extent required by applicable law to accomplish a purpose of the trust or its settlor relating to income, gift, estate, or other tax requirements.

Part 4 Allocation of Receipts During Administration of Trust

A. Receipts From Entities

§ 35-6-401. Character of receipts.

(a) In this section, “entity” means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization in which a trustee has an interest other than a trust or estate to which § 35-6-402 applies, a business or activity to which § 35-6-403 applies, or an asset-backed security to which § 35-6-415 applies.
(b) Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity.
(c) A trustee shall allocate the following receipts from an entity to principal:
1. (1) Property other than money;
2. (2) Money received in one (1) distribution or a series of related distributions in exchange for part or all of a trust's interest in the entity;
3. (3) Money received in total or partial liquidation of the entity; and
4. (4) Money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes.
(d) Money is received in partial liquidation:
1. (1) To the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or
2. (2) If the total amount of money and property received in a distribution or series of related distributions is greater than twenty percent (20%) of the entity's gross assets, as shown by the entity's year-end financial statements or by an attestation by an officer of the entity's gross assets immediately preceding the initial receipt. If the total amount of money and property received in a distribution or series of related distributions is equal to or less than twenty percent (20%) of an entity's gross assets, then it is not a partial liquidation.
(e) Money is not received in partial liquidation, nor may it be taken into account under subdivision (d)(2), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money.
(f) A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity's board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation's board of directors.

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§ 35-6-402. Distribution from trust or estate.

A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, § 35-6-401 or § 35-6-415 applies to a receipt from the trust.

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35-6-401(a)

§ 35-6-403. Business and other activities conducted by trustee.

(a) If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.
(b) A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets, and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust's general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust's general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business.
(c) Activities for which a trustee may maintain separate accounting records include:
1. (1) Retail, manufacturing, service, and other traditional business activities;
2. (2) Farming;
3. (3) Raising and selling livestock and other animals;
4. (4) Management of rental properties;
5. (5) Extraction of minerals and other natural resources;
6. (6) Timber operations; and
7. (7) Activities to which § 35-6-414 applies.

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B. Receipts Not Normally Apportioned

§ 35-6-404. Principal receipts.

A trustee shall allocate to principal:
1. (1) To the extent not allocated to income under this chapter, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its trustee as beneficiary;
2. (2) Money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including realized profit, subject to this chapter;
3. (3) Amounts recovered from third parties to reimburse the trust because of disbursements described in § 35-6-502(a)(7) or for other reasons to the extent not based on the loss of income;
4. (4) Proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income;
5. (5) Net income received in an accounting period during which there is no beneficiary to whom a trustee may or must distribute income; and
6. (6) Other receipts as provided in Part 4C, §§ 35-6-408 — 35-6-415.

§ 35-6-405. Rental property.

To the extent that a trustee accounts for receipts from rental property pursuant to this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount.

§ 35-6-406. Obligation to pay money.

(a) An amount received as interest, whether determined at a fixed, variable, or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, must be allocated to income without any provision for amortization of premium.
(b) A trustee shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the trustee more than one (1) year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity. If the obligation matures within one (1) year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust must be allocated to income.
(c) This section does not apply to an obligation to which § 35-6-409, § 35-6-410, § 35-6-411, § 35-6-412, § 35-6-414, or § 35-6-415 applies.

§ 35-6-407. Insurance policies and similar contracts.

(a) Except as otherwise provided in subsection (b), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.
(b) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income, or, subject to § 35-6-403, loss of profits from a business.
(c) This section does not apply to a contract to which § 35-6-409 applies.

C. Receipts Normally Apportioned

§ 35-6-408. Insubstantial allocations not required.

If a trustee determines that an allocation between principal and income required by § 35-6-409, § 35-6-410, § 35-6-411, § 35-6-412, or § 35-6-415 is insubstantial, the trustee may allocate the entire amount to principal unless one (1) of the circumstances described in § 35-6-104(c) applies to the allocation. This power may be exercised by a cotrustee in the circumstances described in § 35-6-104(d) and may be released for the reasons and in the manner described in § 35-6-104(e). An allocation is presumed to be insubstantial if:
1. (1) The amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than ten percent (10%); or
2. (2) The value of the asset producing the receipt for which the allocation would be made is less than ten percent (10%) of the total value of the trust's assets at the beginning of the accounting period.

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35-6-404(6)

§ 35-6-409. Deferred compensation, annuities, and similar payments.

(a) In this section:
1. (1) “Payment” means a payment that a trustee may receive over a fixed number of years or during the life of one (1) or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term includes a payment made in money or property from the payer's general assets or from a separate fund created by the payer. For purposes of subsections (d), (e), (f), and (g), the term also includes any payment from any separate fund, regardless of the reason for the payment; and
2. (2) “Separate fund” includes, without limitation, a private or commercial annuity, an individual retirement account, and a pension, profit-sharing, stock-bonus, or stock-ownership plan.
(b) To the extent that a payment is characterized as interest, a dividend, or a payment made in lieu of interest or a dividend, a trustee shall allocate the payment to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or an equivalent payment.
(c) If no part of a payment is characterized as interest, a dividend, or an equivalent payment, and all or part of the payment is required to be made, a trustee shall allocate to income ten percent (10%) of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or the payment received is the entire amount to which the trustee is entitled, the trustee shall allocate the entire payment to principal. For purposes of this subsection (c), a payment is not “required to be made” to the extent that it is made because the trustee exercises a right of withdrawal.
(d) Except as otherwise provided in subsection (e), subsections (f) and (g) apply, and subsections (b) and (c) do not apply, in determining the allocation of a payment made from a separate fund to:
1. (1) A trust to which an election to qualify for a marital deduction under 26 U.S.C. § 2056(b)(7) or § 67-8-315(a)(6); or
2. (2) A trust that qualifies for the marital deduction under 26 U.S.C. § 2056(b)(5).
(e) Subsections (d), (f), and (g) do not apply if and to the extent that the series of payments would, without the application of subsection (d), qualify for the marital deduction under 26 U.S.C. § 2056(b)(7)(C).
(f) A trustee shall determine the internal income, without regard to its receipt by the trustee, of each separate fund for the accounting period as if the separate fund were a trust subject to this chapter. Upon request of the surviving spouse, the trustee shall demand that the person administering the separate fund distribute the internal income to the trust. The trustee shall allocate a payment from the separate fund to income to the extent of the internal income of the separate fund and distribute that amount to the surviving spouse. The trustee shall allocate the balance of the payment to principal. Upon request of the surviving spouse, the trustee shall allocate principal to income to the extent the internal income of the separate fund exceeds payments made from the separate fund to the trust during the accounting period.
(g) If a trustee cannot determine the internal income of a separate fund but can determine the value of the separate fund, the internal income of the separate fund is deemed to equal at least three percent (3%) of the fund's value, according to the most recent statement of value preceding the beginning of the accounting period. If the trustee can determine neither the internal income of the separate fund nor the fund's value, the internal income of the fund is deemed to equal the product of the interest rate and the present value of the expected future payments, as determined under 26 U.S.C. § 7520, for the month preceding the accounting period for which the computation is made.
(h) This section does not apply to a payment to which § 35-6-410 applies.

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§ 35-6-410. Liquidating asset.

(a) In this section, “liquidating asset” means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. Liquidating asset includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than one (1) year under an arrangement that does not provide for the payment of interest on the unpaid balance. Liquidating asset does not include a payment subject to § 35-6-409, resources subject to § 35-6-411, timber subject to § 35-6-412, an activity subject to § 35-6-414, an asset subject to § 35-6-415, or any asset for which the trustee establishes a reserve for depreciation under § 35-6-503.
(b) A trustee shall allocate to income ten percent (10%) of the receipts from a liquidating asset and the balance to principal.

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§ 35-6-411. Minerals, water, and other natural resources.

(a) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows:
1. (1) If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income;
2. (2) If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal;
3. (3) If an amount received as a royalty, shut-in-well payment, take-or-pay payment, bonus, or delay rental is more than nominal, ninety percent (90%) must be allocated to principal and the balance to income; and
4. (4) If an amount is received from a working interest or any other interest not provided for in subdivision (1), (2), or (3), ninety percent (90%) of the net amount received must be allocated to principal and the balance to income.
(b) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety percent (90%) of the amount must be allocated to principal and the balance to income.
(c) This chapter applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
(d) If a trust owns an interest in minerals, water, or other natural resources on June 30, 1999, the trustee may allocate receipts from the interest as provided in this chapter or in the manner used by the trustee before July 1, 1999. If the trust acquires an interest in minerals, water, or other natural resources on or after July 1, 1999, the trustee shall allocate receipts from the interest as provided in this chapter.

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§ 35-6-412. Timber.

(a) To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts to:
1. (1) Income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;
2. (2) Principal to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;
3. (3) Between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in subdivisions (1) and (2); or
4. (4) Principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to subdivision (1), (2), or (3).
(b) In determining net receipts to be allocated pursuant to subsection (a), a trustee shall deduct and transfer to principal a reasonable amount for depletion.
(c) This chapter applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.
(d) If a trust owns an interest in timberland on June 30, 1999, the trustee may allocate net receipts from the sale of timber and related products as provided in this chapter or in the manner used by the trustee before July 1, 1999. If the trust acquires an interest in timberland on or after July 1, 1999, the trustee shall allocate net receipts from the sale of timber and related products as provided in this chapter.

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§ 35-6-413. Property not productive of income.

(a) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under § 35-6-104 and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or exercise the power conferred by § 35-6-104(a). The trustee may decide which action or combination of actions to take.
(b) In cases not governed by subsection (a), proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.

§ 35-6-414. Derivatives and options.

(a) In this section, “derivative” means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or other market indicator for an asset or a group of assets.
(b) To the extent that a trustee does not account under § 35-6-403 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.
(c) If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, must be allocated to principal.

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§ 35-6-415. Asset-backed securities.

(a) In this section, “asset-backed security” means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. Asset-backed securities includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. Asset-backed securities does not include an asset to which § 35-6-401 or § 35-6-409 applies.
(b) If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal.
(c) If a trust receives one (1) or more payments in exchange for the trust's entire interest in an asset-backed security in one (1) accounting period, the trustee shall allocate the payments to principal. If a payment is one (1) of a series of payments that will result in the liquidation of the trust's interest in the security over more than one (1) accounting period, the trustee shall allocate ten percent (10%) of the payment to income and the balance to principal.

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Part 5 Allocation of Disbursements During Administration of Trust

§ 35-6-501. Disbursements from income.

A trustee shall make the following disbursements from income to the extent that they are not disbursements to which § 35-6-201(2)(B) or (C) applies:
1. (1) One-half (½) of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee;
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  - 35-6-502(a)(1)
2. (2) One-half (½) of all expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests;
3. (3) All of the other ordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal, and expenses of a proceeding or other matter that concerns primarily the income interest; and
4. (4) Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
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  - 35-6-502(a)(5)

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35-6-201(5)

§ 35-6-502. Disbursements from principal.

(a) A trustee shall make the following disbursements from principal:
1. (1) The remaining one-half (½) of the disbursements described in § 35-6-501(1) and (2); however, if in the judgment of the trustee, the charging of a part or all of that portion of the compensation described under § 35-6-501(1) to principal is impracticable because of the lack of sufficient principal cash and readily marketable intangible personal property, or inadvisable because of the nature of the assets, then that part or all of the compensation must be paid out of income so long as the adjustment does not violate § 35-6-104(c). The decision of the trustee to pay a larger portion or all of the compensation out of income is conclusive, and the income of the trust is not entitled to reimbursement from principal at any subsequent time or times;
2. (2) All of the trustee's compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;
3. (3) Payments on the principal of a trust debt;
4. (4) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
5. (5) Premiums paid on a policy of insurance not described in § 35-6-501(4) of which the trust is the owner and beneficiary;
6. (6) Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and
7. (7) Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters.
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  - 35-6-404(3)
  - 35-6-504(b)(5)
(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.

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35-6-201(5)

§ 35-6-503. Transfers from income to principal for depreciation.

(a) In this section, “depreciation” means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one (1) year.
(b) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:
1. (1) Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;
2. (2) During the administration of a decedent's estate; or
3. (3) Under this section if the trustee is accounting under § 35-6-403 for the business or activity in which the asset is used.
(c) An amount transferred to principal need not be held as a separate fund.

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35-6-410(a)

§ 35-6-504. Transfers from income to reimburse principal.

(a) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one (1) or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
(b) Principal disbursements to which subsection (a) applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:
1. (1) An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;
2. (2) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;
3. (3) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and broker's commissions;
4. (4) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and
5. (5) Disbursements described in § 35-6-502(a)(7).
(c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection (a).

§ 35-6-505. Income taxes.

(a) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.
(b) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.
(c) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid:
1. (1) From income to the extent that receipts from the entity are allocated only to income;
2. (2) From principal to the extent that receipts from the entity are allocated only to principal;
3. (3) Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and
4. (4) From principal to the extent that the tax exceeds the total receipts from the entity.
(d) After applying subsections (a)-(c), the trustee shall adjust income or principal receipts to the extent that the trust's taxes are reduced because the trust receives a deduction for payments made to a beneficiary.

§ 35-6-506. Adjustments between principal and income because of taxes.

(a) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:
1. (1) Elections and decisions, other than those described in subsection (b), that the fiduciary makes from time to time regarding tax matters;
2. (2) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or
3. (3) The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate, trust, or a beneficiary.
(b) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

Part 6 Miscellaneous Provisions

§ 35-6-601. Application and construction of chapter 6.

Section 35-15-1101 controls all application and construction of chapter 6.

§ 35-6-602. Application of act to existing trusts and estates.

This act applies to every trust or decedent's estate existing on or after July 1, 2000, except as otherwise expressly provided in the will or terms of the trust or in this act.

Chapter 7 Tennessee Uniform Transfers to Minors Act

§ 35-7-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Uniform Transfers to Minors Act.”

§ 35-7-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Adult” means an individual who has attained twenty-one (21) years of age;
2. (2) “Benefit plan” means an employer's plan for the benefit of an employee or partner;
3. (3) “Broker” means a person lawfully engaged in the business of effecting transactions in securities or commodities for the person's own account or for the account of others;
4. (4) “Court” means the chancery, probate and juvenile courts and other courts having probate jurisdiction, which shall have concurrent jurisdiction under this chapter;
5. (5) “Custodial property” means:
  1. (A) Any interest in property transferred to a custodian under this chapter; and
  2. (B) The income from and proceeds of that interest in property;
6. (6) “Custodian” means a person so designated, including a person designated as a joint custodian pursuant to § 35-7-111, or a successor or substitute custodian designated according to this chapter;
7. (7) “Financial institution” means a bank, trust company, savings institution, or credit union, chartered and supervised under state or federal law;
8. (8) “Guardian” means a person appointed by or qualified in a court to act as a general, limited, or temporary guardian or conservator of a minor's property or person or a person legally authorized to perform substantially the same functions;
9. (9) “Legal representative” means an individual's personal representative, guardian or conservator;
10. (10) “Member of the minor's family” means the minor's parent, stepparent, spouse, grandparent, brother, sister, uncle, or aunt, whether of the whole or half blood or by adoption;
11. (11) “Minor” means an individual who has not attained twenty-one (21) years of age, although the minor may already be of legal age;
12. (12) “Person” means an individual, corporation, organization, or other legal entity;
13. (13) “Personal representative” means an executor, administrator, successor personal representative, or special administrator of a decedent's estate or a person legally authorized to perform substantially the same functions;
14. (14) “Qualified minor’s trust” means any trust, including a trust created by the custodian, that satisfies the requirements of federal Internal Revenue Code § 2503(c) (26 U.S.C. § 2503(c)), and the regulations implementing that section;
15. (15) “State” includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States;
16. (16) “Transfer” means a transaction that creates custodial property under this chapter;
17. (17) “Transferor” means a person who makes a transfer under this chapter; and
18. (18) “Trust company” means a financial institution, corporation, or other legal entity, authorized to exercise general trust powers.

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§ 35-7-103. Scope and jurisdiction.

(a) This chapter applies to a transfer made on or after October 1, 1992, that refers to this chapter in the designation by which the transfer is made, if at the time of the transfer, the transferor, the minor, or the custodian is a resident of this state or the custodial property is located in this state. The custodianship so created remains subject to this chapter despite a subsequent change in residence of a transferor, the minor, or the custodian, or the removal of custodial property from this state.
(b) A person designated as custodian under this chapter is subject to personal jurisdiction in this state with respect to any matter relating to the custodianship.
(c) A transfer that purports to be made and that is valid under the Uniform Transfers to Minors Act, the Uniform Gifts to Minors Act, or substantially similar act, of another state is governed by the law of the designated state and may be executed and is enforceable in this state, if at the time of the transfer, the transferor, the minor, or the custodian is a resident of the designated state or the custodial property is located in the designated state.
(d) This chapter shall not be construed as an exclusive method for making gifts or other transfers to minors.

§ 35-7-104. Nomination of custodian.

(a) A person having the right to designate the recipient of property transferable upon the occurrence of a future event may revocably nominate a custodian to receive the property for a minor beneficiary upon the occurrence of the event by naming the custodian followed in substance by the words “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act.” The nomination may name one (1) or more persons as substitute custodians to whom the property must be transferred, in the order named, if the first nominated custodian dies before the transfer or is unable, declines, or is ineligible to serve. The nomination may be made in a will, a trust, a deed, an instrument exercising a power of appointment, or in a writing designating a beneficiary of contractual rights which is registered with or delivered to the payor, issuer, or other obligor of the contractual rights.
(b) A custodian nominated under this section must be a person to whom a transfer of property of that kind may be made under § 35-7-110(a).
(c) The nomination of a custodian under this section does not create custodial property until the nominating instrument becomes irrevocable or a transfer to the nominated custodian is completed. Unless the nomination of a custodian has been revoked, upon the occurrence of the future event, the custodianship becomes effective and the custodian shall enforce a transfer of the custodial property pursuant to § 35-7-110.

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§ 35-7-105. Transfer by gift or exercise of power of appointment.

A person may make a transfer by irrevocable gift to, or the irrevocable exercise of a power of appointment in favor of, a custodian for the benefit of a minor pursuant to § 35-7-110.

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§ 35-7-106. Transfer authorized by will or trust.

(a) A personal representative or trustee may make an irrevocable transfer pursuant to § 35-7-110, to a custodian for the benefit of a minor as authorized in the governing will or trust or by a judicial order.
(b) If the testator or settlor has nominated a custodian under § 35-7-104, to receive the custodial property, the transfer must be made to that person.
(c) If the testator or settlor has not nominated a custodian or all persons so nominated as custodian die before the transfer or are unable, decline, or are ineligible to serve, the personal representative or the trustee, as the case may be, shall designate the custodian from among those eligible to serve as custodian for property of that kind under § 35-7-110(a).

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35-7-108(a)

§ 35-7-107. Other transfer by fiduciary.

(a) Subject to subsection (c), a personal representative or trustee may make an irrevocable transfer to another adult or trust company as custodian for the benefit of a minor pursuant to § 35-7-110, in the absence of a will or under a will or trust that does not contain an authorization to do so.
(b) Subject to subsection (c), a guardian may make an irrevocable transfer to another adult or trust company as custodian for the benefit of the minor pursuant to § 35-7-110.
(c) A transfer under subsection (a) or (b) may be made only if:
1. (1) The personal representative, trustee, or guardian considers the transfer to be in the best interest of the minor;
2. (2) The transfer is not prohibited by or inconsistent with provisions of the applicable will, trust agreement, or other governing instrument; and
3. (3) The transfer is authorized by the court if it exceeds twenty-five thousand dollars ($25,000) in value.

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35-7-108(a)

§ 35-7-108. Transfer by obligor.

(a) Subject to subsections (b) and (c), a person not subject to § 35-7-106 or § 35-7-107, who holds property of, or owes a liquidated debt or judgment to, a minor not having a guardian may make an irrevocable transfer to a custodian for the benefit of the minor pursuant to § 35-7-110.
(b) If a person having the right to do so under § 35-7-104 has nominated a custodian under this chapter to receive the custodial property, the transfer must be made to that person.
(c) If no custodian has been nominated, or all persons so nominated as custodian die before the transfer or are unable, decline, or are ineligible to serve, a transfer under this section may be made to an adult member of the minor's family or to a trust company unless the property exceeds twenty-five thousand dollars ($25,000) in value. If the transfer exceeds twenty-five thousand dollars ($25,000) in value, it may be made only if it is authorized by the court.

§ 35-7-109. Receipt for custodial property.

A written acknowledgment of delivery by a custodian constitutes a sufficient receipt and discharge for custodial property transferred to the custodian pursuant to this chapter.

§ 35-7-110. Manner of creating custodial property and effecting transfer — Designation of initial custodian — Control.

(a) Custodial property is created and a transfer is made whenever:
1. (1) An uncertificated security or a certificated security in registered form is either:
  1. (A) Registered in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”; or
  2. (B) Delivered if in certificated form, or any document necessary for the transfer of an uncertificated security is delivered, together with any necessary endorsement to an adult other than the transferor or to a trust company as custodian, accompanied by an instrument in substantially the form set forth in subsection (b);
2. (2) Money is paid or delivered, or a security held in the name of a broker, financial institution, or its nominee is transferred, to a broker or financial institution for credit to an account in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”;
3. (3) The ownership of a life or endowment insurance policy or annuity contract is either:
  1. (A) Registered with the issuer in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”; or
  2. (B) Assigned in a writing delivered to an adult other than the transferor or to a trust company whose name in the assignment is followed in substance by the words: “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”;
4. (4) An irrevocable exercise of a power of appointment or an irrevocable present right to future payment under a contract is the subject of a written notification delivered to the payor, issuer, or other obligor that the right is transferred to the transferor, an adult other than the transferor, or a trust company, whose name in the notification is followed in substance by the words: “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”;
5. (5) A deed for an interest in real property is recorded in the name of the transferor, an adult other than the transferor, or a trust company, followed in substance by the words: “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”;
6. (6) A certificate of title issued by a department or agency of a state or of the United States which evidences title to tangible personal property is either:
  1. (A) Issued in the name of the transferor, an adult other than the transferor, or a trust company followed in substance by the words “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”; or
  2. (B) Delivered to an adult other than the transferor or to a trust company, endorsed to that person followed in substance by the words “as custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act”; or
7. (7) An interest in any property not described in subdivisions (a)(1)-(6) is transferred to an adult other than the transferor or to a trust company by a written instrument in substantially the form set forth in subsection (b).
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- 35-7-104(b)
- 35-7-106(c)
(b) An instrument in the following form satisfies the requirements of subdivisions (a)(1)(B) and (7):
(c) As an alternative to the form of transfer set out in subdivisions (a)(1)-(6), custodial property may be registered, held, recorded or otherwise created in the name of the minor, followed in substance by the words “minor, by (name of custodian or custodians) under the Tennessee Uniform Transfers to Minors Act”.
(d) A transferor shall place the custodian in control of the custodial property as soon as practicable.

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§ 35-7-111. Transfers — Single and joint custodians.

A transfer may be made only for one (1) minor, and up to two (2) persons may be the custodians. All custodial property held under this chapter by the same custodian or custodians for the benefit of the same minor constitutes a single custodianship. If more than one (1) person is appointed a custodian, such persons shall act as joint custodians under this chapter and, unless specified in any document creating the custodial property, each joint custodian shall have full power and authority to act alone with respect to the custodial property. If either joint custodian resigns, dies, becomes incapacitated or is removed, then the remaining one (1) of them may serve as sole custodian without the necessity of appointing a successor joint custodian.

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35-7-102(6)

§ 35-7-112. Validity and effect of transfer.

(a) The validity of a transfer made in a manner prescribed in this chapter is not affected by:
1. (1) Failure of the transferor to comply with sections hereof concerning possession and control;
2. (2) Designation of an ineligible custodian, except designation of the transferor in the case of property for which the transferor is ineligible to serve as custodian under this chapter; or
3. (3) Death or incapacity of a person nominated or designated as custodian or the written disclaimer of the office by that person.
(b) A transfer made pursuant to this chapter is irrevocable, and the custodial property is indefeasibly vested in the minor, but the custodian has all the rights, powers, duties, and authority provided in this chapter, and neither the minor nor the minor's legal representative has any right, power, duty, or authority with respect to the custodial property except as provided in this chapter.
(c) By making a transfer, the transferor incorporates in the disposition all the provisions of this chapter and grants to the custodian, and to any third person dealing with a person designated as custodian, the respective powers, rights, and immunities provided in this chapter.

§ 35-7-113. Care of custodial property.

(a) A custodian shall:
1. (1) Take control of custodial property;
2. (2) Register or record title to custodial property, except tangible personal property of a type for which registration or recording of title is not required under Tennessee law; and
3. (3) Collect, hold, manage, invest, and reinvest custodial property.
(b) In dealing with custodial property, a custodian shall observe the standard of care that would be observed by a prudent person dealing with property of another and is not limited by any other statute restricting investments by fiduciaries. If a custodian has a special skill or expertise or is named custodian on the basis of representations of a special skill or expertise, the custodian shall use that skill or expertise. However, a custodian, in the custodian's discretion and without liability to the minor or the minor's estate, may retain any custodial property received from a transferor.
(c) A custodian may invest in or pay premiums on life insurance or endowment policies on:
1. (1) The life of the minor only if the minor or the minor's estate is the sole beneficiary; or
2. (2) The life of another person in whom the minor has an insurable interest;
3. only to the extent that the minor, the minor's estate, or the custodian in the capacity of custodian, is the irrevocable beneficiary.
(d) A custodian at all times shall keep custodial property separate and distinct from all other property in a manner sufficient to identify it clearly as custodial property of the minor. Custodial property consisting of an undivided interest is so identified if the minor's interest is held as a tenant in common and is fixed. Custodial property subject to recordation is so identified if it is recorded, and custodial property subject to registration is so identified if it is either registered or held in an account designated in the name of the custodian, followed in substance by the words “as a custodian for (name of minor) under the Tennessee Uniform Transfers to Minors Act.”
(e) A custodian shall keep records of all transactions with respect to custodial property, including information necessary for the preparation of the minor's tax returns, and shall make them available for inspection at reasonable intervals by a parent or legal representative of the minor or by the minor if the minor has attained fourteen (14) years of age.

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35-7-114(b)

§ 35-7-114. Powers of custodian.

(a) A custodian, acting in a custodial capacity, has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property, but a custodian may exercise those rights, powers, and authority in that capacity only.
(b) This section does not relieve a custodian from liability for breach of duties of care under § 35-7-113.
(c) The custodian is authorized to invest some or all of the custodial property in the Internal Revenue Code Section 529 plan, if the custodian determines the investment to be in the best interest of the minor.

§ 35-7-115. Use of custodial property.

(a) A custodian may deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor, without court order and without regard to:
1. (1) The duty or ability of the custodian personally or of any other person to support the minor; or
2. (2) Any other income or property of the minor which may be applicable or available for that purpose.
(b) On petition of an interested person or the minor, if the minor has attained fourteen (14) years of age, the court may order the custodian to deliver or pay to the minor or expend for the minor's benefit so much of the custodial property as the court considers advisable for the use and benefit of the minor.
(c) A delivery, payment, or expenditure under this section is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor.

§ 35-7-116. Custodian's expenses, compensation, and bond.

(a) A custodian is entitled to reimbursement from custodial property for reasonable expenses incurred in the performance of the custodian's duties.
(b) Except for one who is a transferor under § 35-7-105, a custodian has a noncumulative election during each calendar year to charge reasonable compensation for services performed during that year.
(c) Except as provided in § 35-7-119(f), a custodian need not give a bond.

§ 35-7-117. Exemption of third person from liability.

A third person in good faith and without court order may act on the instructions of or otherwise deal with any person purporting to make a transfer or purporting to act in the capacity of a custodian and, in the absence of knowledge, is not responsible for determining:
1. (1) The validity of the purported custodian's designation;
2. (2) The propriety of, or the authority under this chapter for, any act of the purported custodian;
3. (3) The validity or propriety under this chapter of any instrument or instructions executed or given either by the person purporting to make a transfer or by the purported custodian; or
4. (4) The propriety of the application of any property of the minor delivered to the purported custodian.

§ 35-7-118. Liability to third persons.

(a) A claim based on:
1. (1) A contract entered into by a custodian acting in a custodial capacity;
2. (2) An obligation arising from the ownership or control of custodial property; or
3. (3) A tort committed during the custodianship;
4. may be asserted against the custodial property by proceeding against the custodian in the custodial capacity, whether or not the custodian or the minor is personally liable therefor.
(b) A custodian is not personally liable:
1. (1) On a contract properly entered into in the custodial capacity unless the custodian fails to reveal that capacity and to identify the custodianship in the contract; or
2. (2) For an obligation arising from control of custodial property or for a tort committed during the custodianship unless the custodian is personally at fault.
(c) A minor is not personally liable for an obligation arising from ownership of custodial property or for a tort committed during the custodianship unless the minor is personally at fault.

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35-7-120(a)(2)

§ 35-7-119. Renunciation, resignation, death, or removal of custodian — Designation of successor custodian.

(a) A person nominated under § 35-7-104, or designated under § 35-7-110, as custodian may decline to serve by delivering a written disclaimer to the person who made the nomination or to the transferor or the transferor's legal representative. If the event giving rise to a transfer has not occurred and no substitute custodian able, willing and eligible to serve was nominated, the person who made the nomination may nominate a substitute custodian; otherwise, the transferor or the transferor's legal representative shall designate a substitute custodian at the time of the transfer, in either case from among the persons eligible to serve as custodian for that kind of property. The custodian so designated has the rights of a successor custodian.
(b) A custodian at any time may designate a trust company or an adult other than a transferor under this chapter as successor custodian by executing and dating an instrument of designation before a subscribing witness other than the successor. If the instrument of designation does not contain or is not accompanied by the resignation of the custodian, the designation of the successor does not take effect until the custodian resigns, dies, becomes incapacitated, or is removed.
(c) A custodian may resign at any time by delivering written notice to the minor if the minor has attained fourteen (14) years of age and to the successor custodian and by delivering the custodial property to the successor custodian.
(d) If a custodian is ineligible, dies, or becomes incapacitated without having effectively designated a successor and the minor has attained fourteen (14) years of age, the minor may designate as a successor custodian, in the manner prescribed in subsection (b), an adult member of the minor's family, a guardian or conservator of the minor, or a trust company. If the minor has not attained fourteen (14) years of age or fails to act within sixty (60) days after the ineligibility, death, or incapacity, the guardian of the minor becomes successor custodian. If the minor has no guardian or the guardian declines to act, the transferor, the legal representative of the transferor or of the custodian, an adult member of the minor's family, or any other interested person may petition the court to designate a successor custodian.
(e) A custodian who declines to serve under subsection (a) or resigns under subsection (c), or the legal representative of a deceased or incapacitated custodian, as soon as practicable, shall put the custodial property and records in the possession and control of the successor custodian. The successor custodian by action may enforce the obligation to deliver custodial property and records and becomes responsible for each item as received.
(f) A transferor, the legal representative of a transferor, an adult member of the minor's family, a guardian or conservator of the person or property of the minor, or the minor if the minor has attained fourteen (14) years of age may petition the court to remove the custodian for cause and to designate a successor custodian other than a transferor under § 35-7-105, or to require the custodian to give appropriate bond.
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- 35-7-116(c)
- 35-7-120(d)

§ 35-7-120. Accounting by and determination of liability of custodian.

(a) A minor who has attained fourteen (14) years of age, the minor's guardian or conservator of the person or legal representative, an adult member of the minor's family, a transferor, or a transferor's legal representative may petition the court:
1. (1) For an accounting by the custodian or the custodian's legal representative; or
2. (2) For a determination of responsibility, as between the custodial property and the custodian personally, for claims against the custodial property unless the responsibility has been adjudicated in an action under § 35-7-118, to which the minor or the minor's legal representative was a party.
(b) A successor custodian may petition the court for an accounting by the predecessor custodian.
(c) The court, in a proceeding under this chapter or in any other proceeding, may require or permit the custodian or the custodian's legal representative to account.
(d) If a custodian is removed under § 35-7-119(f), the court shall require an accounting and order delivery of the custodial property and records to the successor custodian and the execution of all instruments required for transfer of the custodial property.

§ 35-7-121. Termination of custodianship.

(a) The custodian shall transfer in an appropriate manner the custodial property to the minor or to the minor's estate upon the earlier of:
1. (1) The minor's attainment of twenty-one (21) years of age; provided, that this transfer can be withheld until the minor's attainment of up to twenty-five (25) years of age if the instrument so provides, and if the gift is an inter vivos gift, the instrument further expressly states that deferring termination of custodianship beyond the minor's attainment of twenty-one (21) years of age will cause the transfer to be a gift of a future interest which may have adverse federal and state gift tax consequences; or
2. (2) The minor's death.
(b) At any time a custodian may transfer part or all of the custodial property to a qualified minor’s trust without court order. The transfer terminates the custodianship to the extent of the transfer.

§ 35-7-122. Applicability.

This chapter also applies to a transfer made on or after October 1, 1992, if:
1. (1) The transfer purports to have been made under the Tennessee Uniform Gifts to Minors Act; or
2. (2) The instrument by which the transfer purports to have been made uses in substance the designation “as custodian under the Uniform Gifts to Minors Act” or “as custodian under the Uniform Transfers to Minors Act” of any other state, and the application of this chapter is necessary to validate the transfer.

§ 35-7-123. Effect on existing custodianships.

(a) Any transfer of custodial property as now defined in this chapter, including transfers of real property, made before October 1, 1992, is validated, notwithstanding that there was no specific authority in the Tennessee Uniform Gifts to Minors Act for the coverage of custodial property of that kind or for a transfer from that source at the time the transfer was made.
(b) This chapter applies to all transfers made before October 1, 1992, in a manner and form prescribed in the Tennessee Uniform Gifts to Minors Act, except insofar as the application impairs constitutionally vested rights or extends the duration of custodianships beyond eighteen (18) years of age of the minor which were in existence on October 1, 1992.

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35-7-125

§ 35-7-124. Uniformity of application and construction.

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

§ 35-7-125. Repeals prior act.

The Tennessee Uniform Gifts to Minors Act, formerly compiled in this chapter, is repealed. To the extent that this chapter, by virtue of § 35-7-123, does not apply to transfers made in a manner prescribed in the Tennessee Uniform Gifts to Minors Act or to the powers, duties and immunities conferred by transfers in that manner upon custodians and persons dealing with custodians, the repeal of the Tennessee Uniform Gifts to Minors Act does not affect those transfers or those powers, duties and immunities.

§ 35-7-126. Severability.

If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

Chapter 8 Revised Uniform Fiduciary Access to Digital Assets Act

§ 35-8-101. Short title.

This chapter shall be known and may be cited as the “Revised Uniform Fiduciary Access to Digital Assets Act.”

§ 35-8-102. Chapter definitions.

In this chapter:
1. (1) “Account” means an arrangement under a terms-of-service agreement in which a custodian carries, maintains, processes, receives, or stores a digital asset of the user or provides goods or services to the user;
2. (2) “Agent” means an attorney-in-fact granted authority under a durable or nondurable power of attorney;
3. (3) “Carries” means engages in the transmission of an electronic communication;
4. (4) “Catalogue of electronic communications” means information that identifies each person with which a user has had an electronic communication, the time and date of the communication, and the electronic address of the person;
5. (5) “Conservator” means a person appointed by a court to manage the estate of a person with a disability. “Conservator” includes a limited conservator;
6. (6) “Content of an electronic communication” means information concerning the substance or meaning of the communication which:
  1. (A) Has been sent or received by a user;
  2. (B) Is in electronic storage by a custodian providing an electronic communication service to the public or is carried or maintained by a custodian providing a remote-computing service to the public; and
  3. (C) Is not readily accessible to the public;
7. (7) “Court” means any court of record that has jurisdiction to hear matters concerning personal representatives, conservators, guardians, agents acting pursuant to a power of attorney, or trustees;
8. (8) “Custodian” means a person who carries, maintains, processes, receives, or stores a digital asset of a user;
9. (9) “Designated recipient” means a person chosen by a user using an online tool to administer digital assets of the user;
10. (10) “Digital asset” means an electronic record in which an individual has a right or interest. “Digital asset” does not include an underlying asset or liability unless the asset or liability is itself an electronic record;
11. (11) “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities;
12. (12) “Electronic communication” has the same meaning as defined in 18 U.S.C. § 2510(12);
13. (13) “Electronic communication service” means a custodian that provides to a user the ability to send or receive an electronic communication;
14. (14) “Fiduciary” means an original, additional, or successor personal representative, conservator, guardian, agent, or trustee;
15. (15) “Guardian” means a person appointed by a court to manage the estate of a minor. “Guardian” includes a limited guardian;
16. (16) “Information” means data, text, images, videos, sounds, codes, computer programs, software, databases, or the like;
17. (17) “Limited conservator” means a conservator with partial, restricted, or temporary powers;
18. (18) “Limited guardian” means a guardian with partial, restricted, or temporary powers;
19. (19) “Minor” means an unemancipated individual who has not attained eighteen (18) years of age and who has not otherwise been emancipated, and for whom a guardian has been appointed. “Minor” includes an individual for whom an application for the appointment of a guardian is pending;
20. (20) “Online tool” means an electronic service provided by a custodian that allows the user, in an agreement distinct from the terms-of-service agreement between the custodian and user, to provide directions for disclosure or nondisclosure of digital assets to a third person;
21. (21) “Person” means an individual, estate, business or nonprofit entity; public corporation; government or governmental subdivision, agency, or instrumentality; or other legal entity;
22. (22) “Person with a disability” means an individual eighteen (18) years of age or older determined by a court to be in need of partial or full supervision, protection, and assistance by reason of mental illness, physical illness or injury, developmental disability, or other mental or physical incapacity, and for whom a conservator has been appointed. “Person with a disability” includes an individual for whom an application for the appointment of a conservator is pending;
23. (23) “Personal representative” means an executor, administrator, special administrator, or person that performs substantially the same function under law of this state other than this chapter;
24. (24) “Power of attorney” means an instrument that grants an agent authority to act in the place of a principal;
25. (25) “Principal” means an individual who grants authority to an agent in a power of attorney;
26. (26) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form;
27. (27) “Remote-computing service” means a custodian that provides to a user computer-processing services or the storage of digital assets by means of an electronic communications system, as defined in 18 U.S.C. § 2510(14);
28. (28) “Terms-of-service agreement” means an agreement that controls the relationship between a user and a custodian;
29. (29) “Trustee” means a fiduciary with legal title to property under an agreement or declaration that creates a beneficial interest in another. “Trustee” includes a successor trustee;
30. (30) “User” means a person who has an account with a custodian; and
31. (31) “Will” includes a codicil, testamentary instrument that only appoints an executor, and instrument that revokes or revises a testamentary instrument.

§ 35-8-103. Applicability of chapter.

(a) This chapter applies to:
1. (1) A fiduciary or agent acting under a will or power of attorney executed before, on, or after July 1, 2016;
2. (2) A personal representative acting for a decedent who died before, on, or after July 1, 2016;
3. (3) A conservatorship or guardianship proceeding, whether pending in a court or commenced before, on, or after July 1, 2016; and
4. (4) A trustee acting under a trust created before, on, or after July 1, 2016.
(b) This chapter applies to a custodian if the user resides in this state or resided in this state at the time of the user's death.
(c) This chapter does not apply to a digital asset of an employer used by an employee in the ordinary course of the employer's business.

§ 35-8-104. User direction for disclosure of digital assets.

(a) A user may use an online tool to direct the custodian to disclose to a designated recipient or not to disclose some or all of the user's digital assets, including the content of electronic communications. If the online tool allows the user to modify or delete a direction at all times, a direction regarding disclosure using an online tool overrides a contrary direction by the user in a will, trust, power of attorney, or other dispositive or nominative instrument.
(b) If a user has not used an online tool to give direction under subsection (a) or if the custodian has not provided an online tool, the user may allow or prohibit in a will, trust, power of attorney, or other dispositive or nominative instrument, disclosure to a fiduciary of some or all of the user's digital assets, including the content of electronic communications sent or received by the user.
(c) A user's direction under subsection (a) or (b) overrides a contrary provision in a terms-of-service agreement that does not require the user to act affirmatively and distinctly from the user's assent to the terms of service.

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§ 35-8-105. Rights of custodian or user.

(a) This chapter does not change or impair a right of a custodian or a user under a terms-of-service agreement to access and use digital assets of the user.
(b) This chapter does not give a fiduciary or designated recipient any new or expanded rights other than those held by the user for whom, or for whose estate, the fiduciary or designated recipient acts or represents.
(c) A fiduciary's or designated recipient's access to digital assets may be modified or eliminated by a user, by federal law, or by a terms-of-service agreement if the user has not provided direction under § 35-8-104.

§ 35-8-106. Disclosure of digital assets — Powers of custodian — Administrative fee.

(a) When disclosing digital assets of a user under this chapter, the custodian may at its sole discretion:
1. (1) Grant a fiduciary or designated recipient full access to the user's account;
2. (2) Grant a fiduciary or designated recipient partial access to the user's account sufficient to perform the tasks with which the fiduciary or designated recipient is charged; or
3. (3) Provide a fiduciary or designated recipient a copy in a record of any digital asset that, on the date the custodian received the request for disclosure, the user could have accessed if the user were alive and had full capacity and access to the account.
(b) A custodian may assess a reasonable administrative charge for the cost of disclosing digital assets under this chapter.
(c) A custodian need not disclose under this chapter a digital asset deleted by a user.
(d) If a user directs or a fiduciary requests a custodian to disclose under this chapter some, but not all, of the user's digital assets, the custodian need not disclose the assets if segregation of the assets would impose an undue burden on the custodian. If the custodian believes the direction or request imposes an undue burden, the custodian or fiduciary may seek an order from the court to disclose:
1. (1) A subset limited by date of the user's digital assets;
2. (2) All of the user's digital assets to the fiduciary or designated recipient;
3. (3) None of the user's digital assets; or
4. (4) All of the user's digital assets to the court for review in camera.

§ 35-8-107. Disclosure of content of electronic communications of deceased user.

If a deceased user consented or a court directs disclosure of the contents of electronic communications of the user, the custodian shall disclose to the personal representative of the estate of the user the content of an electronic communication sent or received by the user if the representative gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) A certified copy of the death certificate of the user;
3. (3) A certified copy of any of the following: the letters of administration or letters testamentary appointing the personal representative; a small-estate affidavit under title 30, chapter 4; or a court order;
4. (4) Unless the user provided direction using an online tool, a copy of the user's will, trust, power of attorney, or other dispositive or nominative instrument evidencing the user's consent to disclosure of the content of electronic communications; and
5. (5) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user's account;
  2. (B) Evidence linking the account to the user; or
  3. (C) A finding by the court that:
    1. (i) The user had a specific account with the custodian, identifiable by the information specified in subdivision (5)(A);
    2. (ii) Disclosure of the content of electronic communications of the user would not violate 18 U.S.C. §§ 2701 et seq., 47 U.S.C. § 222, or other applicable law;
    3. (iii) Unless the user provided direction using an online tool, the user consented to disclosure of the content of electronic communications; or
    4. (iv) Disclosure of the content of electronic communications of the user is reasonably necessary for administration of the estate.

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35-8-116(a)

§ 35-8-108. Disclosure of other digital assets of deceased user.

Unless the user prohibited disclosure of digital assets or the court directs otherwise, a custodian shall disclose to the personal representative of the estate of a deceased user a catalogue of electronic communications sent or received by the user and digital assets, other than the content of electronic communications, of the user, if the representative gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) A certified copy of the death certificate of the user;
3. (3) A certified copy of any of the following: the letters of administration or letters testamentary appointing the personal representative; a small-estate affidavit under title 30, chapter 4; or a court order; and
4. (4) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user's account;
  2. (B) Evidence linking the account to the user;
  3. (C) An affidavit stating that disclosure of the user's digital assets is reasonably necessary for administration of the estate; or
  4. (D) A finding by the court that:
    1. (i) The user had a specific account with the custodian, identifiable by the information specified in subdivision (4)(A); or
    2. (ii) Disclosure of the user's digital assets is reasonably necessary for administration of the estate.

§ 35-8-109. Disclosure of content of electronic communications to principal.

To the extent a power of attorney expressly grants an agent authority over the content of electronic communications sent or received by the principal and unless directed otherwise by the principal or the court, a custodian shall disclose to the agent the content if the agent gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) An original or a copy of the power of attorney expressly granting the agent authority over the content of electronic communications of the principal;
3. (3) A certification by the agent, under penalty of perjury, that the power of attorney is in effect; and
4. (4) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the principal's account; or
  2. (B) Evidence linking the account to the principal.

§ 35-8-110. Disclosure of other digital assets of principal.

Unless otherwise ordered by the court, directed by the principal, or provided by a power of attorney, a custodian shall disclose to an agent with specific authority over digital assets or general authority to act on behalf of a principal a catalogue of electronic communications sent or received by the principal and digital assets, other than the content of electronic communications, of the principal if the agent gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) An original or a copy of the power of attorney that gives the agent specific authority over digital assets or general authority to act on behalf of the principal;
3. (3) A certification by the agent, under penalty of perjury, that the power of attorney is in effect; and
4. (4) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the principal's account; or
  2. (B) Evidence linking the account to the principal.

§ 35-8-111. Disclosure of digital assets held in trust when trustee is original user.

Unless otherwise ordered by the court or provided in a trust, a custodian shall disclose to a trustee that is an original user of an account any digital asset of the account held in trust, including a catalogue of electronic communications of the trustee and the content of electronic communications.

§ 35-8-112. Disclosure of digital assets held in trust when trustee is not original user.

Unless otherwise ordered by the court, directed by the user, or provided in a trust, a custodian shall disclose to a trustee that is not an original user of an account the content of an electronic communication sent or received by an original or successor user and carried, maintained, processed, received, or stored by the custodian in the account of the trust if the trustee gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) A certified copy of the trust instrument or a certification of the trust under § 35-15-1013, that includes consent to disclosure of the content of electronic communications to the trustee;
3. (3) A certification by the trustee, under penalty of perjury, that the trust exists and the trustee is a currently acting trustee of the trust; and
4. (4) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the trust's account; or
  2. (B) Evidence linking the account to the trust.

§ 35-8-113. Disclosure of other digital assets held in trust when trustee is original user.

Unless otherwise ordered by the court, directed by the user, or provided in a trust, a custodian shall disclose, to a trustee that is not an original user of an account, a catalogue of electronic communications sent or received by an original or successor user and stored, carried, or maintained by the custodian in an account of the trust and any digital assets, other than the content of electronic communications, in which the trust has a right or interest if the trustee gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) A certified copy of the trust instrument or a certification of the trust under § 35-15-1013;
3. (3) A certification by the trustee, under penalty of perjury, that the trust exists and the trustee is a currently acting trustee of the trust; and
4. (4) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the trust's account; or
  2. (B) Evidence linking the account to the trust.

§ 35-8-114. Disclosure of other digital assets held in trust when trustee is not original user.

(a) After an opportunity for a hearing under title 34, chapter 1, the court may grant a guardian or conservator access to the digital assets of a minor or person with a disability.
(b) Unless otherwise ordered by the court or directed by the user, a custodian shall disclose to a guardian or conservator the catalogue of electronic communications sent or received by a minor or person with a disability and any digital assets, other than the content of electronic communications, in which the minor or person with a disability has a right or interest if the guardian or conservator gives the custodian:
1. (1) A written request for disclosure in physical or electronic form;
2. (2) A certified copy of the court order that gives the guardian or conservator authority over the digital assets of the minor or person with a disability; and
3. (3) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the account of the minor or person with a disability; or
  2. (B) Evidence linking the account to the minor or person with a disability.
(c) A guardian or conservator with general authority to manage the assets of a minor or person with a disability may request a custodian of the digital assets of the minor or person with a disability to suspend or terminate an account of the minor or person with a disability for good cause. A request made under this section must be accompanied by a certified copy of the court order giving the guardian or conservator authority over the property of the minor or person with a disability.

§ 35-8-115. Disclosure of digital assets to guardian or conservator.

(a) The legal duties imposed on a fiduciary charged with managing tangible property apply to the management of digital assets, including:
1. (1) The duty of care;
2. (2) The duty of loyalty; and
3. (3) The duty of confidentiality.
(b) A fiduciary's or designated recipient's authority with respect to a digital asset of a user:
1. (1) Except as otherwise provided in § 35-8-104, is subject to the applicable terms of service;
2. (2) Is subject to other applicable law, including copyright law;
3. (3) In the case of a fiduciary, is limited by the scope of the fiduciary's duties; and
4. (4) May not be used to impersonate the user.
(c) A fiduciary with authority over the property of a decedent, minor, person with a disability, principal, or settlor has the right to access any digital asset in which the decedent, minor, person with a disability, principal, or settlor had a right or interest and that is not held by a custodian or subject to a terms-of-service agreement.
(d) A fiduciary acting within the scope of the fiduciary's duties is an authorized user of the property of the decedent, minor, person with a disability, principal, or settlor for the purpose of applicable computer-fraud and unauthorized-computer-access laws, including the Tennessee Personal and Commercial Computer Act of 2003, compiled in title 39, chapter 14, part 6.
(e) A fiduciary with authority over the tangible personal property of a decedent, minor, person with a disability, principal, or settlor:
1. (1) Has the right to access the property and any digital asset stored in it; and
2. (2) Is an authorized user for the purpose of applicable computer-fraud and unauthorized-computer-access laws, including title 39, chapter 14, part 6.
(f) A custodian may disclose information in an account to a fiduciary of the user when the information is required to terminate an account used to access digital assets licensed to the user.
(g) A fiduciary of a user may request a custodian to terminate the user's account. A request for termination must be in writing, in either physical or electronic form, and accompanied by:
1. (1) If the user is deceased, a certified copy of the death certificate of the user;
2. (2) A certified copy of the letters of administration or letters testamentary appointing the personal representative; a certified copy of the small-estate affidavit under title 30, chapter 4; a certified copy of a court order; an original or a copy of a power of attorney; or a certified copy of the trust instrument or a certification of the trust under § 35-15-1013, giving the fiduciary authority over the account; and
3. (3) If requested by the custodian:
  1. (A) A number, username, address, or other unique subscriber or account identifier assigned by the custodian to identify the user's account;
  2. (B) Evidence linking the account to the user; or
  3. (C) A finding by the court that the user had a specific account with the custodian, identifiable by the information specified in subdivision (g)(3)(A).

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35-8-116(a)

§ 35-8-116. Fiduciary duty.

(a) Not later than sixty (60) days after receipt of the information required under §§ 35-8-107 — 35-8-115, a custodian shall comply with a request under this chapter from a fiduciary or designated recipient to disclose digital assets or terminate an account. If the custodian fails to comply, the fiduciary or designated recipient may apply to the court for an order directing compliance.
(b) An order under subsection (a) directing compliance must contain a finding that compliance is not in violation of 18 U.S.C. § 2702.
(c) A custodian may notify the user that a request for disclosure or to terminate an account was made under this chapter.
(d) A custodian may deny a request under this chapter from a fiduciary or designated recipient for disclosure of digital assets or to terminate an account if the custodian is aware of any lawful access to the account following the receipt of the fiduciary's request.
(e) This chapter does not limit a custodian's ability to obtain or require a fiduciary or designated recipient requesting disclosure or termination under this chapter to obtain a court order which:
1. (1) Specifies that an account belongs to the minor, person with a disability, principal, or settlor;
2. (2) Specifies that there is sufficient consent from the minor, person with a disability, principal, or settlor to support the requested disclosure; and
3. (3) Contains a finding required by law other than this chapter.
(f) A custodian and the custodian's officers, employees, and agents are immune from liability for an act or omission done in good faith in compliance with this chapter.

§ 35-8-117. Uniformity of application and construction.

In applying and construing this chapter, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

§ 35-8-118. Electronic signatures — Global and National Commerce Act.

This chapter modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act (15 U.S.C. §§ 7001 et seq.), but does not modify, limit, or supersede Section 101(c), Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001(c)), or authorize electronic delivery of any of the notices described in Section 103(b), Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7003(b)).

Chapter 9 Administration of Private Foundations, Charitable Trusts or Split-Interest Trusts

§ 35-9-101. Prohibited acts.

In the administration of any trust that is a “private foundation,” as defined in § 509 of the Internal Revenue Code of 1954 (26 U.S.C. § 509), a “charitable trust,” as defined in § 4947(a)(1) of the Internal Revenue Code of 1954 (26 U.S.C. § 4947(a)(1)), or a “split-interest trust,” as defined in § 4947(a)(2) of the Internal Revenue Code of 1954 (26 U.S.C. § 4947(a)(2)), the following acts are prohibited:
1. (1) Engaging in any act of self-dealing, as defined in § 4941(d) of the Internal Revenue Code of 1954 (26 U.S.C. § 4941(d)), that would give rise to any liability for the tax imposed by § 4941(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 4941(a));
2. (2) Retaining any excess business holdings (as defined in § 4943(c) of the Internal Revenue Code of 1954 26 U.S.C. § 4943(c)), that would give rise to any liability for the tax imposed by § 4943(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 4943(a));
3. (3) Making any investments that would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of § 4944 of the Internal Revenue Code of 1954 (26 U.S.C. § 4944), so as to give rise to any liability for the tax imposed by § 4944(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 4944(a)); or
4. (4) Making any taxable expenditures (as defined in § 4945(d) of the Internal Revenue Code of 1954 (26 U.S.C. § 4945(d)), that would give rise to any liability for the tax imposed by § 4945(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 4945(a)); provided, that this section does not apply either to those split-interest trusts or to amounts of those split-interest trusts that are not subject to the prohibitions applicable to private foundations by reason of § 4947 of the Internal Revenue Code of 1954 (26 U.S.C. § 4947).

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§ 35-9-102. Distribution of amounts to avoid tax liability.

In the administration of any trust that is a private foundation or that is a charitable trust, there shall be distributed, for the purposes specified in the trust instrument, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by § 4942(a) of the Internal Revenue Code of 1954 (26 U.S.C. § 4942(a)).

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35-9-103

§ 35-9-103. Applicability of §§ 35-9-101 and 35-9-102.

Sections 35-9-101 and 35-9-102 do not apply to any trust to the extent that a court of competent jurisdiction determines that the application would be contrary to the terms of the instrument governing the trust and that the same may not properly be changed to conform to those sections.

§ 35-9-104. Powers of courts and attorney general and reporter unimpaired.

Nothing in this chapter shall impair the rights and powers of the courts or the attorney general and reporter of this state with respect to any trust.

§ 35-9-105. References to Internal Revenue Code.

All references to sections of the Internal Revenue Code of 1954 (U.S.C. title 26), include future amendments to those sections and corresponding provisions of future internal revenue laws.

§ 35-9-106. Authority to amend trust for tax benefits.

(a) It is the purpose of this section to preserve the intent of testators and grantors of testamentary and inter vivos charitable remainder trusts created prior to and after August 31, 1972, by minimizing the imposition of federal income and excise taxes, imposed upon the assets of such trusts, and thereby preserving the maximum amount of the trust assets for the charitable, educational, religious and benevolent purposes for which their remainders were intended. The attorney general and reporter shall perform such acts as, in the attorney general and reporter's opinion, will result in the effectuation of this declaration of purpose.
(b)
1. (1) Notwithstanding any provisions to the contrary in the governing instrument or in any other law of this state, the trustee of any split-interest trust as defined in § 4947(a)(2) of the Internal Revenue Code of 1954 (26 U.S.C. § 4947(a)(2)), with the consent of all the beneficiaries under the governing instrument, may, without application to any court and either before or after the funding of the trust, amend the governing instrument to conform to §§ 170(f), 642(c)(5), 664, 2055(e), and 2522(c) of the Internal Revenue Code of 1954 (26 U.S.C. §§ 170(f), 642(c)(5), 664, 2055(e), and 2522(c)), to the extent applicable, by executing a written amendment to the trust for that purpose. Consent shall not be required as to individual beneficiaries not living at the time of amendment or as to charitable beneficiaries not named or not in existence at the time of amendment. The possibility of beneficial interests arising after the amendment of the governing instruments shall not defeat the ability to amend. In the case of an individual beneficiary not competent to give consent, the consent of the beneficiary's guardian or conservator, if any, or the consent of a guardian ad litem appointed by a court of competent jurisdiction, shall be treated as the consent of the beneficiary. A copy of the proposed amendment, executed by the trustee and consented to by all beneficiaries whose consent is required under this subdivision (b)(1), shall be delivered in person or by registered mail to the attorney general and reporter. The attorney general and reporter may, within sixty (60) days after receipt of the proposed amendment, indicate by registered mail to the trustee any specific objections to the proposed amendment, in which event subdivision (b)(2) shall apply if the attorney general and reporter does not withdraw the objections. In the case of any amendment to a trust created by will or to a trust created by inter vivos instrument, unless otherwise provided, the amendment shall be deemed to apply as of the date of death of the decedent or as of the date of gift.
2. (2) In the event that all of the trustees and beneficiaries under the governing instrument do not consent to the amendment, or in the event there are no named beneficiaries, any court of competent jurisdiction shall have the power to amend the governing instrument in accordance with subdivision (b)(1) upon petition of the trustee or any beneficiary and upon a subsequent finding by the court that the testator's or the grantor's intention would not be defeated by the amendment. A copy of the petition shall be delivered in person or by registered mail to the attorney general and reporter.
3. (3) Unless otherwise expressly provided in the governing instrument, any devise, bequest or transfer in a testamentary or inter vivos trust for religious, educational, charitable or benevolent uses to be determined by the trustee or any other person shall be made only to organizations and for purposes within the meaning of §§ 170(c), 2055(a), and 2522(a) of the Internal Revenue Code of 1954 (26 U.S.C. §§ 170(c), 2055(a), and 2522(a)).
4. (4) This section also applies to executors and administrators of estates of decedents whose wills create trusts described in subdivision (b)(1).
(c) All references to sections of the Internal Revenue Code of 1954 refer to the Internal Revenue Code of 1954 as it exists on August 31, 1972. All references to the Internal Revenue Code of 1954 in subdivisions (b)(1) and (3) refer to the Internal Revenue Code of 1954 as it exists on June 4, 1975.
(d) This section applies in the case of all decedents dying after December 31, 1969, and in the case of all irrevocable inter vivos trusts created after July 31, 1969.

§ 35-9-107. Reformation of trusts to comply with tax regulations.

(a) It is the purpose of this section to permit and authorize the reformation of certain inter vivos and testamentary charitable remainder trusts created prior to and after December 10, 1998, to comply with applicable federal tax regulations regarding qualifying payments to noncharitable beneficiaries. Such reformations shall be permitted and authorized upon the unanimous written consent of all living individual grantors, living individual beneficiaries, charitable remainder beneficiaries named or otherwise provided for in the trust agreement, and the trustee, with the concurrence of the attorney general and reporter. The attorney general and reporter shall perform such acts as, in the attorney general and reporter's opinion, will effectuate this declaration of purpose.
(b)
1. (1) Notwithstanding any provision to the contrary in the governing instrument or in any other law of this state, the trustee of any charitable remainder trust described in § 1.664-3(a)(1)(i)(b) of the Internal Revenue Code Regulations (26 CFR 1.664-3(a)(1)(i)(b)), as currently adopted, or as may be subsequently amended, may, without application to any court and either before or after the funding of such trust, reform the trust to meet the definition of a charitable remainder unitrust described in § 1.664-3(a)(1)(i)(c) of the Internal Revenue Code Regulations (26 CFR 1.664-3(a)(1)(i)(c)), as currently adopted, or as may be subsequently amended. In order to effectuate this reformation, the trustee shall obtain the written consent of all living grantors, living beneficiaries, charitable beneficiaries named or otherwise provided for in the trust agreement, and the trustee, together with the written concurrence of the attorney general and reporter. If the charitable beneficiary is to be determined by a person having discretion to select or name the charitable beneficiary at the time the trust terminates, the consent of that person shall be required. Consent shall not be required as to individual beneficiaries or grantors not living at the time of reformation or as to charitable remainder beneficiaries not named or not in existence at the time of reformation.
2. (2) The possibility of beneficial interests arising after the reformation of the trust instrument shall not defeat the ability to reform the trust pursuant to this section. In the case of an individual beneficiary or grantor not competent to give consent, the consent of that beneficiary's or grantor's guardian or conservator, if any, or the consent of a guardian ad litem appointed by a court of competent jurisdiction, shall be treated as the consent of the beneficiary or grantor. A copy of the proposed reformation, executed by the trustee and consented to by all living grantors, living beneficiaries, and charitable beneficiaries named or otherwise provided for in the trust agreement, shall be delivered to the attorney general and reporter. The attorney general and reporter shall, within thirty (30) days after receipt, either concur with the proposed reformation or state any specific objections to the proposed reformation in writing and delivered to the trustee by registered mail. If the attorney general and reporter state objections and those objections are not resolved to the attorney general's and reporter's satisfaction or the attorney general and reporter does not withdraw the objections, subdivision (b)(3) shall apply.
3. (3) In the event that all of the living grantors, living beneficiaries, and charitable remainder beneficiaries do not consent to the reformation, any court of competent jurisdiction shall have the power to reform the governing instrument in accordance with subdivision (b)(1) upon petition by the trustee or any beneficiary. A copy of the petition shall be delivered in person or by registered mail to the attorney general and reporter.

§ 35-9-108. Information or actions that cannot be required.

(a) For the purposes of this section, “private foundation” has the same meaning ascribed to “private foundation” in § 509(a) of the Internal Revenue Code of 1986 (26 U.S.C. § 509(a)), as amended.
(b) No private foundation shall be required by a department, agency, board, or other entity of state or local government to:
1. (1) Disclose the race, religion, gender, national origin, socioeconomic status, age, ethnicity, disability, marital status, or sexual orientation of:
  1. (A) The foundation's employees, officers, directors, trustees, or contributors, without the prior written consent of the individual or individuals in question; or
  2. (B) Any individual, or of the employees, officers, directors, trustees, members, or owners of any entity, that has received monetary or in-kind contributions or grants from, or contracted with, the foundation, without the prior written consent of the individual or individuals in question;
2. (2) Hire, appoint, or elect an individual of any particular race, religion, gender, national origin, socioeconomic status, age, ethnicity, disability, marital status, or sexual orientation as an employee, officer, director, or trustee of the foundation;
3. (3) Disqualify, remove, or prohibit service of an individual as an officer, director, or trustee of the foundation based upon such individual's familial relationship to other officers, directors, or trustees of the foundation or a contributor to the foundation;
4. (4) Hire, appoint, or elect an individual as an officer, director, or trustee of the foundation who does not share a familial relationship with the other officers, directors, or trustees of the foundation or with a contributor to the foundation; or
5. (5) Except as a lawful condition or requirement on the expenditure of particular funds imposed by the contributor or grantor of such funds, distribute the foundation's funds to, or contract with, any individual or entity based upon the:
  1. (A) Race, religion, gender, national origin, socioeconomic status, age, ethnicity, disability, marital status, or sexual orientation of the individual or of the employees, officers, directors, trustees, members, or owners of the entity; or
  2. (B) Populations, locales, or communities served by the individual or entity.

Chapter 10 Uniform Prudent Management of Institutional Funds Act

§ 35-10-101. Short title.

This chapter shall be known and may be cited as the “Uniform Prudent Management of Institutional Funds Act.”

§ 35-10-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Charitable purpose” means the relief of poverty, the advancement of education or religion, the promotion of health, the promotion of a governmental purpose, or any other purpose the achievement of which is beneficial to the community;
2. (2) “Endowment fund” means an institutional fund or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. The term does not include assets that an institution designates as an endowment fund for its own use;
3. (3) “Gift instrument” means a record or records, including an institutional solicitation, under which property is granted to, transferred to, or held by an institution as an institutional fund;
4. (4) “Institution” means:
  1. (A) A person, other than an individual, organized and operated exclusively for charitable purposes;
  2. (B) A government or governmental subdivision, agency, or instrumentality, to the extent that it holds funds exclusively for a charitable purpose; and
  3. (C) A trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated;
5. (5) “Institutional fund” means a fund held by an institution exclusively for charitable purposes. “Institutional fund” does not include:
  1. (A) Program-related assets;
  2. (B) A fund held for an institution by a trustee that is not an institution; or
  3. (C) A fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise upon violation or failure of the purposes of the fund;
6. (6) “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity;
7. (7) “Program-related asset” means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment; and
8. (8) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

§ 35-10-103. Standard of conduct in managing and investing institutional fund.

(a) Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.
(b) In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
(c) In managing and investing an institutional fund, an institution:
1. (1) May incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution, and the skills available to the institution; and
2. (2) Shall make a reasonable effort to verify facts relevant to the management and investment of the fund.
(d) An institution may pool two (2) or more institutional funds for purposes of management and investment.
(e) Except as otherwise provided by a gift instrument, the following rules apply:
1. (1) In managing and investing an institutional fund, the following factors, if relevant, must be considered:
  1. (A) General economic conditions;
  2. (B) The possible effect of inflation or deflation;
  3. (C) The expected tax consequences, if any, of investment decisions or strategies;
  4. (D) The role that each investment or course of action plays within the overall investment portfolio of the fund;
  5. (E) The expected total return from income and the appreciation of investments;
  6. (F) Other resources of the institution;
  7. (G) The needs of the institution and the fund to make distributions and to preserve capital; and
  8. (H) An asset's special relationship or special value, if any, to the charitable purposes of the institution;
2. (2) Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the institutional fund's portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution;
3. (3) Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section;
4. (4) An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification;
5. (5) Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms, distribution requirements, and other circumstances of the institution and the requirements of this chapter; and
6. (6) A person that has special skills or expertise, or is selected in reliance upon the person's representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

§ 35-10-104. Appropriation for expenditure or accumulation of endowment fund — Rules of construction.

(a) Subject to the intent of a donor expressed in the gift instrument and to subsection (d), an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:
1. (1) The duration and preservation of the endowment fund;
2. (2) The purposes of the institution and the endowment fund;
3. (3) General economic conditions;
4. (4) The possible effect of inflation or deflation;
5. (5) The expected total return from income and the appreciation of investments;
6. (6) Other resources of the institution; and
7. (7) The investment policy of the institution.
(b) To limit the authority to appropriate for expenditure or accumulate under subsection (a), a gift instrument must specifically state the limitation.
(c) Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only “income”, “interest”, “dividends”, or “rents, issues, or profits”, or “to preserve the principal intact”, or words of similar import:
1. (1) Create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and
2. (2) Do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection (a).
(d)
1. (1) The appropriation for expenditure in any year of an amount greater than seven percent (7%) of the fair market value of an endowment fund, calculated on the basis of market values determined at least quarterly and averaged over a period of not less than three (3) years immediately preceding the year in which the appropriation for expenditure was made, creates a rebuttable presumption of imprudence.
2. (2) For an endowment fund in existence for fewer than three (3) years, the fair market value of the endowment fund must be calculated for the period the endowment fund has been in existence.
3. (3) This subsection (d) does not:
  1. (A) Apply to an appropriation for expenditure permitted under law other than this chapter or by the gift instrument; or
  2. (B) Create a presumption of prudence for an appropriation for expenditure of an amount less than or equal to seven percent (7%) of the fair market value of the endowment fund.

§ 35-10-105. Delegation of management and investment functions.

(a) Subject to any specific limitation set forth in a gift instrument or in law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in:
1. (1) Selecting an agent;
2. (2) Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and
3. (3) Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.
(c) An institution that complies with subsection (a) is not liable for the decisions or actions of an agent to which the function was delegated.
(d) By accepting delegation of a management or investment function from an institution that is subject to the laws of this state, an agent submits to the jurisdiction of the courts of this state in all proceedings arising from or related to the delegation or the performance of the delegated function.
(e) An institution may delegate management and investment functions to its committees, officers, or employees as authorized by law of this state other than this chapter.

§ 35-10-106. Release or modification of restrictions on management, investment, or purpose.

(a) If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
(b) The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund, or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the attorney general and reporter of the application, and the attorney general and reporter must be given an opportunity to be heard. To the extent practicable, any modification must be made in accordance with the donor's probable intention.
(c) If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve, or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the attorney general and reporter of the application, and the attorney general and reporter must be given an opportunity to be heard.
(d) If an institution determines that a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund is unlawful, impracticable, impossible to achieve, or wasteful, the institution, sixty (60) days after notification to the attorney general and reporter, may release or modify the restriction, in whole or part, if:
1. (1) The institutional fund subject to the restriction has a total value of less than one hundred fifty thousand dollars ($150,000). This dollar limit shall increase by an amount of five thousand dollars ($5,000) on July 1, 2011, and on each July 1 in subsequent years;
2. (2) More than twenty (20) years have elapsed since the fund was established; and
3. (3) The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.

§ 35-10-107. Reviewing compliance.

Compliance with this chapter is determined in light of the facts and circumstances existing at the time a decision is made or action is taken, and not by hindsight.

§ 35-10-108. Application to existing institutional funds.

This chapter applies to institutional funds existing on or established after July 1, 2007. As applied to institutional funds existing on July 1, 2007, this chapter governs only decisions made or actions taken on or after July 1, 2007.

§ 35-10-109. Relation to Electronic Signatures in Global and National Commerce Act.

This chapter modifies, limits, and supersedes the Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7001 et seq.), but does not modify, limit, or supersede § 101 of that act (15 U.S.C. § 7001(a)), or authorize electronic delivery of any of the notices described in § 103 of that act (15 U.S.C. § 7003(b)).

§ 35-10-110. Uniformity of application and construction.

In applying and construing the uniform act set out in this chapter, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

Chapter 11 Fundraising for Catastrophic Illnesses

§ 35-11-101. Funds placed in trust — Trustee.

(a) All funds raised to meet the medical or related expenses of a named individual suffering from a catastrophic illness shall be placed in trust with a bank or trust company organized and doing business under the laws of any state or territory of the United States, including the District of Columbia, and authorized to do business in this state. The trustee of this trust shall be either an individual, or a bank or trust company. The funds placed with a bank or trust company shall be considered to be held in trust, and the bank or trust company considered a trustee, as those terms are used in this chapter, if the bank or trust company maintains the funds in its name as custodian for the benefit of the injured individual, and limits disbursements to those for which the funds are raised or that are permitted by §§ 35-11-103 and 35-11-105.
(b) As used in this chapter, “catastrophic illness” includes organ transplants.

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§ 35-11-102. Trust relationship prerequisite to accepting contributions — Beneficiaries.

(a) Before accepting any contributions for such fundraising activities, the organizer or promoter shall enter into a trust relationship with a bank or trust company or shall establish a trust in the name of an individual, “ [name of beneficiary] trust, trustee”, or words to the same effect; provided, that if in violation of this chapter contributions are accepted prior to entering into the trust relationship, then those contributions shall be placed in trust immediately upon establishment of the required trust relationship.
(b) The beneficiary of the trust shall be the named individual for whom the funds are being raised.
(c) Contingent beneficiaries shall be selected as provided in § 35-11-103.
(d) On the establishment of a trust for purposes regulated by this chapter, the trustee shall file written notice of the establishment of the trust on forms prescribed by the secretary of state with the division of charitable solicitation in the office of the secretary of state. No person or entity may solicit funds on behalf of an individual with a catastrophic illness that is subject to this chapter prior to the filing of this notice with the division. For any trust regulated under this chapter on July 1, 2007, the notice shall be filed on or before August 1, 2007.
(e) A trustee, other than a bank or trust company acting as trustee, shall file an accounting of the trust with the division of charitable solicitations each year on the anniversary of the establishment of the trust.

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§ 35-11-103. Transfer of remaining funds — Contingent beneficiaries.

(a) If the expenses of the illness of the beneficiary are less than the funds held in trust or the beneficiary dies before the funds held in trust are depleted, any remaining balance shall be transferred to the contingent beneficiary.
(b) When the trust is established, the named beneficiary shall select the manner in which a contingent beneficiary shall be named. If the named beneficiary is a minor or is incompetent, the parent or guardian shall select the manner in which a contingent beneficiary shall be named. The selection of the contingent beneficiary shall be made as follows:
1. (1) An institution involved in research to find a cure for a catastrophic illness shall be named;
2. (2) An individual, if known, who suffers from a catastrophic illness and is in need of financial help for valid reimbursable medical expenses, as defined in § 35-11-105, shall be named; or
3. (3) The trustee shall be authorized to select:
  1. (A) An institution involved in research to find a cure for a catastrophic illness; or
  2. (B) An individual who suffers from a catastrophic illness whether the name of such individual is known at the death of the named beneficiary or comes to the attention of the trustee within one (1) year after the death of the named beneficiary. The selection of this individual by the trustee is not limited to an individual for whom a trust has been established at the bank or trust company. If an individual beneficiary cannot be named within one (1) year, the option in subdivision (b)(3)(A) shall automatically occur.
(c) Modification of the selection of the contingent beneficiary may be made before the death of the named beneficiary or before the disbursement of funds to the selected contingent beneficiary.
(d) The transfer to a contingent beneficiary shall occur as quickly as is reasonably feasible.

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§ 35-11-104. Payment and deposit of contributions.

(a) All contributions for funds raised in accordance with this chapter made by check shall be made payable to the bank or trust company or the trust established by this chapter.
(b) All cash contributions shall be deposited as quickly as is reasonably feasible to the trust.

§ 35-11-105. Disbursement of funds — Valid reimbursable medical expenses.

(a) Funds shall be disbursed by the trustee upon the presentation of a statement for valid reimbursable medical expenses incurred by the named individual for the treatment of the catastrophic illness and for the payment of reasonable solicitation costs and expenses, when appropriate, incurred by the organizer, promoter or solicitor.
(b) “Valid reimbursable medical expenses” are those deductible medical expenses described in the Internal Revenue Code (U.S.C. title 26).

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§ 35-11-106. Powers of institutions apply to trusts.

All powers and authority that are conferred on banks and trust companies in the administration and maintenance of trust funds in those institutions shall also apply to trusts created by this chapter.

§ 35-11-107. Civil penalties — Appeal.

In addition to any other penalty or remedy available under law, the secretary of state or the designee of the secretary may assess a civil penalty, pursuant to § 48-101-514, against any person or entity that violates a provision of this chapter. The person or entity against whom the penalty is assessed shall have appeal rights pursuant to § 48-101-514.

§ 35-11-108. Right to inspect records for trusts.

The secretary of state or the secretary's designee shall have the right to inspect the records for trusts established under this part, subject to title 45, chapter 10 and the Federal Right to Financial Privacy Act (12 U.S.C. § 3401 et seq.)

§ 35-11-109. Subpoena power.

The secretary of state or the secretary's designee shall have the right to issue subpoenas to obtain records relevant to a solicitation or a trust established under this part, subject to title 45, chapter 10 and the Federal Right to Financial Privacy Act (12 U.S.C. § 3401 et seq.)

§ 35-11-110. Rules and regulations.

The secretary of state may adopt rules and regulations to carry out this chapter in accordance with the Uniform Administrative Procedures Act, compiled in title 4, chapter 5.

§ 35-11-111. Unlawful fundraising.

(a) It is an offense for any fundraising to occur for the purposes described in §§ 35-11-101 and 35-11-102 in violation of this chapter.
(b) It is an offense for trust funds raised for the purposes described in §§ 35-11-101 and 35-11-102 to be distributed in violation of this chapter.
(c) A violation of subsection (a) or (b) is a Class B misdemeanor.

§ 35-11-112. Exemptions.

(a)
1. (1) This chapter shall not apply to any nonprofit corporation that is:
  1. (A) Incorporated under the laws of Tennessee;
  2. (B) Exempt from federal income taxation under 26 U.S.C. § 501(c)(3); and
  3. (C) Requested by a patient or a patient's family to raise funds for an organ transplant for a specific individual.
2. (2) Any funds remaining in a particular account shall revert to the general fund of the corporation to be used to assist other similarly situated persons.
(b)
1. (1) This chapter shall not apply to any nonprofit corporation that:
  1. (A) Is incorporated under the laws of Tennessee and is exempt from federal income taxation under 26 U.S.C. § 501(c)(3); and
  2. (B) Solicits and accepts contributions of funds for the purpose of providing minors suffering from a catastrophic illness with nonmedical gifts or benefits to fulfill a desire or wish of the minor.
2. (2) A portion of such funds may be used to provide appropriate adult supervision if required by the gift.
3. (3) Any such funds raised for a particular minor and unexpended shall revert to the general fund of the corporation to be used to provide gifts or benefits for a similar minor.

Chapter 12 Uniform Transfer on Death Security Registration

§ 35-12-101. Short title.

This chapter shall be known and may be cited as the “Uniform Transfer on Death Security Registration Act.”

§ 35-12-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Beneficiary form” means a registration of a security which indicates the present owner of the security and the intention of the owner regarding the person who will become the owner of the security upon the death of the owner;
2. (2) “Devisee” means any person designated in a will to receive a disposition of real or personal property;
3. (3) “Heirs” means those persons, including the surviving spouse, who are entitled under the statutes of intestate succession to the property of a decedent;
4. (4) “Person” means an individual, a corporation, an organization, or other legal entity;
5. (5) “Personal representative” includes executor, administrator, successor personal representative, special administrator, and persons who perform substantially the same function under the law governing their status;
6. (6) “Property” includes both real and personal property or any interest therein and means anything that may be the subject of ownership;
7. (7) “Register,” including its derivatives, means to issue a certificate showing the ownership of a certificated security or, in the case of an uncertificated security, to initiate or transfer an account showing ownership of securities;
8. (8) “Registering entity” means a person who originates or transfers a security title by registration, and includes a broker maintaining security accounts for customers and a transfer agent or other person acting for or as an issuer of securities;
9. (9) “Security” means a share, participation, or other interest in property, in a business, or in an obligation of an enterprise or other issuer, and includes a certificated security, an uncertificated security, and a security account;
10. (10) “Security account” means a:
  1. (A) Reinvestment account associated with a security, a securities account with a broker, a cash balance in a brokerage account, cash, interest, earnings, or dividends earned or declared on a security in an account, a reinvestment account, or a brokerage account, whether or not credited to the account before the owner's death;
  2. (B) Custody account or an investment management account with a trust company or a trust division of a bank with trust powers, including the securities in the account, a cash balance in the account, cash, cash equivalents, interest, earnings, or dividends earned or declared on a security in the account, whether or not credited to the account before the owner's death; or
  3. (C) Cash balance or other property held for or due to the owner of a security as a replacement for or product of an account security, whether or not credited to the account before the owner's death; and
11. (11) “State” includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States.

§ 35-12-103. Who may obtain beneficiary form — Owners hold as joint tenants.

Only individuals whose registration of a security shows sole ownership by one (1) individual or multiple ownership by two (2) or more with right of survivorship, rather than as tenants in common, may obtain registration in beneficiary form. Multiple owners of a security registered in beneficiary form hold as joint tenants with right of survivorship, as tenants by the entireties, or as owners of community property held in survivorship form, and not as tenants in common.

§ 35-12-104. Authorization.

A security may be registered in beneficiary form if the form is authorized by this or a similar statute of the state of organization of the issuer or registering entity, the location of the registering entity's principal office, the office of its transfer agent or its office making the registration, or by this or a similar statute of the law of the state listed as the owner's address at the time of registration. A registration governed by the law of a jurisdiction in which this or similar legislation is not in force or was not in force when a registration in beneficiary form was made is nevertheless presumed to be valid and authorized as a matter of contract law.

§ 35-12-105. Designation.

A security, whether evidenced by certificate or account, is registered in beneficiary form when the registration includes a designation of a beneficiary to take the ownership at the death of the owner or the deaths of all multiple owners.

§ 35-12-106. Evidence of beneficiary form.

Registration in beneficiary form may be shown by the words “transfer on death” or the abbreviation “TOD,” or by the words “pay on death” or the abbreviation “POD,” after the name of the registered owner and before the name of a beneficiary.

§ 35-12-107. No effect until death.

The designation of a TOD beneficiary on a registration in beneficiary form has no effect on ownership until the owner's death. A registration of a security in beneficiary form may be cancelled or changed at any time by the sole owner or all then surviving owners without the consent of the beneficiary.

§ 35-12-108. Effect upon death.

On death of a sole owner or the last to die of all multiple owners, ownership of securities registered in beneficiary form passes to the beneficiary or beneficiaries who survive all owners. On proof of death of all owners, compliance with any applicable requirements of the registering entity, and procurement of any inheritance tax waiver as required by § 67-8-417, a security registered in beneficiary form may be reregistered in the name of the beneficiary or beneficiaries who survived the death of all owners. Until division of the security after the death of all owners, multiple beneficiaries surviving the death of all owners hold their interests as tenants in common. If no beneficiary survives the death of all owners, the security belongs to the estate of the deceased sole owner or the estate of the last to die of all multiple owners.

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35-12-109(c)

§ 35-12-109. Registration.

(a) A registering entity is not required to offer or to accept a request for security registration in beneficiary form. If a registration in beneficiary form is offered by a registering entity, the owner requesting registration in beneficiary form assents to the protections given to the registering entity by this chapter.
(b) By accepting a request for registration of a security in beneficiary form, the registering entity agrees that the registration will be implemented on death of the deceased owner as provided in this chapter.
(c) A registering entity is discharged from all claims to a security by the estate, creditors, heirs, or devisees of a deceased owner if it registers a transfer of the security in accordance with § 35-12-108 and does so in good faith reliance on the registration, on this chapter, and on information provided to it by affidavit of the personal representative of the deceased owner, or by the surviving beneficiary or by the surviving beneficiary's representatives, or other information available to the registering entity. The protections of this chapter do not extend to a reregistration or payment made after a registering entity has received written notice from any claimant to any interest in the security objecting to implementation of a registration in beneficiary form. No other notice or other information available to the registering entity affects its right to protection under this chapter.
(d) The protection provided by this chapter to the registering entity of a security does not affect the rights of beneficiaries in disputes between themselves and other claimants to ownership of the security transferred or its value or proceeds.

§ 35-12-110. Transfer.

(a) A transfer on death resulting from a registration in beneficiary form is effective by reason of the contract regarding the registration between the owner and the registering entity and this chapter and is not testamentary.
(b) This chapter does not limit the rights of creditors of security owners against beneficiaries and other transferees under other laws of this state.

§ 35-12-111. Establishment of terms and conditions.

(a) A registering entity offering to accept registrations in beneficiary form may establish the terms and conditions under which it will receive requests for registrations in beneficiary form, and for implementation of registrations in beneficiary form, including requests for cancellation of previously registered TOD beneficiary designations and requests for reregistration to effect a change of beneficiary. The terms and conditions so established may provide for proving death, avoiding or resolving any problems concerning fractional shares, designating primary and contingent beneficiaries, and substituting a named beneficiary's descendants to take in the place of the named beneficiary in the event of the beneficiary's death. Substitution may be indicated by appending to the name of the primary beneficiary the letters LDPS, standing for “lineal descendants per stirpes.” This designation substitutes a deceased beneficiary's descendants who survive the owner for a beneficiary who fails to so survive, the descendants to be identified and to share in accordance with the law of the beneficiary's domicile at the owner's death governing inheritance by descendants of an intestate. Other forms of identifying beneficiaries who are to take on one (1) or more contingencies, and rules for providing proofs and assurances needed to satisfy reasonable concerns by registering entities regarding conditions and identities relevant to accurate implementation of registrations in beneficiary form, may be contained in a registering entity's terms and conditions.
(b) The following are illustrations of registrations in beneficiary form which a registering entity may authorize:
1. (1) Sole owner-sole beneficiary: John S. Brown TOD (or POD) John S. Brown Jr.
2. (2) Multiple owners-sole beneficiary: John S. Brown, Mary B. Brown JT TEN TOD John S. Brown Jr.
3. (3) Multiple owners-primary and secondary (substituted) beneficiaries: John S. Brown, Mary B. Brown JT TEN TOD, John S. Brown Jr. SUB BENE, Peter Q. Brown or John S. Brown, Mary B. Brown JT TEN TOD, John S. Brown Jr. LDPS.

§ 35-12-112. Construction.

(a) This chapter shall be liberally construed and applied to promote its underlying purposes and policy and to make uniform the laws with respect to the subject of this chapter among states enacting it.
(b) Unless displaced by the particular provisions of this chapter, the principles of law and equity supplement its provisions.

§ 35-12-113. Application.

This chapter applies to registrations of securities in beneficiary form made before or after July 1, 1995, by decedents dying on or after July 1, 1995.

Chapter 13 Charitable Beneficiaries

§ 35-13-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Charitable Beneficiaries Act of 1997.”

§ 35-13-102. Purpose — Chapter definitions.

(a) This chapter declares that the public policy of this state, as declared in its cases and statutes, favors gifts to charity that improve the general welfare through acts of philanthropy.
(b) As used in this chapter, unless the context otherwise requires:
1. (1) “Attorney general and reporter” means the attorney general and reporter of Tennessee or the attorney general and reporter's designee;
2. (2) “Charitable beneficiary” means the United States, any state that is part of the United States, or any political subdivision of a state, the District of Columbia, any corporation, trust, fraternal society or other organization described in §§ 170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Internal Revenue Code (26 U.S.C. §§ 170(b)(1)(A), 170(c), 2055(a) and 2522(a)), that is exempt from taxation under § 501(c)(3) of the Internal Revenue Code (26 U.S.C. §§ 170(b)(1)(A), 170(c), 2055(a) and 2522(a)), or any church, synagogue, other religious organization, or any other organization, entity or association to which a gift would be deductible under §§ 170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Internal Revenue Code;
3. (3) “Charitable gift” means any gift clearly intended for charitable purposes;
4. (4) “Charitable purpose” means any purpose generally considered charitable at common law, or for any charitable purpose under any section of Tennessee Code Annotated, or for any purpose described in §§ 170(b)(1)(A), 170(c), 2055(a) and 2522(a) of the Internal Revenue Code. A reference to the applicable section or sections of Tennessee Code Annotated or the Internal Revenue Code sufficiently describes the charitable purposes of the gift;
5. (5) “Court” means the chancery court or other court exercising equity jurisdiction or a probate court of record;
6. (6) “Discretionary charitable gift” means a charitable gift that has indefinite beneficiaries, objects, purposes or subjects;
7. (7) “Donor” means the person making the lifetime or testamentary charitable gift;
8. (8) “Gift instrument” means a will, deed, grant, conveyance, trust agreement, memorandum, writing or other governing document that creates the charitable gift;
9. (9) “Internal Revenue Code” means the Internal Revenue Code of 1986 (U.S.C. title 26); and
10. (10) “Tax-exempt” means that the organization, trust or beneficiary referred to is one that is described in § 501(c)(3) of the Internal Revenue Code.
(c) The words “humane,” “beneficial,” “beneficent,” “worthy,” “philanthropic,” “humanitarian” or their derivatives or similar language in the gift instrument shall be presumed to be synonyms for “charitable” as used in this chapter, unless expressly indicated not to be charitable by the context in which they are used.

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35-13-114

§ 35-13-103. Gift instrument to control disposition of gift.

A gift instrument that specifies the charitable beneficiaries, objects, purposes or subjects of the charitable gift controls the disposition or administration of the charitable gift, except as provided in §§ 35-13-114 and 35-13-107.

§ 35-13-104. [Reserved.]

§ 35-13-105. Discretionary charitable gifts.

When the donor makes a discretionary charitable gift the following provisions apply:
1. (1) The person to whom discretion is given shall choose the charitable beneficiaries and charitable purposes within a reasonable time after having accepted the duty to select the beneficiaries or purposes of the discretionary charitable gift;
2. (2) If a donor makes a testamentary discretionary charitable gift not in trust and does not expressly designate the person to select the charitable beneficiaries or the charitable purposes, the personal representative of the donor's estate shall select the beneficiaries or the charitable purposes, or both, of the gift;
3. (3) If a donor makes a testamentary discretionary charitable gift in trust and does not expressly designate the person to select the charitable beneficiaries or the charitable purposes, the trustee shall select the charitable beneficiaries or the charitable purposes, or both, of the gift and, if appropriate, shall establish a trust or charitable corporation or other legal entity to implement the discretionary charitable gift;
4. (4) If the court receives notice that the person having the discretion is not ready, willing or able to perform the selection duties within a reasonable time or to establish the trust or other organization, the court shall select the person to exercise the discretion. If the discretionary gift is in trust, the court may exercise the power granted under the Uniform Trust Code, compiled in chapter 15 of this title.

§ 35-13-106. [Reserved.]

§ 35-13-107. Change in tax-exempt status of beneficiary.

IF:
1. (1) a gift made to a trust is to take effect at a date later than the date of the gift instrument; and
2. (2) when the gift instrument is executed, the gift to the trust would qualify for a charitable deduction under the Internal Revenue Code (26 U.S.C.), if the gift were then effective; and
3. (3) the trust, or beneficiary of the trust, loses its tax-exempt status before the gift takes effect; THEN
4. the donor shall be presumed to have intended that the trust should be tax-exempt when the gift was to take effect, unless the donor clearly indicated in the gift instrument that the designated beneficiary should receive the gift even if the gift is not eligible for the charitable deduction. The court has jurisdiction to reform the trust by selecting another tax-exempt beneficiary, or to select another tax-exempt trust, and to select one (1) or more charitable purposes of the gift.

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35-13-103

§ 35-13-108. Validity under rules of remoteness or rule against perpetuities.

No charitable gift shall fail for remoteness of vesting or for any violation of the rule against perpetuities.

§ 35-13-109. Validity where no trustee.

No trust to which a charitable gift or a discretionary charitable gift is or has been made shall fail for lack of a trustee. If there is no trustee, the title to any trust property intended for a charitable purpose shall vest in the clerk of the court that has jurisdiction and venue of the trust as determined under § 35-13-110 until the court either appoints a trustee or orders distribution of the gift.

§ 35-13-110. Attorney general and reporter to be party to court actions affecting gifts — Court approval of disposition.

(a) In all court actions directly affecting the amount, administration or disposition of a charitable gift or a discretionary charitable gift, the court may require that the attorney general and reporter be made a party to represent the charitable beneficiaries, potential charitable beneficiaries and all citizens of the state in all legal matters pertaining to the amount, administration and disposition of a charitable gift or discretionary charitable gift. The attorney general and reporter may sue and be sued, and, insofar as the suit against the attorney general and reporter is against the state, the state expressly consents to be sued. The attorney general and reporter may designate a district attorney general to prosecute or defend any court action.
(b) It is unlawful to settle any litigation concerning the validity of a charitable gift or discretionary charitable gift without first obtaining the approval of the court. The court shall approve a settlement only after determining that the interest of the people of the state, as true beneficiaries of any charitable gift, has been served.

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35-13-109

§ 35-13-111. Venue of court action.

(a) If the gift instrument is a will and the estate is in administration, or if the gift under a will is not in trust, the venue of any court action is in the county in which the donor's will was or is being administered.
(b) If the gift instrument is an inter-vivos trust or a testamentary trust under a fully administered will, venue of any court action shall be in any county in which a trustee resides, or is located if not an individual, or in which a majority of the beneficiaries, or potential beneficiaries, reside or are located.
(c) If neither subsection (a) nor (b) applies, venue is in Davidson County, in a court of competent jurisdiction; provided, that the court may transfer the court action to a more convenient forum.
(d) With the consent of the court in which an action is pending, the parties may waive the venue provisions of subsections (a), (b) and (c).

§ 35-13-112. Trust in violation of state or federal law.

If the department of revenue makes a written determination that the operation of a charitable trust violates § 35-9-101 or if the Internal Revenue Service makes such a written determination with respect to the corresponding provisions of the Internal Revenue Code (U.S.C. title 26), and provides the written determination to the trustee, the trustee shall furnish a copy of the determination to the attorney general and reporter, and any other person may notify the attorney general and reporter of the determination. The attorney general and reporter may take any action that is deemed necessary to protect the interest of the people of the state.

§ 35-13-113. Construction with other laws.

This chapter is deemed cumulative to any equitable doctrine or remedy or statute having for its object the same or similar purposes of this chapter.

§ 35-13-114. Cy pres.

Section 35-15-413 shall also apply to charitable gifts, as defined in § 35-13-102, whether given before or after April 12, 2007, on the same basis as charitable trusts.

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35-13-103

Chapter 14 Uniform Prudent Investor Act

§ 35-14-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Uniform Prudent Investor Act of 2002.”

§ 35-14-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Governing instrument” means:
  1. (A) A will, deed, trust instrument or agency agreement;
  2. (B) For purposes of subdivision (1)(A), an agency agreement includes but is not limited to, any agreement under which any delegation is made, either pursuant to § 35-15-807 or by anyone holding a power or duty pursuant to chapter 15, part 12 of this title;
2. (2) “Trust” means any fiduciary relationship created by a governing instrument; and
3. (3) “Trustee” means any fiduciary as defined in § 35-15-103.

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35-15-103(13)(B)

§ 35-14-103. Prudent investor rule.

(a) Except as otherwise provided in subsection (b), a trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule set forth in this chapter.
(b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated, or otherwise altered by the provisions of a trust. A trustee is not liable to a beneficiary to the extent that the trustee acted in reliance on the provisions of the trust.
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§ 35-14-104. Standard of care — Portfolio strategy — Risk and return objectives.

(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.
(b) A trustee's investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.
(c) Among circumstances that a trustee may consider in investing and managing trust assets the following are relevant to the trust or its beneficiaries:
1. (1) General economic conditions;
2. (2) The possible effect of inflation or deflation;
3. (3) The expected tax consequences of investment decisions or strategies;
4. (4) The role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;
5. (5) The expected total return from income and the appreciation of capital;
6. (6) Other resources of the beneficiaries;
7. (7) Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
8. (8) An asset's special relationship or special value, if any, to the purposes of the trust or to one (1) or more of the beneficiaries.
(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.
(e) In addition to the permissible investments listed in §§ 35-3-102 — 35-3-111, a trustee may invest in any kind of property or type of investment consistent with the standards of this chapter.
(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.
(g) The powers granted by this section to trustees, guardians and other fiduciaries shall be in addition to the powers existing under other provisions of this code authorizing investments by fiduciaries.

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§ 35-14-105. Diversification.

(a) A trustee shall diversify the investments of the trust:
1. (1) Unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying, or
2. (2) Except as otherwise provided in subsection (b).
(b)
1. (1) In the absence of express provisions to the contrary in the governing instrument, a fiduciary may without liability continue to hold property received into a trust at its inception or subsequently added to it or acquired pursuant to proper authority if and as long as the fiduciary, in the exercise of good faith and reasonable prudence, discretion and intelligence, may consider that retention is in the best interest of the trust and its beneficiaries or in furtherance of the goals of the trustor as determined from that instrument. Such property may include capital stock in the corporate fiduciary and stock in any corporation controlling, controlled by or under common control with such fiduciary; and the fiduciary may acquire additional shares of such stock by stock dividends, stock splits, exchanges and conversions for other stock or debentures and exercise of rights to acquire stock of the corporation or another corporation acquiring the stock of the corporation by merger, consolidation or reorganization.
2. (2) In the absence of express provisions to the contrary in the governing instrument, a deposit of trust funds at interest in any bank, savings and loan association or other financial institution (including the fiduciary and an affiliated depository institution) shall be a qualified investment to the extent that such deposit is insured under any present or future law of the United States. The fiduciary may also hold deposits in such institutions without interest in reasonable amounts and for reasonable times for operating expenses, anticipated distributions and pending investments.
(c)
1. (1) Notwithstanding any other provision of this chapter to the contrary, and except as otherwise provided in the governing instrument, the duties of a trustee regarding the acquisition, retention or ownership of a contract of insurance on the life of the grantor of the trust, or on the lives of the grantor and the grantor's spouse, children, grandchildren, or parents, do not include a duty to:
  1. (A) Determine whether any contract of life insurance in the trust, or to be acquired by the trust, is or remains a proper investment;
    1. (i) As to the type of insurance contract;
    2. (ii) As to the quality of the insurance company;
    3. (iii) Or otherwise;
  2. (B) Diversify the investment; or
  3. (C) Exercise any policy options, rights, or privileges available under any contract of life insurance in the trust, including any right to borrow the cash value or reserve of the policy, acquire a paid-up policy, or convert to a different policy.
2. (2) The trustee is not liable to the beneficiaries of the contract of insurance or to any other party for loss arising from the absence of these duties regarding insurance contracts under this subsection (c).

§ 35-14-106. Duties at inception of trusteeship.

Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee shall review the trust assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the trust portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the trust, and with the requirements of this chapter.

§ 35-14-107. Loyalty.

A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.

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§ 35-14-108. Impartiality.

If a trust has two (2) or more beneficiaries, the trustee shall act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries.

§ 35-14-109. Investment costs.

In investing and managing trust assets, a trustee may only incur costs that are appropriate and reasonable in relation to the assets, the purposes of the trust, and the skills of the trustee.

§ 35-14-110. Reviewing compliance.

Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a trustee's decision or action and not by hindsight.

§ 35-14-111. Delegation of investment and management functions.

(a) A trustee may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
1. (1) Selecting an agent;
2. (2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
3. (3) Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.
(c) A trustee who complies with the requirements of subsection (a) is not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated.
(d) By accepting the delegation of a trust function from the trustee of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.

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§ 35-14-112. Language invoking standard of act.

The following terms or comparable language in the provisions of a trust, unless otherwise limited or modified, authorizes any investment or strategy permitted under this chapter: “investments permissible by law for investment of trust funds,” “legal investments,” “authorized investments,” “using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital,” “prudent man rule,” “prudent trustee rule,” “prudent person rule,” and “prudent investor rule.”

§ 35-14-113. Application to existing trusts.

(a) This chapter applies to trusts existing on and created after July 1, 2002. As applied to trusts existing on July 1, 2002, this chapter governs only decisions or actions occurring after that date.
(b) This section shall not apply in any situation governed by the Uniform Veterans Guardianship Act, compiled in title 34, chapter 5.

§ 35-14-114. Court authority.

Nothing in this chapter abrogates or restricts the power of an appropriate court in proper cases to direct or permit the fiduciary to deviate from the terms of the governing instrument or restrains a fiduciary from taking any action regarding the making or retention of investments.

Chapter 15 Tennessee Uniform Trust Code

Part 1 General Provisions and Definitions

§ 35-15-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Uniform Trust Code.”

§ 35-15-102. Scope.

This chapter applies to express trusts, charitable or noncharitable, and trusts created pursuant to a statute, judgment, or decree that requires the trust to be administered in the manner of an express trust.

§ 35-15-103. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Action” with respect to an act of a trustee, includes a failure to act;
2. (2) “Another state” or “other state” means any state other than this state;
3. (3) “Ascertainable standard” means a standard relating to an individual’s health, education, support or maintenance within the meaning of § 2041(b)(1)(A) or § 2514(c)(1) of the Internal Revenue Code of 1986 (U.S.C. § 2041(b)(1)(A) and § 2514(c)(1)), as in effect on July 1, 2004, or as later amended;
4. (4) “Beneficial interest” means a distribution interest or a remainder interest; provided, however, that a beneficial interest specifically excludes a power of appointment or a power reserved by a settlor;
5. (5) “Beneficiary” means a person that has a present or future beneficial interest in a trust, vested or contingent;
6. (6) “Charitable trust” means a trust, or portion of a trust, created for a charitable purpose described in § 35-15-405(a);
7. (7) “Conservator” has the same meaning as in § 34-1-101;
8. (8) “Directed trust” means a trust where either through the terms of the trust, an agreement of the qualified beneficiaries or a court order, one or more persons are given the authority to direct or consent to a fiduciary's actual or proposed investment decision, distribution decision, or any other decision of the fiduciary;
9. (9) “Distribution beneficiary” means a beneficiary who is an eligible distributee or permissible distributee of the income or principal of a trust;
10. (10) “Distribution interest” means:
  1. (A) An interest, other than a remainder interest, held by a distribution beneficiary under a trust and may be a current distribution interest or a future distribution interest;
  2. (B) Relative to a distribution interest:
    1. (i) Neither the existence of a distribution interest or the provision of services by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest is relevant in the equitable division of marital property;
    2. (ii) None of the factors in subdivision (10)(B)(i) or the exercise or nonexercise of any power or discretion by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest (even if that spouse is also a beneficiary of the trust creating the distribution interest) are relevant to, indicative of or effect the transmutation or other conversion of separate property to community property;
    3. (iii) The expending of any community funds by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest relative to the operation or maintenance of property related to a distribution interest is not relevant to or indicative of, and does not effect a transmutation or other conversion of separate property to community property;
    4. (iv) Any funds expended pursuant to subdivision (10)(B)(iii) shall be valid debts of the trust and shall be repaid to the community with appropriate interest;
  3. (C) A distribution interest is classified as either a mandatory interest, a support interest or a discretionary interest; and although not the exclusive means to create each such respective distribution interest, absent clear and convincing evidence to the contrary, use of the example language accompanying the following definitions of each such respective distribution interest results in the indicated classification of distribution interest:
    1. (i) A mandatory interest means a distribution interest in which the timing of any distribution must occur within one (1) year from the date the right to the distribution arises and the trustee has no discretion in determining whether a distribution shall be made or the amount of such distribution; example distribution language indicating a mandatory interest includes, but is not limited to:
      1. (a) All income shall be distributed to a named beneficiary; or
      2. (b) One hundred thousand dollars ($100,000) a year shall be distributed to a named beneficiary;
    2. (ii) A support interest means a distribution interest that is not a mandatory interest but still contains mandatory language such as “shall make distributions” and is coupled with a standard capable of judicial interpretation; example distribution language indicating a support interest includes, but is not limited to:
      1. (a) The trustee shall make distributions for health, education, maintenance, and support;
      2. (b) Notwithstanding the distribution language used, if a trust instrument containing such distribution language specifically provides that the trustee exercise discretion in a reasonable manner with regard to a discretionary interest, then notwithstanding any other provision of this subdivision (10) defining distribution interests, the distribution interest shall be classified as a support interest;
    3. (iii) A discretionary interest means any interest that is not a mandatory or a support interest and is any distribution interest where a trustee has any discretion to make or withhold a distribution; example distribution language indicating a discretionary interest includes, but is not limited to:
      1. (a) The trustee may, in the trustee's sole and absolute discretion, make distributions for health, education, maintenance, and support;
      2. (b) The trustee, in the trustee’s sole and absolute discretion, shall make distributions for health, education, maintenance, and support;
      3. (c) The trustee may make distributions for health, education, maintenance, and support;
      4. (d) The trustee shall make distributions for health, education, maintenance, and support; provided, however, that the trustee may exclude any of the beneficiaries or may make unequal distributions among them; or
      5. (e) The trustee may make distributions for health, education, maintenance, support, comfort, and general welfare;
      6. (f) A discretionary interest may also be evidenced by:
        
        (1) Permissive distribution language such as “may make distributions”;
        
        (2) Mandatory distribution language that is negated by the discretionary distribution language contained in the trust such as “the trustee shall make distributions in the trustee’s sole and absolute discretion”;
      7. (g) An interest that includes mandatory distribution language such as “shall” but is subsequently qualified by discretionary distribution language shall be classified as a discretionary interest and not as a support or a mandatory interest;
  4. (D)
    1. (i) To the extent a trust contains distribution language indicating the existence of any combination of a mandatory, support and discretionary interest, that combined interest of the trust shall be divided and treated separately as follows:
      1. (a) The trust shall be a mandatory interest only to the extent of the mandatory distribution language;
      2. (b) The trust shall be a support interest only to the extent of such support distribution language; and
      3. (c) The remaining trust property shall be held as a discretionary interest;
    2. (ii) For purposes of this subdivision (10)(D), a support interest that includes mandatory distribution language such as “shall” but is subsequently qualified by discretionary distribution language, shall be classified as a discretionary interest and not as a support interest;
11. (11) “Environmental law” means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment;
12. (12) “Excluded fiduciary” means any trustee, trust advisor, or trust protector to the extent that, under the terms of a trust, an agreement of the qualified beneficiaries, an exercise of the authority described in § 35-15-716, or court order:
  1. (A) The trustee, trust advisor, or trust protector is excluded from exercising a power, or is relieved of a duty; and
  2. (B) The power or duty is granted or reserved to another person;
13. (13) “Fiduciary” means:
  1. (A) A trustee, conservator, guardian, agent under any agency agreement or other instrument, an executor, personal representative or administrator of a decedent’s estate, or any other party, including a trust advisor or a trust protector, who is acting in a fiduciary capacity for any person, trust, or estate;
  2. (B) Fiduciary also means a trustee as defined in § 35-14-102;
  3. (C) For purposes of subdivision (13)(A), an agency agreement includes but is not limited to, any agreement under which any delegation is made, either pursuant to § 35-15-807 or by anyone holding a power or duty pursuant to part 12;
  4. (D) For purposes of the definition of fiduciary in this subdivision (13), fiduciary does not mean any person who is an excluded fiduciary as such is defined in this section;
14. (14) “Foreign” or “foreign country” means any jurisdiction, subdivision, territory or possession thereof, other than that of the United States of America or of a state;
15. (15) “Foreign jurisdiction” means any jurisdiction, subdivision, territory or possession thereof, other than this state;
16. (16) “Guardian” has the same meaning as in § 34-1-101. The term does not include a guardian ad litem;
17. (17) “Interests of the beneficiaries” means the beneficial interests provided in the terms of the trust;
18. (18) “Internal Revenue Code” means the Internal Revenue Code of 1986 (U.S.C. title 26), as in effect on July 1, 2004, or as later amended;
19. (19) “Jurisdiction” with respect to a geographic area, includes a state or country;
20. (20) “Person” means an individual; corporation; business trust; estate; trust or civil law equivalent of a trust, including a fideicomiso or equivalent, or a foundation of the equivalent; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity;
21. (21) “Power of appointment” means:
  1. (A) An inter vivos or testamentary power to direct the disposition of trust property, other than a distribution decision made by a trustee or other fiduciary to a beneficiary;
  2. (B) Powers of appointment are held by the person to whom such power has been given, and not by a settlor in that person’s capacity as settlor;
22. (22) “Power of withdrawal” means a presently exercisable general power of appointment other than a power:
  1. (A) Exercisable by a trustee and limited by an ascertainable standard; or
  2. (B) Exercisable by another person only upon consent of the trustee or a person holding an adverse interest;
23. (23) “Property” means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein;
24. (24) “Qualified beneficiary” means a beneficiary who, assuming the nonexercise of all powers of appointment and the nonoccurrence of any event not reasonably expected to occur, on the date the beneficiary’s qualification is determined:
  1. (A) Is a distributee or permissible distributee of trust income or principal;
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    35-15-708(a)
  2. (B) Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subdivision (24)(A) terminated on that date without causing the trust to terminate; or
  3. (C) Would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date;
  4. (D)
    1. (i) Notwithstanding any other provisions of this subdivision (24), no ultimate beneficiary or potential ultimate beneficiary shall be a qualified beneficiary;
    2. (ii) In determining who is or may be an ultimate beneficiary, all of the following shall be taken into consideration:
      1. (a) The terms of the trust naming any ultimate beneficiary or potential ultimate beneficiary and the intention of the settlor relative to any such beneficiary as expressed in such terms; and
      2. (b) Any terms or provisions related to the exercise of any power by any person naming any ultimate beneficiary or potential ultimate beneficiary and the intention of the person exercising such power relative to any such beneficiary as expressed in such terms or provisions;
    3. (iii) Determined as provided in subdivision (24)(D)(ii), an ultimate beneficiary or potential ultimate beneficiary is any beneficiary who the settlor or power holder did not reasonably anticipate would take any interest upon termination of all or any part of a trust absent all other beneficiaries or members of classes of beneficiaries named in the trust instrument or in the exercise of the power, respectively, predeceasing or otherwise not being in existence at the time at which such trust or part thereof terminates;
    4. (iv) By way of example and not in limitation of this subdivision (24)(D), an ultimate beneficiary is a person or persons often included in a trust instrument or under the exercise of a power to take an interest in a trust at the time all or any part of such trust terminates only in a case where all other named beneficiaries or classes of beneficiaries that have or had an affinity through either familial connection or friendship with any of:
      1. (a) The settlor;
      2. (b) The person holding any power; or
      3. (c) Any prior beneficiary or potential beneficiary of the trust;
      4. are predeceased or are otherwise not in existence at the time all or any part of the trust terminates;
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  - 35-6-108(a)(6)
25. (25) “Reach” means, with respect to a distribution interest or any power held by anyone relative to a trust, to subject such distribution interest or such power to a judgment, decree, garnishment, attachment, execution, levy, creditor’s bill or other legal, equitable, or administrative process, relief, or control of any court, tribunal, agency, or other entity that, by power of law, is provided with powers or jurisdiction similar to those described in this subdivision (25);
26. (26) “Remainder interest” means an interest under which a trust beneficiary will receive property held by a trust outright at some time during the future; relative to a remainder interest:
  1. (A) Neither the existence of a remainder interest or the provision of services by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest is relevant in the equitable division of marital property;
  2. (B) None of the factors in subdivision (26)(A) or the exercise or non-exercise of any power or discretion by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest (even if that spouse is also a beneficiary of the trust creating the remainder interest) are relevant to, indicative of or effect the transmutation or other conversion of separate property to community property;
  3. (C) The expending of any community funds by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest relative to the operation or maintenance of property related to a remainder interest is not relevant to or indicative of, and does not effect a transmutation or other conversion of separate property to community property;
  4. (D) Any funds expended pursuant to subdivision (26)(C) shall be valid debts of the trust and shall be repaid to the community with appropriate interest;
27. (27) “Reserved power” means a power held by a settlor;
28. (28) “Revocable” as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest;
29. (29) “Settlor” means a person, including a testator, who creates, or contributes property to, a trust. If more than one (1) person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion;
30. (30) “Spendthrift provision” means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary's interest;
31. (31) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band recognized by federal law or formally acknowledged by a state;
32. (32) “Successors in interest” means the beneficiaries under the settlor’s will, if the settlor has a will, or in the absence of an effective will provision, the settlor’s heirs at law;
33. (33) “Terms of a trust” means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding;
34. (34) “This state” means the state of Tennessee;
35. (35) “Trust advisor” means any person described in § 35-15-1201(a);
36. (36) “Trust instrument” means an instrument executed by the settlor that contains terms of the trust, including any amendments thereto;
37. (37) “Trust protector” means any person described in § 35-15-1201(a); and
38. (38) “Trustee” includes an original, additional, and successor trustee, and a cotrustee.

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§ 35-15-104. Knowledge.

(a) Subject to subsection (b), a person has knowledge of a fact if the person:
1. (1) Has actual knowledge of it;
2. (2) Has received a notice or notification of it; or
3. (3) From all the facts and circumstances known to the person at the time in question, has reason to know it.
(b) 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. An organization exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the employee having responsibility to act for the trust and there is reasonable compliance with the routines. Reasonable diligence does not require an employee of the organization to communicate information unless the communication is part of the individual's regular duties or the individual knows a matter involving the trust would be materially affected by the information.

§ 35-15-105. Default and mandatory rules.

(a) Except as otherwise provided in the terms of the trust, this chapter governs the duties and powers of a trustee or any other fiduciary under this chapter, relations among trustees and such other fiduciaries, and the rights and interests of a beneficiary. The terms of a trust may expand, restrict, eliminate, or otherwise vary the duties and powers of a trustee, any such other fiduciary, relations among any of them, and the rights and interests of a beneficiary; provided, however, that nothing contained in this subsection (a) shall be construed to override or nullify the provisions of subsection (b). The rule of statutory construction that states that statutes in derogation of the common law are to be strictly construed shall have no application to this section. Except as restricted by subsection (b), pursuant to this section, courts shall give maximum effect to the principle of freedom of disposition and to the enforceability of trust instruments.
(b) The terms of a trust prevail over any provision of this chapter except:
1. (1) The requirements for creating a trust;
2. (2) The duty of a trustee to act in accordance with the terms and purposes of the trust and the interests of the beneficiaries;
3. (3) The requirement that a trust and its terms be for the benefit of its beneficiaries as the interests of such beneficiaries are defined under the terms of the trust, and that the trust has a purpose that is lawful and possible to achieve;
4. (4) The power to modify or terminate a trust under §§ 35-15-410 — 35-15-416;
5. (5) The effect of a spendthrift provision and the rights of certain creditors and assignees to reach a trust as provided in part 5 of this chapter;
6. (6) The power of the court under § 35-15-702 to require, dispense with, or modify or terminate a bond;
7. (7) The power of the court under § 35-15-708(b) to adjust a trustee's compensation specified in the terms of the trust which is unreasonably low or high;
8. (8) The effect of an exculpatory term under § 35-15-1008;
9. (9) The rights under §§ 35-15-1010 — 35-15-1013 of a person other than a trustee or beneficiary;
10. (10) Periods of limitation for commencing a judicial proceeding;
11. (11) The power of the court to take such action and exercise such jurisdiction as may be necessary in the interests of justice; and
12. (12) The subject matter jurisdiction of the court and venue for commencing a proceeding as provided in §§ 35-15-203 and 35-15-204.
(c) Any purpose enunciated as a material purpose of a trust in that trust's trust instrument shall be treated as a material purpose of that trust for all purposes of this chapter and chapter 16.

§ 35-15-106. Law supplemental to chapter — Applicability of certain sections of Restatement of Trusts.

(a) The common law of trusts and principles of equity supplement this chapter, except to the extent modified by this chapter or another statute of this state.
(b) Notwithstanding subsection (a):
1. (1) No provision in a trust directing or authorizing accumulation of trust income shall be invalid; and
2. (2) The traditional common law distinction between a discretionary trust and a support trust and the dual judicial review standards related to this distinction shall be maintained. Unless specifically provided otherwise in this chapter, courts shall not consult, rely on or give any persuasive value to the Restatement (Third) of Trusts §§ 50, 56, 58, 59 or 60, nor any of the comments under such sections or related thereto, none of which have any force or effect relative to trusts governed by the laws of this state.

§ 35-15-107. Governing law.

(a) The validity and construction of a trust are determined by the law of the jurisdiction designated in the terms of the trust instrument, which is called a state jurisdiction provision.
(b) When a state jurisdiction provision designates that the law of this state controls:
1. (1) This state and its courts have jurisdiction over a trust created in a foreign jurisdiction;
2. (2) The validity, construction, and administration of a trust are determined by the laws of this state, including but not limited to:
  1. (A) The capacity of the settlor;
  2. (B) The powers, obligations, liabilities, and rights of the trustees and other fiduciaries;
  3. (C) The appointment and removal of the trustees and other fiduciaries;
  4. (D) The existence and extent of all powers conferred on a trustee or other fiduciary, including but not limited to, any trustee's or other fiduciary's discretionary powers, as well as the existence and extent of all powers retained by a settlor and the validity of the exercise of any such power, whether conferred on a trustee or other fiduciary or retained by a settlor;
3. (3)
  1. (A) Neither a trust nor any disposition made subject to the terms of such trust is subject to the laws of any foreign country, nor is any such trust or such disposition void, voidable, liable to be set aside or defective in any manner for any reason including but not limited to:
    1. (i) The law of any foreign country prohibits or does not recognize the concept of a trust; or
    2. (ii) The trust or disposition avoids or defeats any right, claim, or interest conferred by the law of a foreign country upon any person by reason of a personal relationship to the settlor or by way of heirship rights or contravenes any rule or law of a foreign country or any foreign country's judicial or administrative order or action intended to recognize, protect, enforce, or give effect to such right, claim, or interest;
  2. (B) Relative to any foreign country or any interest in property arising or originating under the laws of any foreign country:
    1. (i) No form of forced heirship, legitime, forced share or any similar heirship rights or form of transmission or transfer of property from a decedent or from a living person, or any restrictions on transmission or transfer of property from a decedent or a living person is recognized by this state; or
    2. (ii) No heirship rights described in subdivision (b)(3)(B)(i) conferred under the law of a foreign country shall constitute an obligation or liability, the transfer, conveyance or devise of which, would violate title 66, chapter 3; and
  3. (C) This subdivision (b)(3) shall apply to all realty or other forms of immovable property physically in this state, as well as to all personal or movable property wherever situated if owned by a trust containing a state jurisdiction provision designating that the law of this state controls such trust;
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  - 35-16-104(k)(1)
4. (4) No judgment or other holding of any judicial body of any foreign country, including but not limited to, any court, administrative body or other entity or organization purportedly having the power to make judicial or administrative decisions of any foreign country, shall be recognized or enforced or give rise to any equitable forms of relief, including but not limited to, estoppel, to the extent such judgment or other holding concerns a trust containing a state jurisdiction provision designating that the law of this state controls such trust or to the extent such judgment or other holding concerns property held by such trust;
5. (5) If, in any action brought against a trustee or other fiduciary of a trust, any judicial body of any foreign country, including but not limited to, any court, administrative body or other entity or organization purportedly having the power to make judicial or administrative decisions of any foreign country, takes any action whereby such judicial body declines to apply the law of this state in determining the validity, construction, or administration of a trust, or the effect of a spendthrift provision or discretionary interest of a trust, the trustee or other fiduciary, as applicable, shall immediately upon the action of the judicial body of the foreign country and without the further order of any court of this state, cease in all respects to be trustee or other fiduciary, as applicable, of the trust and a vacancy in the office of trustee or other fiduciary, as applicable, shall immediately exist:
  1. (A) Upon the existence of such vacancy, the trustee or other fiduciary, as applicable, has no power or authority other than to convey the trust property to the successor trustee or other fiduciary who fills such vacancy as provided in subdivision (b)(5)(B);
  2. (B) Such vacancy shall be filled in the same manner as would a vacancy in trusteeship that is required to be filled, either as provided by § 35-15-704(c) if the trust is a noncharitable trust, or as provided by § 35-15-704(d) if the trust is a charitable trust; and
  3. (C) Section 35-15-704(e) shall also apply relative to such trustee or other fiduciary, as applicable, in the same manner as § 35-15-704(e) applies to trustees and vacancies in trusteeship in general; provided, however, that when exercising its power provided by § 35-15-704(e), the court shall consider the purposes of this subsection (b) and make any such appointments pursuant to § 35-15-704(e) in a manner designed to give full force and effect to this subsection (b) to the maximum extent allowed by the laws of this state or of the United States.
(c) In the absence of the existence of a state jurisdiction provision, the laws of the jurisdiction where the trust was executed determine the validity of the trust and the laws of descent, while the laws of the principal place of administration determine the administration of the trust.

§ 35-15-108. Place of administration — Sufficient nexus for a state jurisdiction provision — Transfer of place of administration.

(a) Without limiting or precluding other means for establishing a sufficient connection with a jurisdiction, for purposes of determining the applicable law controlling a trust's administration, the terms of a trust designating a jurisdiction's trust administration laws in a state jurisdiction provision are valid and controlling if:
1. (1) A trustee's principal place of business is located in or a trustee is a resident of the designated jurisdiction; or
2. (2) All or part of the administration occurs in the designated jurisdiction; which such administration, includes but is not limited to:
  1. (A) Maintenance of some trust records physically in the designated jurisdiction; and
  2. (B) Wholly or partly preparing or arranging for the preparation, either on an exclusive or a nonexclusive basis, in the designated jurisdiction of an income tax return that must be filed by the trust; or
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  - 35-15-113(a)
3. (3) Some or all of the trust assets are deposited in the designated jurisdiction or physical evidence of such assets is held in the designated jurisdiction and the trust is being administered by a person defined in subdivision (a)(1). For purposes of this subdivision (a)(3), “deposited in the designated jurisdiction,” includes assets being held in any of a checking account, time deposit, certificate of deposit, brokerage account, trust company fiduciary account, or other similar account or deposit that is located in the designated jurisdiction.
(b) Except as otherwise expressly provided in a state jurisdiction provision that is valid and controlling under subsection (a), or by court order addressing the applicable law for trust administration, the laws of this state govern the administration of a trust while the trust is administered in this state. Without precluding other means for establishing that a trust is administered in this state, if any of the activities described in subsection (a) occur in this state, the trust is administered in this state.
(c) A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries.
(d) Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (c), may transfer the trust's principal place of administration to another state or to a jurisdiction outside of the United States.
(e) The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust's principal place of administration not less than sixty (60) days before initiating the transfer. The notice of proposed transfer must include:
1. (1) The name of the jurisdiction to which the principal place of administration is to be transferred;
2. (2) The address and telephone number at the new location at which the trustee can be contacted;
3. (3) An explanation of the reasons for the proposed transfer;
4. (4) The date on which the proposed transfer is anticipated to occur; and
5. (5) The date, not less than sixty (60) days after the giving of the notice, by which the qualified beneficiary must notify the trustee of an objection to the proposed transfer.
(f) The authority of a trustee under this section to transfer a trust's principal place of administration terminates if a majority of those qualified beneficiaries described in § 35-15-103 notify the trustee of an objection to the proposed transfer on or before the date specified in the notice.
(g) In connection with a transfer of the trust's principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed pursuant to § 35-15-704.

§ 35-15-109. Methods and waiver of notice.

(a) 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. 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.
(b) Notice otherwise required under this chapter or a document otherwise required to be sent under this chapter need not be provided to a person whose identity or location is unknown to and not reasonably ascertainable by the trustee.
(c) Notice under this chapter or the sending of a document under this chapter may be waived by the person to be notified or sent the document.
(d) Notice of a judicial proceeding must be given as provided in the applicable rules of civil procedure.

§ 35-15-110. Others treated as qualified beneficiaries.

(a) A charitable organization expressly designated to receive distributions under the terms of a charitable trust has the rights of a qualified beneficiary under this chapter, if the charitable organization, on the date the charitable organization's qualification is being determined, would be a qualified beneficiary under this chapter if such charitable organization were an individual beneficiary.
(b) The attorney general and reporter has the rights of a qualified beneficiary with respect to a charitable trust having its principal place of administration in this state if all of the interests in the trust that are for a charitable purpose, in the aggregate, on the date the attorney general and reporter's qualification is being determined, would cause an individual beneficiary to be a qualified beneficiary under this chapter if all of such interests were for the benefit of an individual beneficiary instead of for charitable purposes.

§ 35-15-111. Nonjudicial settlement agreements.

(a) Except as otherwise provided in subsection (b), the trustee and the qualified beneficiaries may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust.
(b) A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the court under this chapter or other applicable law.
(c) Matters that may be resolved by a nonjudicial settlement agreement include, but are not limited to:
1. (1) The interpretation or construction of the terms of the trust;
2. (2) The approval of a trustee's report or accounting;
3. (3) Direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
4. (4) The resignation or appointment of a trustee and the determination of a trustee's compensation;
5. (5) Transfer of a trust's principal place of administration;
6. (6) Liability of a trustee for an action relating to the trust;
7. (7) The extent or waiver of bond of a trustee;
8. (8) The governing law of the trust;
9. (9) The criteria for distribution to a beneficiary where the trustee is given discretion;
10. (10) The resignation, appointment, and establishment of the powers and duties of trust protectors or trust advisors; and
11. (11) The approval of an investment decision, delegation, policy, plan, or program.
(d) Any qualified beneficiary or trustee may request the court to approve a nonjudicial settlement agreement, to determine whether the representation as provided in part 3 of this chapter was adequate, and to determine whether the agreement contains terms and conditions the court could have properly approved.

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§ 35-15-112. Rules of construction.

The rules of construction that apply in this state to the interpretation of and disposition of property by will also apply as appropriate to the interpretation of the terms of a trust and the disposition of the trust property.

§ 35-15-113. Registration of trust.

(a) The trustee of a trust that has the trust's principal place of administration in this state may register the trust with the secretary of state. For purposes of this section, a trust is considered to have the trust's principal place of administration in this state if one (1) of the trustees has its principal place of business in this state or is a resident of this state and the trust meets the requirements described in § 35-15-108(a)(2) or (3).
(b) Registration is accomplished by filing a statement with the secretary of state that includes the following:
1. (1) The name, address, and phone number of the trustee with its principal place of business in this state or that is a resident of this state, in which the trustee acknowledges the trusteeship;
2. (2) Dates and locations of each prior registration, if any, or a statement that the trust has not previously been registered in a jurisdiction;
3. (3) The name of the trust, date of the trust instrument, and each subsequent amendment or modification;
4. (4) In the case of a testamentary trust, the name of the testator and the date and place of domiciliary probate; or in the case of a written inter vivos trust, the name of each settlor and the original trustee;
5. (5) The name and address of each current co-trustee, trust advisor, or trust protector;
6. (6) A statement that the trustee submits to the jurisdiction of the courts of this state in any proceeding relating to the trust that may be initiated by any interested person while the trust remains registered, provided that notice is given as provided by law; and
7. (7) A filing fee of two hundred fifty dollars ($250) payable to the secretary of state.
(c) If a trust has been registered elsewhere, registration in this state is ineffective until either the earlier registration is released by the jurisdiction where prior registration occurred or an instrument executed by the trustee and all current beneficiaries is filed with the registration in this state.
(d) The registration is confidential and not subject to public inspection under title 10, chapter 7, part 5.
(e) Notwithstanding subsection (d), the settlor, a trustee, trust advisor, or trust protector for the trust may obtain a certified copy of the registration upon filing a request with the secretary of state that includes a signed attestation that they are the settlor or a currently serving trustee, trust advisor, or trust protector, and paying a filing fee of one hundred dollars ($100) payable to the secretary of state. If the requesting person is not listed in the initial registration, such as in the case of a newly appointed trustee, trust advisor, or trust protector, then the requesting party must provide documentation evidencing the requesting party's appointment.
(f) The registration may be cancelled by a signed request of the trustee, attesting to current service as a trustee, accompanied by:
1. (1) Documentary evidence of subsequent registration of the trust in a different jurisdiction; or
2. (2) An acknowledged instrument executed by all current beneficiaries agreeing to the cancellation.
(g) The secretary of state may designate required forms and methods for filing a registration, requesting a certified copy of a registration, and cancelling a registration.

§ 35-15-114. Real property in trust.

(a) An estate in real property may be acquired in the name of the trust or in the name of the trustee on behalf of the named trust, and title to real property conveyed by the trust must be conveyed by the trustee, as trustee of the trust.
(b) Subsection (a) applies to documents executed prior to, on, and after July 1, 2021.
(c) This section does not abrogate or amend § 35-15-402(d).

Part 2 Judicial Proceedings

§ 35-15-201. Role of court in administration of trust.

(a) The court may intervene in the administration of a trust to the extent its jurisdiction is invoked by an interested person or as provided by law.
(b) A trust is not subject to continuing judicial supervision unless ordered by the court.
(c) A judicial proceeding involving a trust may relate to any matter involving the trust's administration, including a request for instructions and an action to declare rights.

§ 35-15-202. Jurisdiction over trustee and beneficiary.

(a) By accepting the trusteeship of a trust having its principal place of administration in this state or by moving the principal place of administration to this state, the trustee submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.
(b) With respect to their interests in the trust, the beneficiaries of a trust having its principal place of administration in this state are subject to the jurisdiction of the courts of this state regarding any matter involving the trust. By accepting a distribution from such a trust, the recipient submits personally to the jurisdiction of the courts of this state regarding any matter involving the trust.
(c) This section does not preclude other methods of obtaining jurisdiction over a trustee, beneficiary, or other person receiving property from the trust.

§ 35-15-203. Subject matter jurisdiction.

Chancery courts and other courts of record having probate jurisdiction:
1. (1) To the exclusion of all other courts, have concurrent jurisdiction over proceedings in this state brought by a trustee or beneficiary concerning the administration of a trust; and
2. (2) Have concurrent jurisdiction with other courts of record in this state over other proceedings involving a trust.

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35-15-105(b)(12)

§ 35-15-204. Venue.

(a) Except as otherwise provided in subsection (b), venue for a judicial proceeding involving a trust is in the county of this state in which the trust's principal place of administration is or will be located and, if the trust is created by will and the estate is not yet closed, in the county in which the decedent's estate is being administered.
(b) If a trust has no trustee, venue for a judicial proceeding for the appointment of a trustee is in a county of this state in which a beneficiary resides, in a county in which any trust property is located, and if the trust is created by will, in the county in which the decedent's estate was or is being administered.

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35-15-105(b)(12)

§ 35-15-205. Petition for final accounting upon resignation or removal of trustee or termination of trust.

(a) If the trustee resigns, is removed, or upon the full or partial termination of the trust, a qualified beneficiary or successor trustee may petition the court to require the trustee transferring or distributing the trust to appear before the court for a final accounting. However, a successor trustee shall not have any obligation to petition the court to require the final accounting. The trustee transferring or distributing the trust may also petition the court to approve a final accounting relieving the trustee from liability for the period of its administration. The final accounting period shall begin from the latest of:
1. (1) The date of acceptance of the trusteeship by the trustee; or
2. (2) The end of the period since an accounting was last approved by the court.
(b) The petition shall set forth:
1. (1) The name and address of the then-serving trustee, trust advisor, and trust protector, to the extent known by the petitioner;
2. (2) The qualified beneficiaries of the trust; and
3. (3) The period that the accounting covers.
(c) The petition must be served on each trustee, trust protector, trust advisor, and qualified beneficiary or their representative under part 3 of this chapter to the extent there is no material conflict of interest.
(d) Upon review of the trustee's final accounting and after considering any objections thereto and any evidence presented, the court may approve the final accounting or enter judgment granting appropriate relief. If no objection to the petition is filed within the time allowed by law after service, or if the parties consent, the petition may be approved without notice, hearing, or further proceedings. The final judgment of the court shall be binding on all parties.
(e) Upon approval of the final accounting, the trustee shall be relieved from liability for the period covered by the final accounting.
(f) In accordance with § 35-15-1004, costs and expenses, including reasonable attorney's fees of the petitioner, must be taxed against the trust, unless otherwise directed by the court.

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Part 3 Representation

§ 35-15-301. Representation — Basic effect.

(a) Notice to a person who may represent and bind another person under this chapter has the same effect as if notice were given directly to the other person.
(b) The consent of a person who may represent and bind another person under this chapter is binding on the person represented unless the person represented objects to the representation before the consent would otherwise have become effective.
(c) Except as otherwise provided in §§ 35-15-411 and 35-15-602, a person who under this chapter may represent a settlor who lacks capacity may receive notice and give a binding consent on the settlor's behalf.
(d) A settlor may not represent and bind a beneficiary under this chapter with respect to the termination or modification of a trust under § 35-15-411(a).

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32-3-113(a)(5)

§ 35-15-302. Representation by holder of power of appointment — “General power of appointment” defined.

(a)
1. (1) To the extent there is no material conflict of interest between the holder of a power of appointment and the persons represented with respect to the particular question or dispute, the holder may represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power. Notwithstanding this section to the contrary, the holder of any general power of appointment may, regardless of whether there is a material conflict of interest between the holder of such general power of appointment and the persons represented with respect to the particular question or dispute, represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to such power.
2. (2) As used in this section, “general power of appointment” means a power, regardless of when exercisable, to appoint in favor of any one (1) or more of the following: such power holder, such power holder's creditors, such power holder's estate, and the creditors of the estate of such power holder.
(b) Notwithstanding subsection (a) to the contrary, if the holder, under the terms of the governing instrument, may only exercise such general power of appointment with the consent of another person, then the written consent of such other person is required in order for the holder of the general power of appointment to represent and bind persons whose interests, as permissible appointees, takers in default, or otherwise, are subject to the power.

§ 35-15-303. Representation by fiduciaries and parents.

(a) To the extent there is no material conflict of interest between the representative and the person represented or among those being represented with respect to a particular question or dispute:
1. (1) A conservator may represent and bind the estate that the conservator controls;
2. (2) A guardian may represent and bind the ward if a conservator of the ward's estate has not been appointed;
3. (3) An agent having authority to act with respect to the particular question or dispute may represent and bind the principal;
4. (4) A trustee may represent and bind the beneficiaries of the trust;
5. (5) When a trust is a beneficiary of another trust, the beneficiary trust may be represented by its trustee or, if the beneficiary trust has not yet been created, has previously terminated, or is otherwise not then in existence, or the trustee is unwilling or unable to represent the trust, the beneficiary trust may be represented by those persons who are qualified beneficiaries or who would be qualified beneficiaries of the beneficiary trust if the beneficiary trust were then in existence;
6. (6) A personal representative of a decedent's estate may represent and bind persons interested in the estate;
7. (7) A person may represent and bind the person's minor or unborn descendant if a guardian for the descendant has not been appointed. If a disagreement or material conflict of interest arises between persons seeking to represent the same minor descendant or unborn descendant, representation is determined as follows:
  1. (A) If only one (1) person is a beneficiary of the trust that is the subject of the representation, that person may represent the minor descendant or unborn descendant;
  2. (B) If both persons are beneficiaries of the trust that is the subject of the representation, then the person who is related to the settlor, other than by reason of being married to the other person, may represent the minor descendant or unborn descendant;
  3. (C) Subject to subdivision (a)(7)(D), if neither person is a beneficiary of the trust that is the subject of the representation, then the person who is the settlor of the trust that is the subject of the representation may represent the minor descendant or unborn descendant; or
  4. (D) If neither person is a beneficiary or settlor of the trust that is the subject of the representation, then the person who is related to the settlor, other than by reason of being married to the other person, may represent the minor descendant or unborn descendant;
8. (8) A person designated by the settlor in the trust instrument or in a writing delivered to the trustee to represent the beneficiaries of the trust may represent and bind the beneficiaries;
9. (9) A person designated by the beneficiaries of the trust to represent them may represent and bind the beneficiaries; and
10. (10) A parent or spouse of an incapacitated adult who has assumed responsibility for the adult, may represent and bind the incapacitated adult if no conservator or guardian has been appointed and no agent has authority to act with respect to the matter in question.
(b) As used in subdivision (5), “beneficiary trust” means a trust that is a beneficiary of another trust.

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§ 35-15-304. Representation by person having substantially identical interest.

Unless otherwise represented, a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown and not reasonably ascertainable, may be represented by and bound by another having a substantially identical interest with respect to the particular question or dispute, but only to the extent there is no material conflict of interest between the representative and the person represented.

§ 35-15-305. Appointment of representative.

(a) If the court determines that an interest is not represented under this chapter, or that the otherwise available representation might be inadequate, the court may appoint a representative to receive notice, give consent, and otherwise represent, bind, and act on behalf of a minor, incapacitated, or unborn individual, or a person whose identity or location is unknown. A representative may be appointed to represent several persons or interests.
(b) A representative may act on behalf of the individual represented with respect to any matter arising under this chapter, whether or not a judicial proceeding concerning the trust is pending.
(c) In making decisions, a representative may consider general benefit accruing to the living members of the individual's family.

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Part 4 Creation, Validity, Modification, and Termination of Trust

§ 35-15-401. Methods of creating trust.

A trust may be created by:
1. (1) The transfer of property to another person as trustee during the settlor's lifetime or by will or other disposition taking effect upon the settlor's death;
2. (2) The declaration by the owner of property that the owner holds identifiable property as trustee;
3. (3) The exercise of a power of appointment in favor of a trustee; or
4. (4) A court pursuant to its statutory or equitable powers.

§ 35-15-402. Requirements for creation.

(a) A trust is created only if:
1. (1) The settlor has capacity to create a trust;
2. (2) The settlor indicates an intention to create the trust;
3. (3) The trust has a definite beneficiary or is:
  1. (A) A charitable trust;
  2. (B) A trust for the care of an animal, as provided in § 35-15-408; or
  3. (C) A trust for a noncharitable purpose, as provided in § 35-15-409;
4. (4) The trustee has duties to perform; and
5. (5) The same person is not the sole trustee and sole beneficiary.
(b) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.
(c) A power in a trustee to select a beneficiary from an indefinite class is valid. If the power is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons who would have taken the property had the power not been conferred.
(d) A lifetime trust is valid as to any assets held by the trust to the extent the assets have been transferred to the trust. For purposes of this subsection (d):
1. (1) Assets capable of registration, such as real estate, stocks, bonds, bank and brokerage accounts, and the 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 assignment, holding, or receipt in the trust instrument; and
2. (2) Assets not capable of registration, are transferred to the trust through a recital of assignment describing the asset with particularity in the trust instrument.
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(e) Notwithstanding subdivision (a)(4), a passive trust is not terminable because it is passive.

§ 35-15-403. Trusts created in other jurisdictions.

A trust not created by will is validly created if its creation complies with the law of the jurisdiction in which the trust instrument was executed, or the law of the jurisdiction in which, at the time of creation:
1. (1) The settlor was domiciled, had a place of abode, or was a national;
2. (2) A trustee was domiciled or had a place of business; or
3. (3) Any trust property was located.

§ 35-15-404. Trust purposes.

A trust may be created only to the extent its purposes are lawful and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries as the interests of such beneficiaries are defined under the terms of the trust.

§ 35-15-405. Charitable purposes — Enforcement.

(a) A charitable trust may be created for the relief of poverty, the advancement of education or religion, the promotion of health, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.
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(b) If the terms of a charitable trust do not indicate a particular charitable purpose or beneficiary, the court may select one (1) or more charitable purposes or beneficiaries. The selection must be consistent with the settlor's intention to the extent it can be ascertained.
(c) The settlor of a charitable trust, among others, may maintain a proceeding to enforce the trust.

§ 35-15-406. Creation of trust induced by fraud, duress, or undue influence.

A trust is void to the extent its creation was induced by fraud, duress, or undue influence.

§ 35-15-407. Evidence of oral trust.

Except as required by a statute other than this chapter, a trust need not be evidenced by a trust instrument, but the creation of an oral trust and its terms may be established only by clear and convincing evidence.

§ 35-15-408. Trust for care of animal.

(a) A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one (1) animal alive during the settlor's lifetime, upon the death of the last surviving animal. The trust may not be enforced for more than ninety (90) years.
(b) A trust authorized by this section may be enforced by any of the following who are appointed under the terms of a trust: a trustee, trust advisor, trust protector or other person or, if no person is so appointed, by a person appointed by the court. In addition, a person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed.
(c) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor's successors in interest.

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§ 35-15-409. Noncharitable trust without ascertainable beneficiary.

Except as otherwise provided in § 35-15-408 or by another statute, the following rules apply:
1. (1) A trust may be created for a noncharitable purpose without a definite or definitely ascertainable beneficiary or for a noncharitable but otherwise valid purpose to be selected by the trustee. The trust may not be enforced for more than three hundred sixty (360) years;
2. (2) A trust authorized by this section may be enforced by any of the following who are appointed under the terms of a trust: a trustee, trust advisor, trust protector or other person; or if no person is so appointed, by a person appointed by the court; and
3. (3) Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor's successors in interest.

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35-15-402(a)(3)(C)

§ 35-15-410. Modification or termination of trust — Proceedings for approval or disapproval.

(a) In addition to the methods of termination prescribed by §§ 35-15-411 — 35-15-414, a trust terminates to the extent the trust is revoked or expires pursuant to its terms, no purpose of the trust remains to be achieved, or the purposes of the trust have become unlawful or impossible to achieve.
(b) A proceeding to approve or disapprove a proposed modification or termination under §§ 35-15-411 — 35-15-416, or trust combination or division under § 35-15-417, may be commenced by a trustee or beneficiary. The settlor of a charitable trust may maintain a proceeding to modify the trust under § 35-15-413.
(c) Nothing in this section or this chapter is intended to create or imply a duty for a trustee to make or seek approval of a modification, termination, combination or division, and a trustee is not liable for not making or seeking approval of a modification, termination, combination or division.
(d) No modification, termination, combination or division may be made pursuant to §§ 35-15-411 — 35-15-417 that:
1. (1) Results in the trust not qualifying for the federal or state marital or charitable income, gift, estate or inheritance tax deduction if the trust would qualify but for the modification, termination, combination or division;
2. (2) Results in the trust being subject to the federal or state generation-skipping transfer tax if the trust would not be subject to the generation-skipping transfer tax but for the modification, termination, combination or division; or
3. (3) Results in an overall increase in federal or state estate, inheritance, gift or generation-skipping transfer taxes.

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§ 35-15-411. Modification or termination of noncharitable irrevocable trust by consent.

(a) During the settlor's lifetime, a noncharitable irrevocable trust may be modified or terminated by the trustee upon consent of all qualified beneficiaries, even if the modification or termination is inconsistent with a material purpose of the trust if the settlor does not object to the proposed modification or termination. The trustee shall notify the settlor of the proposed modification or termination not less than sixty (60) days before initiating the modification or termination. The notice of modification or termination must include:
1. (1) An explanation of the reasons for the proposed modification or termination;
2. (2) The date on which the proposed modification or termination is anticipated to occur; and
3. (3) The date, not less than sixty (60) days after the giving of the notice, by which the settlor must notify the trustee of an objection to the proposed modification or termination.
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(b) Following the settlor's death, a noncharitable irrevocable trust may be terminated upon the unanimous agreement of the trustee and all qualified beneficiaries if such termination does not violate a material purpose of the trust. Additionally, following the settlor's death, a noncharitable irrevocable trust may be terminated upon consent of all of the qualified beneficiaries if the court concludes that continuance of the trust is not necessary to achieve any material purpose of the trust.
(c) Following the settlor's death, a noncharitable irrevocable trust may be modified or terminated upon the unanimous agreement of the trustee and all qualified beneficiaries if such modification or termination does not violate a material purpose of the trust. Additionally, a noncharitable irrevocable trust may be modified or terminated upon consent of all of the qualified beneficiaries if the court concludes that modification or termination is not inconsistent with a material purpose of the trust.
(d) Modification of a trust as authorized in this section is not prohibited by a spendthrift clause or by a provision in the trust instrument that prohibits amendment or revocation of the trust.
(e) An agreement to modify a trust as authorized by this section is binding on a beneficiary whose interest is represented by another person under part 3 of this chapter.
(f) Upon termination of a trust under subsection (a) or (b), the trustee shall distribute the trust property as agreed by the qualified beneficiaries.
(g) If not all of the qualified beneficiaries consent to a proposed modification or termination of the trust under subsection (a), (b), or (c), as applicable, the modification or termination may be approved by the court if the court is satisfied that:
1. (1) If all of the qualified beneficiaries had consented, the trust could have been modified or terminated under this section; and
2. (2) The interests of a qualified beneficiary who does not consent will be adequately protected.
(h) As used in this section, “noncharitable irrevocable trust” refers to a trust that is not revocable by the settlor with respect to which:
1. (1) No federal or state income, gift, estate, or inheritance tax charitable deduction was allowed upon transfers to the trust; and
2. (2) The value of all interests in the trust owned by charitable organizations does not exceed five percent (5%) of the value of the trust.
(i) Notwithstanding subsection (a), (b), or (c), the trustee may seek court approval of a modification or termination.

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§ 35-15-412. Modification or termination because of unanticipated circumstances or inability to administer trust effectively.

(a) The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the modification must be made in accordance with the settlor's probable intention.
(b) The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration.
(c) Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

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§ 35-15-413. Cy pres.

(a) Except as otherwise provided in subsection (b), if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, obsolete or ineffective:
1. (1) The trust does not fail, in whole or in part;
2. (2) The trust property does not revert to the settlor or the settlor’s successors in interest; and
3. (3) The court may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner that fulfills as nearly as possible the settlor’s charitable intent and purposes.
(b) A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under subsection (a) to apply cy pres to modify or terminate the trust only if, when the provision takes effect:
1. (1) The trust property is to revert to the settlor and the settlor is still living; or
2. (2) Fewer than twenty-one (21) years have elapsed since the date of the trust’s creation.

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§ 35-15-414. Modification or termination of uneconomic trust.

(a) After notice to the qualified beneficiaries, the trustee of a trust consisting of trust property having either a total value less than one hundred thousand dollars ($100,000) or for which the trustee's annual fee for administering the trust, as set forth in the trustee's published fee schedule, is five percent (5%) or more of the market value of the principal assets of the trust as of the last day of the preceding trust accounting year or the present market value of the principal assets of the trust if there is no applicable trust accounting for a preceding year may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.
(b) The court may modify or terminate a trust or remove the trustee and appoint a different trustee if it determines that the value of the trust property is insufficient to justify the cost of administration.
(c) Upon the termination of a trust under this section, the trustee shall distribute the trust property to or for the benefit of the beneficiaries, in such shares as the trustee, or the court if a court proceeding, determines, after taking into account the interests of income and remainder beneficiaries so as to conform as nearly as possible to the intention of the settlor, but a trust that qualified for the marital deduction for tax purposes shall only be distributed to the spouse of the settlor for whom the trust was created.
(d) This section does not apply to an easement for conservation or preservation.
(e) This section shall not limit the right of a trustee, acting alone, to terminate a trust in accordance with applicable provisions of the governing instrument.

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§ 35-15-415. Reformation to correct mistakes.

The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intention if it is proved by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.

§ 35-15-416. Modification to achieve settlor's tax objectives.

To achieve the settlor's tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor's probable intention. The court may provide that the modification has retroactive effect.

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§ 35-15-417. Combination and division of trusts.

After notice to the qualified beneficiaries, a trustee may combine two (2) or more trusts into a single trust or divide a trust into two (2) or more separate trusts, if the result does not impair rights of any beneficiary or adversely affect the achievement of the purposes of the trust. If the trusts to be combined or divided have different trustees, the trustees may negotiate the terms of the combined or divided trusts, including which trust or trusts will be the surviving trust or trusts, who will be the trustee or trustees of the surviving trust or trusts and any other matter relating to the operation of the surviving trust or trusts.

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Part 5 Creditor's Claims — Mandatory, Support and Discretionary Interests — Effect of Spendthrift Provision

§ 35-15-501. Application — Rights of beneficiary's creditor or assignee.

This part applies to a creditor's or assignee's claims and ability to reach mandatory, support and discretionary interests regardless of whether such interests are subject to a spendthrift provision. To the extent not otherwise prohibited by this part, the court may authorize a creditor or assignee of the beneficiary to reach the beneficiary's distribution interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means. The court may limit the award to such relief as is appropriate under the circumstances.

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§ 35-15-502. Spendthrift provision.

(a) A spendthrift provision is valid only if it restrains both voluntary and involuntary transfer of a beneficiary's interest.
(b) A term of a trust providing that the interest of a beneficiary is held subject to a “spendthrift trust,” or words of similar import, is sufficient to restrain both voluntary and involuntary transfer of the beneficiary's interest.
(c) A spendthrift provision applies to all beneficial interests, including distribution interests and remainder interests.
(d) A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and a creditor or assignee of the beneficiary may not reach any of, the interest, or a present, future or prospective distribution at the trust level. Similarly, no creditor or assignee of the beneficiary may force any distribution from the trust. This subsection (d) remains applicable regardless of the beneficiary's potential right to force a distribution under § 35-15-814.
(e) Notwithstanding any other provision of this section to the contrary, regardless of whether a beneficiary has any outstanding creditor, a trustee, cotrustee or other fiduciary of a trust subject to a spendthrift provision may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary. No trustee, cotrustee or other fiduciary is liable to any creditor for paying the expenses of a beneficiary under a trust subject to a spendthrift provision. This subsection (e) remains applicable regardless of whether the beneficiary for whom such direct payment was made held a mandatory, support, discretionary or remainder interest.

§ 35-15-503. Exceptions to spendthift provision.

A spendthrift provision is unenforceable against a claim of this state to the extent a statute of this state so provides.

§ 35-15-504. Discretionary interests — Effect thereof.

(a) A discretionary interest is neither a property interest nor an enforceable right; it is a mere expectancy.
(b) Relative to a discretionary interest, whether or not a trust contains a spendthrift provision:
1. (1) No creditor or assignee shall force or otherwise reach a distribution with regard to a discretionary interest;
2. (2) No creditor or assignee shall require a trustee, cotrustee or other fiduciary to exercise the trustee's, cotrustee's or other fiduciary's discretion to make a distribution with regard to a discretionary interest;
3. (3) Regardless of whether a beneficiary has any outstanding creditors or assignees, a trustee, cotrustee or other fiduciary of a discretionary interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary;
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4. (4) No trustee, cotrustee or other fiduciary is liable to any creditor or assignee for paying the expenses of a beneficiary of a discretionary interest;
5. (5)
  1. (A) Regardless of whether a beneficiary holding a discretionary interest is also a trustee, cotrustee or other fiduciary, subdivisions (b)(1)-(4) remain applicable if:
    1. (i) The beneficiary-fiduciary does not have the discretion to make or participate in making distributions to such beneficiary-fiduciary;
    2. (ii) The beneficiary-fiduciary's discretion to make or participate in making distributions to such beneficiary-fiduciary is limited by an ascertainable standard; or
    3. (iii) The beneficiary-fiduciary's discretion to make or participate in making distributions to such beneficiary-fiduciary is exercisable only with the consent of a cotrustee or another person holding an adverse interest;
  2. (B) A creditor or assignee may compel or otherwise reach a distribution only to the extent the creditor or assignee may compel or otherwise reach a distribution if the beneficiary was not acting as a trustee, cotrustee or other fiduciary.

§ 35-15-505. Creditor's claims against settlor.

(a) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
1. (1) During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors;
2. (2) Except as provided in chapter 16 of this title regarding investment services trusts and subdivisions (a)(3)-(5) regarding an irrevocable special needs trust, a creditor or assignee of the settlor of an irrevocable trust may reach the maximum amount that can be distributed to or for the settlor's benefit. If a trust has more than one (1) settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution;
3. (3) For the purposes of this section, “irrevocable special needs trust” means an irrevocable trust established for the benefit of one or more disabled persons, which includes, but is not limited to, any individual who is disabled pursuant to 42 U.S.C. § 1382c(a), as well as any individual who is disabled pursuant to any similar federal, state or other jurisdictional law or regulation, or has a condition that is substantially equivalent to one that qualifies them to be so disabled in accordance with any of the above even if not officially found to be so disabled by a governmental body if one of the purposes of the trust, expressed in the trust instrument or implied from the trust instrument, is to allow the disabled person to qualify or continue to qualify for public, charitable or private benefits that might otherwise be available to the disabled person. The existence of one or more nondisabled remainder beneficiaries of the trust shall not disqualify it as an irrevocable special needs trust for the purposes of this section;
4. (4) No creditor or assignee of the settlor of an irrevocable special needs trust, as defined in subdivision (a)(3), may reach or compel distributions from such special needs trust, to or for the benefit of the settlor of such special needs trust, or otherwise, regardless of whether or not such irrevocable special needs trust complies with, and irrespective of the requirements of, chapter 16 of this title;
5. (5) Notwithstanding any law to the contrary, neither a creditor nor any other person shall have any claim or cause of action against the trustee or other fiduciary, or an advisor of an irrevocable special needs trust. For purposes of this subdivision (a)(5), an advisor of an irrevocable special needs trust includes any person involved in the counseling, drafting, preparation, execution or funding of an irrevocable special needs trust; and
6. (6) After the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable immediately preceding the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate and the expenses of the settlor's funeral and disposal of remains. With respect to claims, expenses, and taxes in connection with the settlement of the settlor's estate, any claim of a creditor that would be barred against the fiduciary of a settlor's estate, the estate of the settlor, or any creditor or beneficiary of the settlor's estate shall be barred against the trust property of a trust that was revocable at the settlor's death, the trustee of the revocable trust, and the creditors and beneficiaries of the trust. The provisions of § 30-2-317(a) detailing the priority of payment of claims, expenses, and taxes from the probate estate of a decedent shall apply to a revocable trust to the extent the assets of the settlor's probate estate are inadequate and the personal representative or creditor or taxing authority of the settlor's estate has perfected its right to collect from the settlor's revocable trust.
(b) For purposes of this section during the period a power of withdrawal may be exercised or upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in § 2041(b)(2) or 2514(e) of the Internal Revenue Code of 1986 (26 U.S.C. § 2041(b)(2) and § 2514(e)), or § 2503(b) of the Internal Revenue Code of 1986 (26 U.S.C. § 2503(b)), in each case as in effect on July 1, 2004, or as later amended.
(c) For purposes of subdivision (a)(2), the power of a trustee of an irrevocable trust, whether arising under the trust agreement or any other provision of the law, to make a distribution to or for the benefit of a settlor for the purpose of reimbursing the settlor in an amount equal to any income taxes payable on any portion of the trust principal and income that are includable in the settlor's personal income under applicable law, as well as distributions made by the trustee pursuant to such authority, shall not be considered an amount that may be distributed to or for the settlor's benefit.
(d) With respect to an irrevocable trust for which the settlor made a qualified election pursuant to 26 U.S.C. § 2523(f), the power of a trustee, and any benefit resulting to the settlor from any exercise of such power, whether arising under the trust agreement or any other provision of the law, to make a distribution to or for the benefit of a settlor or to otherwise permit the settlor to use or benefit from trust property following the death of the settlor's spouse, shall not be considered an amount that may be distributed to or for the settlor's benefit for purposes of subdivision (a)(2). This subsection (d) shall not limit a creditor's remedies under the Uniform Fraudulent Transfer Act, compiled in title 66, chapter 3, part 3, regarding the settlor's transfers to such trust.
(e) For purposes of subdivision (a)(2) and subsection (g), a person who is the holder of a power of withdrawal is not considered a settlor of the trust by failing to exercise that power of withdrawal or letting that power of withdrawal lapse.
(f) For purposes of subdivision (a)(2) and subsection (g), a person who becomes a beneficiary of a trust due to the exercise of a power of appointment by someone other than such person shall not be considered a settlor of the trust.
(g)
1. (1) Notwithstanding § 66-3-310, no person shall bring an action with respect to a transfer of property to a spendthrift trust:
  1. (A) If the person is a creditor when the transfer is made, unless the action is commenced within the later of two (2) years after the transfer is made or six (6) months after the person discovers or reasonably should have discovered the transfer; or
  2. (B) If the person becomes a creditor after the transfer is made, unless the action is commenced within two (2) years after the transfer is made.
2. (2) If subdivision (g)(1) applies:
  1. (A) A person shall be deemed to have discovered the existence of a transfer at the time any public record is made of the transfer, including but not limited to, a conveyance of real property that is recorded in the office of the county register of deeds of the county in which the property is located or the filing of a financing statement under title 47, chapter 9, or the equivalent recording or filing of either with the appropriate person or official under the laws of a jurisdiction other than this state; and
  2. (B)
    1. (i) No creditor shall bring an action with respect to a transfer of property to a spendthrift trust unless that creditor proves by clear and convincing evidence that the settlor's transfer to the trust was made with the intent to defraud that specific creditor;
    2. (ii) Notwithstanding any law to the contrary, neither a creditor nor any other person shall have any claim or cause of action against the trustee or other fiduciary or an advisor of a spendthrift trust if that claim or cause of action is based in any way on any person availing themselves of the benefits of this subsection (g);
    3. (iii) For purposes of subdivision (g)(2)(B)(i), an advisor of a spendthrift trust includes, but is not limited to, any person involved in the counseling, drafting, preparation, execution or funding of a spendthrift trust;
    4. (iv) For purposes of subdivision (g)(2)(B)(ii), counseling, drafting, preparation, execution or funding of a spendthrift trust includes the counseling, drafting, preparation, execution and funding of a limited partnership, a limited liability company or any other type of entity if interests in the limited partnership, limited liability company or other entity are subsequently transferred to a spendthrift trust.
3. (3) Notwithstanding subdivision (g)(2)(B), in the same manner as provided other than by this section to trusts in general, a beneficiary, settlor, cotrustee, trust advisor or trust protector retains the right to bring a claim against a trustee or against another cotrustee, trust advisor, trust protector or any of their predecessors; however, no such claim shall arise solely because a person availed themselves, or attempted to avail themselves, of the benefits of this subsection (g).
4. (4) If more than one transfer of property is made to a spendthrift trust, the subsequent transfer of property to the spendthrift trust shall be disregarded for the purpose of determining whether a person may bring an action pursuant to this subsection (g) with respect to a prior transfer of property to the spendthrift trust; and any distribution to a beneficiary from the spendthrift trust shall be deemed to have been made from the most recent transfer made to the spendthrift trust.
5. (5) With the exception of any claim brought pursuant to subdivision (g)(3), notwithstanding any other law, no action of any kind, including, without limitation, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity against the trustee, other fiduciary or advisor of a spendthrift trust if, as of the date such action is brought, an action by a creditor with respect to a transfer of property to the spendthrift trust would be barred pursuant to this subsection (g).
6. (6) This subsection (g) shall not abridge the rights of a creditor, to the extent otherwise provided by this section, to reach the maximum amount that can be distributed to or for the settlor's benefit under a spendthrift trust.
(h) For purposes of this section, a person is not considered the settlor or deemed settlor of an irrevocable inter vivos trust if the person is a beneficiary with respect to property that was contributed to the trust by the person's spouse, regardless of whether or when the person was a settlor of an irrevocable inter vivos trust for the benefit of the person's spouse. For purposes of this subsection (h), “person's spouse” means the individual to whom the person was married at the time the irrevocable inter vivos trust was created, regardless of a subsequent dissolution of the marriage.

§ 35-15-506. Distributions relative to support, mandatory and certain remainder interests.

(a) Relative to a support interest, whether or not a trust contains a spendthrift provision:
1. (1) Although a beneficiary of a support interest has enforceable rights under § 35-15-814, those rights do not raise the beneficiary's support interest to the level of a property interest;
2. (2) No creditor or assignee shall reach that support interest until a distribution from the support interest is actually made to the beneficiary;
3. (3) After all or a portion of a support interest is distributed to the beneficiary, no portion of the distribution made from the support interest shall be reached by a creditor or assignee of the beneficiary except to the extent that the distribution made from the support interest exceeds the amount necessary for the health, education, maintenance and support of the beneficiary who received the distribution made from the support interest;
4. (4) In the case of a beneficiary who holds a support interest, the use or enjoyment of property belonging to the trust by that beneficiary shall not be transferred and shall not be reached by creditors or assignees of that beneficiary;
5. (5) Regardless of whether a beneficiary has any outstanding creditors or assignees, a trustee or other fiduciary of a support interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary; and
6. (6) No trustee or other fiduciary is liable to any creditor or assignee for paying the expenses of a beneficiary of a support interest.
(b) Relative to a mandatory interest, whether or not a trust contains a spendthrift provision:
1. (1) While a court may order a trustee or other fiduciary to distribute a past due mandatory distribution to its beneficiary, no court shall order a trustee or other fiduciary to distribute such past due mandatory distribution directly to a creditor or assignee;
2. (2) Regardless of whether a beneficiary has any outstanding creditors or assignees, a trustee or other fiduciary of a mandatory interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary;
3. (3) No trustee or other fiduciary is liable to any creditor or assignee for paying the expenses of a beneficiary of a mandatory interest.
(c) Although a remainder interest may be an enforceable right, where it is not absolutely certain based on the language of the trust that the remainder interest will be distributed within one (1) year, it shall not be classified as a property interest. This subsection (c) does not affect eligibility for any public assistance program administered by the department of human services.

§ 35-15-507. Personal obligations of trustee.

Trust property is not subject to personal obligations of the trustee, even if the trustee becomes insolvent or bankrupt.

§ 35-15-508. Removal or replacement power over trustee or other fiduciary not reachable by holder's creditors — Interests of beneficiary who is also a trustee or other fiduciary not reachable.

(a) No creditor or assignee of a beneficiary shall have the power to reach an interest of a beneficiary or any other person who holds an unconditional or conditional removal or replacement power over a trustee or other fiduciary. Such power over a trustee or other fiduciary is personal to the holder and shall not be exercised by the holder's creditors. No court shall direct a holder to exercise the power.
(b) Subject to § 35-15-504(b)(3):
1. (1) No creditor or assignee of a beneficiary may reach an interest of a beneficiary who is also a trustee, cotrustee or other fiduciary, or otherwise compel a distribution because the beneficiary is then serving as a trustee, cotrustee or other fiduciary; and
2. (2) No court may foreclose against a beneficiary's interest described in subdivision (b)(1).

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35-15-1105(1)

§ 35-15-509. Judicial foreclosure of beneficial interests, powers of appointment, and reserved powers prohibited — Certain reaches prohibited.

Regardless of whether or not a trust contains a spendthrift provision:
1. (1) No beneficial interest, power of appointment, or reserved power in a trust shall be judicially foreclosed;
2. (2) No creditor or assignee shall reach a power of appointment or a remainder interest at the trust level and such creditor or assignee shall wait until any funds are distributed relative to such power of appointment or remainder interest before such creditor or assignee may reach such funds;
3. (3) No creditor or assignee shall reach property transferred pursuant to a power of appointment exercised by a decedent unless the power of appointment was actually exercised in favor of the decedent or the decedent's estate; and
4. (4) No power of appointment is a property interest.

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26-4-101

§ 35-15-510. Immunity from claims of separate creditors of trust property conveyed to trustee by husband and wife as tenants by the entirety.

1. (a) As used in this section, “proceeds” means:
  1. (1) Property acquired by the trustee upon the sale, lease, license, exchange, or other disposition of property originally conveyed by a husband and wife as tenants by the entirety to a trustee or trustees;
  2. (2) Property collected by the trustee on, or distributed on account of, property originally conveyed by a husband and wife as tenants by the entirety to a trustee or trustees;
  3. (3) Rights arising out of property originally conveyed by a husband and wife as tenants by the entirety to a trustee;
  4. (4) Claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, property originally conveyed by a husband and wife as tenants by the entirety to a trustee;
  5. (5) Insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, property originally conveyed by a husband and wife as tenants by the entirety to a trustee; or
  6. (6) Property held by the trustee that is otherwise traceable to property originally conveyed by a husband and wife as tenants by the entirety to a trustee or the property proceeds described in subdivisions (a)(1)-(5).
2. (b) Any property of a husband and wife that was held by them as tenants by the entirety and subsequently conveyed as tenants by the entirety to the trustee or trustees of one (1) or more trusts, and the proceeds of that property, shall have the same immunity from the claims of their separate creditors as would exist if the husband and wife had continued to hold the property or its proceeds as tenants by the entirety, so long as:
  1. (1) The husband and wife remain married;
  2. (2) The property or its proceeds continues to be held in trust by the trustee or trustees or their successors in trust;
  3. (3) The trust or trusts are, while both settlors are living, revocable by either settlor or both settlors, acting together;
  4. (4) Both the husband and the wife are permissible current beneficiaries of the trust or trusts while living; and
  5. (5) The trust instrument, deed, or other instrument of conveyance provides that this section shall apply to the property or its proceeds.
3. (c) After the death of the first of the husband and wife to die, all property held in trust that was immune from the claims of their separate creditors under subsection (b) immediately prior to the individual's death shall continue to have the same immunity from the claims of the decedent's separate creditors as would have existed if the husband and wife had continued while both were alive to hold the property conveyed in trust, or its proceeds, as tenants by the entirety. To the extent that the surviving spouse remains a beneficiary of the trust and has the power, exercisable in the individual capacity of the surviving spouse, to vest in the surviving spouse individually title to the property that was immune from the claims of the separate creditors of the decedent under subsection (b), the property shall be subject to the claims of the separate creditors of the surviving spouse.
4. (d) The immunity from the claims of separate creditors under subsections (b) and (c) may be waived as to any specific creditor or any specifically described trust property, including all separate creditors of a husband and wife or all former tenancy by the entirety property conveyed to the trustee or trustees, by the express provisions of a trust instrument, deed, or other instrument of conveyance, or by the written consent of both the husband and the wife.
5. (e)
  1. (1) Except as provided in subdivision (e)(2), immunity from the claims of separate creditors under subsections (b) and (c) shall be waived if a trustee executes and delivers a financial statement for the trust that fails to disclose the requested identity of property held in trust that is immune from the claims of separate creditors.
  2. (2) Immunity is not waived under this subsection (e) if the identity of the property that is immune from the claims of separate creditors and the fact of such immunity is otherwise reasonably disclosed by:
    1. (A) A publicly recorded deed or other instrument of conveyance by the husband and wife to the trustee;
    2. (B) A written memorandum by the husband and wife, or by a trustee, that is recorded among the land records or other public records in the county or other jurisdiction where the records of the trust are regularly maintained; or
    3. (C) The terms of the trust instrument, including any schedule or exhibit attached to the trust instrument, if a copy of the trust instrument is provided with the financial statement.
  3. (3) A waiver under this subsection (e) shall be effective only as to:
    1. (A) The person to whom the financial statement is delivered by the trustee;
    2. (B) The particular trust property held in trust for which the immunity from the claims of separate creditors is insufficiently disclosed on the financial statement; and
    3. (C) The transaction for which the disclosure was sought.
6. (f) In any dispute relating to the immunity of trust property from the claims of a separate creditor of a husband or wife, the trustee has the burden of proving the immunity of the trust property from the creditor's claims.
7. (g) In the event that any transfer of real property held in tenancy by the entirety to a trustee of a trust as provided under subsection (b) is held invalid by any court of proper jurisdiction, or if the trust is revoked or dissolved by a court decree or operation of law, while both spouses are living, then immediately upon the occurrence of either event, absent a contrary provision in a court decree, all real property held in the trust automatically shall be deemed for all purposes to be held by both spouses as tenants by the entirety.
8. (h) No transfer by a husband and wife described in subsection (b) shall affect or change either settlor's marital property rights to the transferred property or interest therein immediately prior to such transfer in the event of dissolution of marriage of the spouses, unless both spouses otherwise expressly agree otherwise in writing. Upon entry of a decree granting divorce or annulment between the spouses, the immunity from the claims of separate creditors under subsection (b) shall terminate immediately.
9. (i) After a conveyance to a trustee described in subsection (b), the property transferred is no longer held by the spouses as tenants by the entirety, but is held by the trustee, in trust, and the spouses and the spouse's creditors have the rights as set forth in this section with regard to the property.
10. (j) This section may not be construed to affect existing state law with respect to tenancies by the entirety. This section applies only to tenancy by the entirety property conveyed to a trustee or trustees on or after July 1, 2014.

Part 6 Revocable Trusts

§ 35-15-601. Capacity of settlor of revocable trust — Form of execution for post-death disposition.

The capacity required to create, amend, revoke, or add property to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that required to make a will. To be effective as a post death disposition of property transferred during the transferor's life or by the transferor's will to a trust of which the transferor is the settlor or deemed to be the settlor, neither a revocable nor irrevocable trust existing on or executed after July 1, 2004, has to be executed with the formalities of a will.

§ 35-15-602. Revocation or amendment of revocable trust.

(a) Unless the terms of a trust expressly provide that the trust is irrevocable, the settlor may revoke or amend the trust. This subsection (a) does not apply to a trust created under an instrument executed before July 1, 2004.
(b) If a revocable trust is created or funded by more than one (1) settlor:
1. (1) To the extent the trust consists of community property, the trust may be revoked by either spouse acting alone but may be amended only by joint action of both spouses;
2. (2) To the extent the trust consists of property other than community property, each settlor may revoke or amend the trust with regard to the portion of the trust property attributable to that settlor's contribution; and
3. (3) At the death of one (1) settlor, each surviving settlor shall have the right to revoke the trust as to that surviving settlor's portion of the trust as determined by the type of property in accordance with subdivisions (b)(1) and (b)(2).
(c) The settlor may revoke or amend a revocable trust:
1. (1) By substantial compliance with a method provided in the terms of the trust; or
2. (2) If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by:
  1. (A) A later will or codicil that expressly refers to the trust or specifically devises property that would otherwise have passed according to the terms of the trust; or
  2. (B) Any other method manifesting clear and convincing evidence of the settlor's intent.
(d) Upon revocation of a revocable trust, the trustee shall deliver the trust property as the settlor directs. However, with respect to community property under subdivision (b)(1), the trustee shall deliver the property one-half (½) to each spouse unless the governing instrument specifically states otherwise.
(e) A settlor's powers with respect to revocation, amendment, or distribution of trust property may be exercised by an agent under a power of attorney only to the extent expressly authorized by the terms of the trust or the power.
(f) A conservator of the settlor or, if no conservator has been appointed, a guardian of the settlor may exercise a settlor's powers with respect to revocation, amendment, or distribution of trust property only if the trust instrument specifically grants to the conservator or guardian the power to revoke or amend the trust or distribute trust property.
(g) A trustee who does not know that a trust has been revoked or amended is not liable to the settlor or settlor's successors in interest for distributions made and other actions taken on the assumption that the trust had not been amended or revoked.

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35-15-301(c)

§ 35-15-603. Settlor's powers — Powers of withdrawal.

(a) While a trust is revocable and the settlor has capacity to revoke the trust, rights of the beneficiaries are subject to the control of, and the duties of the trustee are owed exclusively to, the settlor.
(b) If a revocable trust has more than one (1) settlor, the duties of the trustee are owed to all of the settlors having capacity to revoke the trust.
(c) During the period the power may be exercised, the holder of a power of withdrawal has the rights of a settlor of a revocable trust under this section to the extent of the property subject to the power.

§ 35-15-604. Limitation on action contesting validity of revocable trust — Distribution of trust property.

(a) A person may commence a judicial proceeding to contest the validity of a trust that was revocable immediately preceding the settlor's death within the earlier of:
1. (1) Two (2) years after the settlor's death; or
2. (2) One hundred twenty (120) days after the trustee sent the person a copy of the trust instrument and a notice informing the 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.
(b) Upon the death of the settlor of a trust that was revocable immediately preceding the settlor's death, the trustee may proceed to distribute the trust property in accordance with the terms of the trust. Except as provided in § 35-15-817, the trustee is subject to liability for making the distribution only if at the time of the distribution:
1. (1) The trustee had actual knowledge of a pending judicial proceeding contesting the validity of the trust; or
2. (2) A potential contestant had notified the trustee in writing of a possible judicial proceeding to contest the trust and the judicial proceeding is commenced within sixty (60) days following the trustee's receipt of the notification.
(c) 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 the 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, return the improper distribution to the court. If the beneficiary fails to return the improper distribution to the court, the beneficiary is liable for costs, including reasonable attorney's fees, incurred to recover the improper distribution from the beneficiary.

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§ 35-15-605. Written statement or list to dispose of items of tangible personal property.

(a)
1. (1) A revocable (living) trust that becomes irrevocable upon the death of its settlor may refer to a written statement or list to dispose of items of tangible personal property not otherwise specifically disposed of by the revocable trust, other than money, evidences of indebtedness, documents of title, securities, and property used in a trade or business.
2. (2) To be effective under this section as evidence of the intended disposition, the writing:
  1. (A) Must:
    1. (i) Be either in the handwriting of the settlor or signed by the settlor;
    2. (ii) Be dated; and
    3. (iii) Describe the items and the beneficiaries with reasonable certainty;
  2. (B) May be prepared before or after the execution of the revocable trust;
  3. (C) May be altered by the settlor after its preparation, provided that the settlor signs and dates the alteration; and
  4. (D) May be a writing that has no significance apart from its effect upon the dispositions made by the revocable trust.
3. (3) If more than one (1) otherwise effective writings exist or a single writing contains properly signed and dated alterations, the provisions of the most recent writing or alteration revoke any inconsistent provisions of all prior writings.
(b) A trustee is not liable for any distribution of tangible personal property to the apparent beneficiary under the settlor's revocable trust without actual knowledge of the written statement or list, as described in subsection (a), and the trustee has no duty to recover property distributed without knowledge of the written statement or list.

§ 35-15-606. Settlor's powers — Powers to remove and appoint trustees.

(a) The settlor of a revocable trust may remove a trustee and appoint a successor trustee by giving written notice to the trustee being removed and to the successor trustee being appointed.
(b) If there are two (2) or more settlors of the same revocable trust, then the removal and appointment of trustees must be made by unanimous decision of all settlors.

Part 7 Office of Trustee

§ 35-15-701. Accepting or declining trusteeship.

(a) Except as otherwise provided in subsection (c), a person designated as trustee accepts the trusteeship:
1. (1) By substantially complying with a method of acceptance provided in the terms of the trust; or
2. (2) If the terms of the trust do not provide a method or the method provided in the terms is not expressly made exclusive, by accepting delivery of the trust property, exercising powers or performing duties as trustee, or otherwise indicating acceptance of the trusteeship.
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- 35-15-711(a)
(b) A person designated as trustee who has not yet accepted the trusteeship may reject the trusteeship. A designated trustee who does not accept the trusteeship within a reasonable time after knowing of the designation and the assets comprising the trust is deemed to have rejected the trusteeship.
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- 35-15-711(b)
(c) A person designated as trustee, without accepting the trusteeship, may:
1. (1) Act to preserve the trust property if, within a reasonable time after acting, the person sends a rejection of the trusteeship to the settlor or, if the settlor is dead or lacks capacity, to a qualified beneficiary; and
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  - 35-15-709(b)
2. (2) Inspect or investigate trust property to determine potential liability under environmental or other law or for any other purpose.
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- 35-15-711(c)

§ 35-15-702. Trustee's bond.

(a) A trustee shall give bond to secure performance of the trustee's duties only if the court finds that a bond is needed to protect the interests of the beneficiaries or is required by the terms of the trust and the court has not dispensed with the requirement.
(b) The court may specify the amount of a bond, its liabilities, and whether sureties are necessary. The court may modify or terminate a bond at any time.
(c) A state or national bank, savings institution, or trust company authorized to exercise fiduciary powers and regulated by the office of the comptroller of the currency, office of thrift supervision, the department of financial institutions or equivalent state banking supervisors need not give bond, even if required by the terms of the trust.

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§ 35-15-703. Cotrustees.

(a) Cotrustees who are unable to reach a unanimous decision may act by majority decision.
(b) If a vacancy occurs in a cotrusteeship, the remaining cotrustees may act for the trust.
(c) A cotrustee must participate in the performance of a trustee's function unless the cotrustee is unavailable to perform the function because of absence, illness, disqualification under other law, or other temporary incapacity or the cotrustee has properly delegated the performance of the function to another trustee.
(d) If a cotrustee is unavailable to perform duties because of absence, illness, disqualification under other law, or other temporary incapacity, and prompt action is necessary to achieve the purposes of the trust or to avoid injury to the trust property, the remaining cotrustee or a majority of the remaining cotrustees may act for the trust.
(e) A trustee may not delegate to a cotrustee the performance of a function the settlor reasonably expected the trustees to perform jointly. Unless a delegation was irrevocable, a trustee may revoke a delegation previously made.
(f) Except as otherwise provided in subsection (g), a trustee who does not join in an action of another trustee is not liable for the action.
(g) Each trustee shall exercise reasonable care to:
1. (1) Prevent a cotrustee from committing a serious breach of trust; and
2. (2) Compel a cotrustee to redress a serious breach of trust.
(h) A dissenting trustee who joins in an action at the direction of the majority of the trustees and who notified any cotrustee of the dissent at or before the time of the action is not liable for the action unless the action is a serious breach of trust.
(i) A trustee shall keep each cotrustee and any other fiduciary reasonably informed about the administration of the trust, to the extent the trustee has knowledge that each such cotrustee or other fiduciary does not have such knowledge of the trustee's actions, or regarding other material information or the availability of such information, related to the administration of the trust that would be reasonably necessary for each such cotrustee or other fiduciary to perform such person's duties as a trustee or other fiduciary of the trust.

§ 35-15-704. Vacancy in trusteeship — Appointment of successor.

(a) A vacancy in a trusteeship occurs if:
1. (1) A person designated as trustee rejects the trusteeship;
2. (2) A person designated as trustee cannot be identified or does not exist;
3. (3) A trustee resigns;
4. (4) A trustee is disqualified or removed;
5. (5) A trustee dies; or
6. (6) A conservator is appointed for an individual serving as trustee.
(b) If one (1) or more cotrustees remain in office, a vacancy in a trusteeship need not be filled. A vacancy in a trusteeship must be filled if the trust has no remaining trustee.
(c) A vacancy in a trusteeship of a noncharitable trust that is required to be filled must be filled in the following order of priority:
1. (1) By a person designated in the terms of the trust to act as successor trustee;
2. (2) By a person appointed by unanimous agreement of the qualified beneficiaries; or
3. (3) By a person appointed by the court.
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- 35-15-107(b)(5)(B)
- 35-15-713(b)
(d) A vacancy in a trusteeship of a charitable trust that is required to be filled must be filled in the following order of priority:
1. (1) By a person designated in the terms of the trust to act as successor trustee;
2. (2) By a person selected by the charitable organizations expressly designated to receive distributions under the terms of the trust if the attorney general does not affirmatively object within thirty (30) days of receipt of notice of the person selected; or
3. (3) By a person appointed by the court.
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- 35-15-107(b)(5)(B)
- 35-15-713(b)
(e) Whether or not a vacancy in a trusteeship exists or is required to be filled, the court may appoint an additional trustee or special fiduciary whenever the court considers the appointment necessary for the administration of the trust.
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- 35-15-107(b)(5)(C)
- 35-15-713(b)

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§ 35-15-705. Resignation of trustee.

(a) A trustee may resign:
1. (1) Upon at least thirty (30) days' notice to the qualified beneficiaries, the settlor, if living, and all cotrustees; or
2. (2) With the approval of the court.
(b) In approving a resignation, the court may issue orders and impose conditions reasonably necessary for the protection of the trust property.
(c) Any liability of a resigning trustee or of any sureties on the trustee's bond for acts or omissions of the trustee is not discharged or affected by the trustee's resignation.

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35-15-714(a)

§ 35-15-706. Removal of trustee.

(a) The settlor, a cotrustee, or a qualified beneficiary may request the court to remove a trustee, or a trustee may be removed by the court on its own initiative.
(b) The court may remove a trustee if:
1. (1) The trustee has committed a serious breach of trust;
2. (2) Lack of cooperation among cotrustees substantially impairs the administration of the trust;
3. (3) Because of unfitness, unwillingness, or persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the interests of the beneficiaries; or
4. (4) There has been a substantial change of circumstances or removal is requested by all of the qualified beneficiaries, the court finds that removal of the trustee best serves the interests of all of the beneficiaries and is not inconsistent with a material purpose of the trust, and a suitable cotrustee or successor trustee is available.
(c) Pending a final decision on a request to remove a trustee, or in lieu of or in addition to removing a trustee, the court may order such appropriate relief under § 35-15-1001(b) as may be necessary to protect the trust property or the interests of the beneficiaries.

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§ 35-15-707. Delivery of property by former trustee — Petition for approval of accountings and release and discharge from liability.

(a) Unless a cotrustee remains in office or the court otherwise orders, and until the trust property is delivered to a successor trustee or other person entitled to it, a trustee who has resigned or been removed has the duties of a trustee and the powers necessary to protect the trust property.
(b) A trustee who has resigned or been removed shall, within a reasonable time, deliver the trust property within the trustee's possession to the cotrustee, successor trustee, or other person entitled to it.
(c) Prior to delivering the trust property within the trustee's possession to the co-trustee, successor trustee, or other person entitled to it, a trustee who has resigned or been removed shall have the right and authority to petition the court for approval of its accountings and a release and discharge from all liability related to such trust as allowed under § 35-15-205.

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35-15-817(m)

§ 35-15-708. Compensation of trustees, trust advisors and trust protectors.

(a) If the terms of a trust do not specify a trustee's, trust advisor's or trust protector's compensation, and if the settlor, if living, or otherwise a majority of the qualified beneficiaries as defined in § 35-15-103(24)(A), have not otherwise agreed, a trustee, trust advisor or trust protector is entitled to compensation that is reasonable under the circumstances.
(b) If the terms of a trust specify a trustee's, trust advisor's or trust protector's compensation, the trustee, trust advisor or trust protector is entitled to be compensated as specified in the trust, but the court may allow more or less compensation if:
1. (1) The duties of the trustee, trust advisor or trust protector are substantially different from those contemplated when the trust was created; or
2. (2) The compensation specified by the terms of the trust would be unreasonably low or high.
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- 35-15-105(b)(7)
(c) Factors for the court to consider in deciding upon a trustee's, trust advisor's or trust protector's compensation shall include the size of the trust, the nature and number of the assets, the income produced, the time and responsibility required, the expertise required, any management or sale of real property or closely held business interests, any involvement in litigation to protect trust property, and other relevant factors.
(d) Subject to the court's authority as provided in subsection (b), regardless of its form of entity, the fees set forth in the published fee schedule of a trustee, trust advisor or trust protector that is regulated by the department of financial institutions, the equivalent regulatory agency of another state, the office of the comptroller of the currency or the office of thrift supervision shall be presumed to be reasonable, unless otherwise provided by the terms of the trust.

§ 35-15-709. Reimbursement of expenses.

(a) A trustee, trust advisor or trust protector is entitled to be reimbursed out of the trust property, with interest as appropriate, for:
1. (1) Expenses that were properly incurred in the administration of the trust; and
2. (2) To the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.
(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 for the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.

§ 35-15-710. Directed trusts.

If the terms of the trust, an agreement of the qualified beneficiaries, an exercise of the authority described in § 35-15-716, or a court order requires a trustee, trust advisor, or trust protector to follow the direction of a trust advisor, trust protector, or trustee, and the trustee, trust advisor, or trust protector acts in accordance with such direction, then the trustee, trust advisor, or trust protector so directed must be treated as an excluded fiduciary.

§ 35-15-711. Directed trusts — Accepting or declining fiduciary appointment.

(a) A trust advisor, trust protector or other fiduciary other than a cotrustee, such cotrustee already being provided for in § 35-15-701(a), may accept its appointment as such respective fiduciary in a like manner as provided for a trustee under § 35-15-701(a).
(b) A trust advisor, trust protector or other fiduciary other than a cotrustee, such cotrustee already being provided for in § 35-15-701(b), may reject its appointment as such respective fiduciary in a like manner as provided for a trustee under § 35-15-701(b).
(c) A trust advisor, trust protector or other fiduciary other than a cotrustee, such cotrustee already being provided for in § 35-15-701(c), may, without accepting its appointment as such respective fiduciary, carry out the appropriate activities relative to such respective fiduciary as are provided for a trustee under § 35-15-701(c).

§ 35-15-712. Directed trusts — Fiduciary's bond.

(a) Section 35-15-702 applies to trust advisors, trust protectors or other fiduciaries other than cotrustees, such cotrustees already being provided for in § 35-15-702.
(b) When exercising its powers under this section, the court shall consider the powers, duties and liabilities relative to such respective fiduciaries other than a cotrustee and whether any of such respective fiduciaries are excluded fiduciaries.

§ 35-15-713. Vacancy — Directed trusts.

(a) Except as otherwise provided by the terms of the trust upon obtaining knowledge of a vacancy in the office of trust advisor or trust protector, the trustee shall be vested with any fiduciary power or duty that otherwise would be vested in the trustee but that by the terms of the trust was vested in the trust advisor or trust protector, until such time that the vacancy in the office of trust advisor or trust protector, as applicable is filled.
(b) Such vacancy shall be filled in the same manner as would a vacancy in trusteeship that is required to be filled, either as provided by § 35-15-704(c) if the trust is a noncharitable trust, or as provided by § 35-15-704(d) if the trust is a charitable trust. Section 35-15-704(e) shall also apply relative to trust advisors and trust protectors in the same manner as that subsection does to trustees and vacancies in trusteeship.
(c) Notwithstanding subsection (a), a trustee shall not be liable for failing to exercise or assume any power or duty held by a trust advisor or trust protector and conferred upon the trustee by subsection (a) for the sixty-day period immediately following the date the trustee obtains knowledge of such vacancy.

§ 35-15-714. Directed trusts — Resignation of fiduciary.

(a) A trust advisor, trust protector or other fiduciary other than a cotrustee, such cotrustee's resignation already being provided for in § 35-15-705, may resign its appointment as such respective fiduciary in a like manner as provided for a trustee under § 35-15-705.
(b) When exercising its powers under this section relative to resignation, the court shall consider the powers, duties and liabilities relative to such respective fiduciaries other than a cotrustee and whether any of such respective fiduciaries are excluded fiduciaries.

§ 35-15-715. Directed trusts — Removal of fiduciary.

(a) A trust advisor, trust protector or other fiduciary other than a cotrustee, such cotrustee's removal already being provided for in § 35-15-706, may be removed as such respective fiduciary in a like manner as provided for a trustee under § 35-15-706.
(b) When exercising its powers under this section relative to removal of such respective fiduciary, the court shall consider the powers, duties and liabilities relative to such respective fiduciaries other than a cotrustee and whether any of such respective fiduciaries are excluded fiduciaries.

§ 35-15-716. Appointment of successor trustees — Applicability of trust provisions — Excluded fiduciaries.

(a) The power to appoint a successor trustee under a trust instrument includes the power to appoint multiple successor trustees. A presently exercisable power to remove and replace a trustee under a trust instrument includes the power to appoint additional trustees to serve with the current trustee. Such power to appoint multiple successor trustees and additional trustees under this subsection (a) includes the power to allocate various trustee powers, including the power to direct or prevent certain actions of the trustees, exclusively to one (1) or more of the trustees serving from time to time.
(b) All of the provisions of a trust instrument generally applicable to the trustees, including the provisions regarding trustee qualifications, resignation, removal, standard of care, indemnification, compensation, and the scope and nature of the restrictions, limitations, and immunities applicable when exercising powers and authority, apply to trustees appointed under this section. Such provisions include, but are not limited to:
1. (1) Provisions waiving certain duties when exercising certain investment powers apply equally to trustees appointed under this section;
2. (2) Provisions permitting the removal and replacement of a trustee subject to various limitations and conditions apply equally to trustees appointed under this section; and
3. (3) Provisions proscribing the settlor and beneficiaries and persons or entities related or subordinate to the settlor and any beneficiary from being eligible to serve as a trustee apply equally to proscribe all of those persons from serving as trustees appointed under this section.
(c) Notwithstanding subsection (b), if an appointment under this section confers upon a co-trustee, to the exclusion of another co-trustee, the power to take certain actions with respect to the trust, including the power to direct or prevent certain actions of the trustees, then the respective duties and liabilities of the trustee who is an excluded fiduciary as well as of the co-trustee holding the power are as set forth under § 35-15-1204 and § 35-15-1205.
(d) Any powers granted in subsection (a) to appoint additional trustees, which are exercised in such a manner as to modify the duties of an existing trustee, do not become effective until thirty (30) days after the receipt by the existing trustee of a written notice from the person authorized to appoint additional trustees detailing the changes. The thirty-day notice requirement may be waived by the existing trustee.
(e) Except as otherwise expressly provided by the terms of a trust instrument, this section is available to any trust that is administered in this state or otherwise governed by the laws of this state.

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Part 8 Duties and Powers of Trustee

§ 35-15-801. Duty to administer trust.

Upon acceptance of a trusteeship, the trustee shall administer the trust until such time as the trust terminates or a successor trustee is appointed and all assets are delivered in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this chapter.

§ 35-15-802. Duty of loyalty.

(a) A trustee shall administer the trust solely in the interests of the beneficiaries as the beneficiaries' interests are defined under the terms of the trust.
(b) Subject to the rights of persons dealing with or assisting the trustee as provided in § 35-15-1012 or as may otherwise be allowed under Tennessee law, a sale, encumbrance, or other transaction involving the investment or management of trust property entered into by the trustee for the trustee's own personal account or which is otherwise affected by a conflict between the trustee's fiduciary and personal interests is voidable by a beneficiary affected by the transaction unless:
1. (1) The transaction was authorized by the terms of the trust;
2. (2) The transaction was approved by the court;
3. (3) The beneficiary did not commence a judicial proceeding within the time allowed by § 35-15-1005;
4. (4) The beneficiary consented to the trustee's conduct, ratified the transaction, or released the trustee in compliance with § 35-15-1009; or
5. (5) The transaction involves a contract entered into or claim acquired by the trustee before the person became or contemplated becoming trustee.
(c) A sale, encumbrance, or other transaction involving the investment or management of trust property is presumed to be affected by a conflict between personal and fiduciary interests of the trustee if it is entered into by the trustee with:
1. (1) The trustee's spouse;
2. (2) The trustee's descendants, siblings, parents, or their spouses;
3. (3) An agent or attorney of the trustee; or
4. (4) A corporation or other person or enterprise in which the trustee, or a person that owns a significant interest in the trustee, has an interest that might affect the trustee's best judgment.
(d) A transaction between a trustee and a beneficiary that does not concern trust property but that occurs during the existence of the trust or while the trustee retains significant influence over the beneficiary and from which the trustee obtains an advantage is voidable by the beneficiary unless the trustee establishes that the transaction was fair to the beneficiary.
(e) A transaction not concerning trust property in which the trustee engages in the trustee's individual capacity involves a conflict between personal and fiduciary interests of the trustee if the transaction concerns an opportunity properly belonging to the trust.
(f) In addition to all other permissible investments and delegatable duties listed in this title, so long as they are fairly priced and in accordance with the interest of the beneficiaries and the interests of the fiduciary's appointment and otherwise comply with chapter 14 of this title, a fiduciary may purchase, sell, hold or otherwise deal with an affiliate or an interest in an affiliated investment, as well as delegate to an affiliate or other agent associated with the fiduciary and, upon satisfaction of the conditions stated in subsection (h), such fiduciary may receive fiduciary compensation from such account at the same rate as the fiduciary would otherwise be entitled to be compensated. Such activities shall occur without any presumption of a conflict between personal and fiduciary interests of the trustee or other fiduciary.
(g) As used in this section:
1. (1) “Affiliate” means any corporation or other entity that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the fiduciary;
2. (2) “Affiliated investment” means an investment for which the fiduciary or an affiliate of the fiduciary acts as adviser, administrator, distributor, placement agent, underwriter, broker or in any other capacity for which it receives or has received a fee or commission from such investment or an investment acquired or disposed of in a transaction for which the fiduciary or an affiliate of the fiduciary receives or has received a fee or commission. “Affiliated investment” also means an investment in an insurance contract purchased from an insurance agency owned by, or affiliated with, the fiduciary, or any of its affiliates;
3. (3) “Delegate to an affiliate or associated agent” means a proper delegation of any duty of the fiduciary to any person or entity that is affiliated with, or associated with, the fiduciary. The action of doing any of the above shall be known as a “delegation to an affiliate or associated agent”;
4. (4) “Fee or commission” means compensation paid to a fiduciary or an affiliate thereof on account of its services to or on behalf of an investment;
5. (5) For purposes of this section, “fiduciary” means any fiduciary as defined in § 35-15-103, as well as any other fiduciary; and
6. (6) “Investment” means any security as defined in § 2(a)(1) of the Securities Act of 1933 (15 U.S.C. § 77b(a)(1)), any contract of sale of a commodity for future delivery within the meaning of § 2(i) of the Commodity Exchange Act (7 U.S.C. § 2(i)), or any other asset permitted for fiduciary accounts pursuant to the terms of chapter 14 of this title or by the terms of the governing instrument, including by way of illustration and not limitation: shares or interests in a public or private investment fund, which shall include, but not be limited to, a public or private investment fund organized as a limited partnership, limited liability company, statutory or common law business trust, real estate investment trust, joint venture or other general or limited partnership; or an open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 et seq.).
(h) A fiduciary seeking compensation pursuant to subsection (f) shall, as is applicable relative to the fiduciary's particular appointment, disclose either: to those persons entitled to be kept informed about the administration of a trust under § 35-15-813(a)(1), subject to § 35-15-813(d) and (e); to each principal in an agency relationship; or to all current recipients of statements of any other fiduciary account not described above; all fees or commissions paid or to be paid by the account, or received or to be received by an affiliate arising from such affiliated investment or delegation to an affiliate or associated agent. The disclosure required under this subsection (h) may be given either in a copy of the prospectus or any other disclosure document prepared for the affiliated investment under federal or state securities laws or in a written summary that includes all fees or commissions received or to be received by the fiduciary or any affiliate of the fiduciary and an explanation of the manner in which such fees or commissions are calculated, either as a percentage of the assets invested or by some other method. Such disclosure shall be made at least annually unless there has been no increase in the rate at which such fees or commissions are calculated since the most recent disclosure. Notwithstanding this subsection (h), no such disclosure is required if the governing instrument or a court order expressly authorizes the fiduciary to invest the fiduciary account in affiliated investments or to perform the delegation to an affiliate or associated agent.
(i) A fiduciary that has complied with subsection (h), whether by making the applicable disclosure or by relying on the terms of a governing instrument or court order, shall have full authority to administer an affiliated investment, including the authority to vote proxies thereon, without regard to the affiliation between the fiduciary and the investment or the fiduciary and delegatee, as the case may be.
(j) In voting shares of stock or in exercising powers of control over similar interests in other forms of enterprise, the trustee shall act in the best interests of the beneficiaries. If the trust is the sole owner of a corporation or other form of enterprise, the trustee shall elect or appoint directors or other managers who will manage the corporation or enterprise in the best interests of the beneficiaries.
(k) This section does not preclude the following transactions, if fair to the beneficiaries:
1. (1) An agreement between a trustee and a beneficiary relating to the appointment or compensation of the trustee;
2. (2) Payment of reasonable compensation to the trustee;
3. (3) A transaction between a trust and another trust, decedent's estate, or conservatorship of which the trustee is a fiduciary or in which a beneficiary has an interest;
4. (4) A deposit of trust money in a regulated financial-service institution operated by the trustee; or
5. (5) An advance by the trustee of money for the protection of the trust.
(l) The court may appoint a special fiduciary to make a decision with respect to any proposed transaction that might violate this section if entered into by the trustee.

§ 35-15-803. Impartiality.

If a trust has two (2) or more beneficiaries, the trustee shall act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries' respective interests.

§ 35-15-804. Prudent administration.

A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution.

§ 35-15-805. Costs of administration.

In administering a trust, the trustee may incur only costs that are reasonable in relation to the trust property, the purposes of the trust, and the skills of the trustee.

§ 35-15-806. Trustee's skills.

A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee's representation that the trustee has special skills or expertise, shall use those special skills or expertise.

§ 35-15-807. Delegation by trustee.

(a) A trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustee shall exercise reasonable care, skill, and caution in:
1. (1) Selecting an agent;
2. (2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and
3. (3) Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.
(b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.
(c) A trustee who complies with subsection (a) is not liable to the beneficiaries for any act performed or omitted pursuant to written directions or to the trust for an action of the agent to whom the function was delegated.
(d) By accepting a delegation of powers or duties from the trustee of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.

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§ 35-15-808. Powers to direct — Transitional provisions.

(a) While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust or contrary to the normal practice of the trustee in regard to the action requested.
(b) If the terms of a trust, an agreement of the qualified beneficiaries, or a court order, confer upon a person other than the settlor of a revocable trust power to direct certain actions of the trustee, the trustee shall act in accordance with an exercise of the power.
(c) The terms of a trust may confer upon a trustee or other person a power to direct the modification or termination of the trust.
(d) Unless the terms of a trust provide otherwise, if a person holds a power to perform any act in reliance on §§ 35-3-122 and 35-3-123, and that power holder is other than a beneficiary, that person is a fiduciary who, as such, is required to act in good faith with regard to the purposes of the trust and the interests of the beneficiaries. The holder of a power to perform any act under this subsection (d) is liable for any loss that results from breach of a fiduciary duty. In so following the directions of such person the trustee is protected from liability as provided in §§ 35-3-122 and 35-3-123.
(e) If a person holds a power to direct pursuant to part 12 of this chapter, that person is a trust advisor, trust protector or both. Such power holder is subject to all the provisions of part 12, including any duties prescribed by part 12 and any provisions that make the power holder a fiduciary. Any trustee or other person that under part 12 is relieved of any duty or any liability, or is otherwise protected under part 12, shall be so relieved and otherwise protected.
(f) Transitional provisions applicable to this section shall be as follows:
1. (1) Powers to direct or perform any act held in reliance on or that are subject to §§ 35-3-122 and 35-3-123 that are in existence prior to July 1, 2013, remain effective thereafter and remain subject to those sections and their protections;
2. (2) Notwithstanding subdivision (f)(1), should any power that is described in part 12 of this chapter be held under a trust instrument that was in existence or became irrevocable before July 1, 2013, and that power is not held in reliance on nor is it subject to §§ 35-3-122 and 35-3-123, then from July 1, 2013, all law relative to such power shall be controlled by and subject to part 12 of this chapter, along with any amendments made to this chapter in furtherance of the implementation and effectiveness of such part 12; and
3. (3) For all trust instruments entered into, that become irrevocable or that are amended relative to any power that is described in part 12 of this chapter on or after July 1, 2013, part 12 of this chapter, along with any amendments made to this chapter in furtherance of the implementation and effectiveness of such part 12, shall be the exclusive method to create a directed trust or a provision regarding such and shall control such. Relative to trusts described in this subdivision (f)(3) and subdivision (f)(2), §§ 35-3-122 and 35-3-123 shall be of no further force and effect.

§ 35-15-809. Control and protection of trust property.

A trustee shall take reasonable steps to take control of and protect the trust property.

§ 35-15-810. Recordkeeping and identification of trust property.

(a) A trustee shall keep adequate records of the administration of the trust.
(b) A trustee shall keep trust property separate from the trustee's own property.
(c) Except as otherwise provided in subsection (d), a trustee shall cause the trust property to be designated so that the interest of the trust, to the extent feasible, appears in records maintained by a party other than a trustee or beneficiary.
(d) If the trustee maintains records clearly indicating the respective interests, a trustee may invest as a whole the property of two (2) or more separate trusts.
(e) For all purposes under the Tennessee Uniform Trust Code, when a trust is apportioned into separate shares for a single beneficiary or related beneficiary group, the apportioned separate share of the trust shall be treated as separate trusts even though such share may be commingled with other separate shares for investment and tax reporting purposes as provided in this section.
(f) For all purposes under this chapter, if a trust is apportioned into separate shares for one (1) or more beneficiaries, then the apportioned separate shares must be treated as separate trusts even though the share may be commingled with other separate shares of the trust for investment and tax reporting purposes as provided in this section.

§ 35-15-811. Enforcement and defense of claims.

(a) A trustee shall take reasonable steps to enforce claims of the trust and to defend claims against the trust.
(b) A trustee may abandon or assign any claim that it believes is unreasonable to enforce to one or more of the beneficiaries of the trust holding the claim.

§ 35-15-812. Collecting trust property.

A trustee shall take reasonable steps to compel a former trustee or other person to deliver trust property to the trustee, and to redress a breach of trust known to the trustee to have been committed by a former trustee. No successor trustee appointed after the examination of the accounts of a trustee or the waiver of the examination by the beneficiaries shall be responsible for the acts and omissions of the prior trustee.

§ 35-15-813. Duty to inform and report.

(a)
1. (1) A trustee shall keep the beneficiaries of the trust who are current mandatory or permissible distributees of trust income or principal, or both, reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. If a trust is divided into separate shares for the sole benefit of a single beneficiary or a separate group of beneficiaries, the trustee's duty shall apply only to the beneficiary or beneficiaries of the separate share of the trust.
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2. (2) Unless unreasonable under the circumstances, a trustee shall respond in a reasonable amount of time to a qualified beneficiary's request for information related to the administration of the trust. Additionally, a qualified beneficiary shall reimburse the trustee for any reasonable expenses incurred in responding to requests for information.
3. (3) The requirements of subdivisions (a)(1) and (2) shall also apply to the benefit of anyone who, in a capacity other than that of a fiduciary, as defined by § 35-15-103, holds a power of appointment.
(b)
1. (1) The trustee of an irrevocable or nongrantor trust within sixty (60) days after the acceptance and funding of a trust, excluding nominal funding for the trust to have corpus or the depositing of insurance policies on the life of a living person, shall notify each current income beneficiary, each vested ultimate beneficiary of a remainder interest and anyone who, in a capacity other than that of a fiduciary, as defined by § 35-15-103, holds a power of appointment, that the trust has been established.
2. (2) The required notice shall:
  1. (A) Be sent by first class mail or personal delivery; and
  2. (B) Consist of either a complete copy of the document establishing the trust together with the trustee's name, address and telephone number or an abstract of the trust, whichever the trustee, in the trustee's absolute discretion, may choose.
3. (3) The abstract shall contain:
  1. (A) The name, address and telephone number of each trustee;
  2. (B) If for a current income beneficiary:
    1. (i) The number of other current income beneficiaries;
    2. (ii) Whether distributions of income are required or discretionary;
    3. (iii) Whether distributions of principal are permitted and, if so, for what purpose or purposes;
    4. (iv) An estimate of the value of the trust at the date of the notice from which distributions may be made; and
    5. (v) An estimate of the income that may be distributable to the beneficiary;
  3. (C) If for a remainder beneficiary:
    1. (i) The number of other remainder beneficiaries;
    2. (ii) An estimate of the value of the trust at the date of the notice; and
    3. (iii) The conditions which must be met before the beneficiary's share is distributable; and
  4. (D) If for anyone who, in a capacity other than that of a fiduciary, as defined by § 35-15-103, holds a power of appointment, all of the information required by subdivisions (b)(3)(A)-(C) necessary or beneficial for that person to effectively determine whether or not to exercise that power of appointment.
(c) Upon the termination of an interest of any one (1) or more of the current income beneficiaries:
1. (1) The trustee shall similarly notify the income beneficiaries who are takers of the terminated interest of their interest by sending or delivering them the notice required in subsection (b); and
2. (2) If at that time the period described in subsection (b) has lapsed, the trustee shall similarly notify anyone who, in a capacity other than that of a fiduciary, as defined by § 35-15-103, holds a power of appointment by sending or delivering to such person the notice required in subsection (b).
(d) A beneficiary may waive the right to a trustee's report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given. Anyone who, in a capacity other than that of a fiduciary, as defined by § 35-15-103, holds a power of appointment has the same power as provided a beneficiary in this subsection (d) to waive reports and other information and to withdraw a waiver previously given. During the time a beneficiary is represented by another pursuant to § 35-15-303, a trustee shall send its report or other information otherwise required to be furnished under this section to the representative of the beneficiary, which has the same effect as sending the report or other information otherwise required to be furnished under this section to the beneficiary being represented.
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(e) Subsections (a) and (b) do not apply to the extent:
1. (1) That the terms of the trust provide otherwise; or
2. (2) The settlor of the trust, or a trust protector or trust advisor under part 12 of this chapter, that holds the power to so direct, directs otherwise in a writing delivered to the trustee. Directions made in a writing delivered to the trustee by the settlor, trust advisor, or trust protector as set forth in this subdivision (e)(2) remain in effect until and unless the settlor, trust advisor, or trust protector revokes the written instructions or is incapacitated. Additionally, the written directions remain in effect only while the trust advisor or trust protector providing the written directions is serving as the current trust advisor or trust protector. Unless otherwise specifically provided in the written directions, upon the death or incapacity of a settlor who provided the written directions described in this subdivision (e)(2), the directions are revoked. However, upon the death or incapacity of the settlor, a trust advisor or trust protector, if any, may further direct the trustee in writing pursuant to this subdivision (e)(2). Unless otherwise stated in the governing instrument, in the event of a conflict in the written directions, the written directions of the settlor control. Notwithstanding this subdivision (e)(2), during the time a settlor has designated a representative to represent and bind the interests of a beneficiary or beneficiaries under § 35-15-303, a trustee shall send its report or other information otherwise required to be furnished under this section to the representative designated by the settlor until the settlor revokes the designation or until the designated representative ceases serving. Sending reports or other information otherwise required to be furnished to a designated representative has the same effect as sending the report or other information otherwise required to be furnished under this section to the beneficiary or beneficiaries being represented. To the extent a settlor, trust advisor, or trust protector directs a trustee not to send its report or other information otherwise required to be furnished under this section to a beneficiary or beneficiaries and does not designate a representative to receive the information, the trustee shall send the information it would otherwise be required to send to the beneficiary or beneficiaries to the settlor, trust advisor, or trust protector, which has the same effect as sending the report or other information otherwise required to be furnished under this section to the beneficiary or beneficiaries.
(f) Subdivision (a)(1) and subsection (b) do not apply to a trust created under a trust agreement that became irrevocable before July 1, 2004. Trust law in effect prior to July 1, 2004, regarding the subject matter of subdivision (a)(1) and subsection (b) shall continue to apply to those trusts.
(g) If the trustee of a trust is bound by any written confidentiality restrictions with respect to an asset of a trust, a trustee may require that any beneficiary who is eligible to receive information pursuant to this or any other section of this title about such asset shall agree in writing to be bound by the confidentiality restrictions that bind the trustee before receiving such information from the trustee.
(h) A trust advisor, trust protector, or other fiduciary designated by the terms of the trust shall keep each excluded fiduciary designated by the terms of the trust reasonably informed about:
1. (1) The administration of the trust with respect to any specific duty or function being performed by the trust advisor, trust protector, or other fiduciary to the extent that the duty or function would normally be performed by the excluded fiduciary or to the extent that providing such information to the excluded fiduciary is reasonably necessary for the excluded fiduciary to perform its duties; and
2. (2) Any other material information that the excluded fiduciary would be required to disclose to the specified beneficiaries under subsection (a) regardless of whether the terms of the trust relieve the excluded fiduciary from providing such information to qualified beneficiaries. Neither the performance nor the failure to perform of a trust advisor, trust protector, or other fiduciary designated by the terms of the trust as provided in this subsection (h) shall affect the limitation on the liability of any excluded fiduciary provided by part 12 of this chapter.

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35-15-1204(b)

§ 35-15-814. Exercise of powers over discretionary and other interests — Tax savings.

(a) Relative to exercise of powers over discretionary and other interests:
1. (1) “Improper motive” means to demonstrate action such as the following:
  1. (A) A trustee refusing to make or limiting distributions to beneficiaries other than the trustee due to the trustee's self interest when the trustee also holds a beneficial interest subject to a discretionary interest; or
  2. (B) A trustee making a distribution in excess of an ascertainable standard to such trustee as beneficiary when the trustee is restricted by an ascertainable standard in the trust;
2. (2) Unless otherwise provided in the trust:
  1. (A) If the settlor's spouse is named as a beneficiary, the settlor's spouse is still living and the trust is classified as a support trust, then the trustee shall consider the resources of the settlor's spouse, including the settlor's obligation of support, prior to making a distribution; and
  2. (B) In all other cases, unless otherwise provided in the trust, the trustee need not consider the beneficiary's resources in determining whether a distribution should be made.
(b) The following provisions apply only to discretionary interests:
1. (1) A discretionary interest is neither a property interest nor an enforceable right; it is a mere expectancy;
2. (2) A court may review a trustee's distribution discretion only if the trustee acts dishonestly, acts with an improper motive, or fails to act if under a duty to do so;
3. (3) A reasonableness standard shall not be applied to the exercise of discretion by the trustee with regard to a discretionary interest;
4. (4) Other than for the three (3) circumstances listed in subdivision (b)(2) or to enforce the limitations of subsection (d), a court has no jurisdiction to review the trustee's discretion or to force a distribution; and
5. (5) Absent express language in the trust instrument to the contrary, in the event that the distribution language in a discretionary interest permits unequal distributions between beneficiaries or distributions to the exclusion of other beneficiaries, the trustee may distribute all of the accumulated, accrued, or undistributed income and principal to one beneficiary in the trustee's discretion.
(c) The following provisions apply only to mandatory or support interests:
1. (1) A beneficiary of a mandatory or a support interest has an enforceable right to a distribution pursuant to a court's review;
2. (2) A trustee's distribution decision may be reviewed for unreasonableness, dishonesty, improper motivation, or failure to act if under a duty to do so; and
3. (3) In the case of a support interest, nothing in this section shall raise a beneficiary's support interest to the level of a property interest.
(d) Unless otherwise provided in subsection (f), and unless the terms of the trust expressly indicate that a rule in this subsection (d) does not apply:
1. (1) A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee's personal benefit may exercise the power only in accordance with an ascertainable standard; and
2. (2) A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.
(e) A power that is limited or prohibited by subsection (d) may be exercised by a majority of the remaining trustees whose exercise of the power is not so limited or prohibited. If the power of all trustees is so limited or prohibited, the court may appoint a special fiduciary with authority to exercise the power.
(f) Subsection (d) shall not apply to:
1. (1) A power held by the settlor's spouse who is the trustee of a trust for which a marital deduction, as defined in § 2056(b)(5) or § 2523(e) of the Internal Revenue Code (26 U.S.C. § 2056(b)(5) and § 2523(e)), was previously allowed;
2. (2) Any trust during any period that the trust may be revoked or amended by its settlor; or
3. (3) A trust if contributions to the trust qualify for the annual exclusion under § 2503(c) of the Internal Revenue Code (26 U.S.C. § 2503(c)).

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§ 35-15-815. General powers of trustee.

(a) A trustee, without authorization by the court, may exercise:
1. (1) Powers conferred by the terms of the trust; and
2. (2) Except as limited by the terms of the trust:
  1. (A) All powers over the trust property which an unmarried competent owner has over individually owned property;
  2. (B) Any other powers appropriate to achieve the proper investment, management, and distribution of the trust property; and
  3. (C) Any other powers conferred by this chapter.
(b) The exercise of a power is subject to the fiduciary duties prescribed by this part.

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35-15-816(b)

§ 35-15-816. Specific powers of trustee.

(a) Any references contained in a will or trust incorporating by reference the powers enumerated in § 35-50-110 as they relate to a trustee will incorporate by reference the powers contained in this section.
(b) Unless the terms of the instrument expressly provide otherwise and without limiting the authority conferred by § 35-15-815, a trustee may:
1. (1) Collect trust property and accept or reject additions to the trust property from a settlor or any other person;
2. (2) Acquire or sell property, for cash or on credit, at public or private sale;
3. (3) Exchange, partition, or otherwise change the character of trust property;
4. (4) Deposit trust money in an account in a regulated financial-service institution;
5. (5) Borrow money, with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;
6. (6) With respect to an interest in a proprietorship, partnership, limited liability company, business trust, corporation, or other form of business or enterprise, continue the business or other enterprise and take any action that may be taken by shareholders, members, or property owners, including merging, dissolving, or otherwise changing the form of business organization or contributing additional capital;
7. (7) With respect to stocks or other securities, exercise the rights of an absolute owner, including the right to:
  1. (A) Vote, or give proxies to vote, with or without power of substitution, or enter into or continue a voting trust agreement;
  2. (B) Hold a security in the name of a nominee or in other form without disclosure of the trust so that title may pass by delivery;
  3. (C) Pay calls, assessments, and other sums chargeable or accruing against the securities, and sell or exercise stock subscription or conversion rights; and
  4. (D) Deposit the securities with a depository or other regulated financial service institution;
8. (8) With respect to an interest in real property, construct, or make ordinary or extraordinary repairs to, alterations to, or improvements in, buildings or other structures, demolish improvements, raze existing or erect new party walls or buildings, subdivide or develop land, dedicate land to public use or grant public or private easements, and make or vacate plats and adjust boundaries;
9. (9) Enter into a lease for any purpose as lessor or lessee, including a lease or other arrangement for exploration and removal of natural resources, with or without the option to purchase or renew, for a period within or extending beyond the duration of the trust;
10. (10) Grant an option involving a sale, lease, or other disposition of trust property or acquire an option for the acquisition of property, including an option exercisable beyond the duration of the trust, and exercise an option so acquired;
11. (11) Insure the property of the trust against damage or loss and insure the trustee, the trustee's agents, and beneficiaries against liability arising from the administration of the trust;
12. (12) Abandon or decline to administer property of no value or of insufficient value to justify its collection or continued administration;
13. (13) With respect to possible liability for violation of environmental law:
  1. (A) Inspect or investigate property the trustee holds or has been asked to hold, or property owned or operated by an organization in which the trustee holds or has been asked to hold an interest, for the purpose of determining the application of environmental law with respect to the property;
  2. (B) Take action to prevent, abate, or otherwise remedy any actual or potential violation of any environmental law affecting property held directly or indirectly by the trustee, whether taken before or after the assertion of a claim or the initiation of governmental enforcement;
  3. (C) Decline to accept property into trust or disclaim any power with respect to property that is or may be burdened with liability for violation of environmental law;
  4. (D) Compromise claims against the trust which may be asserted for an alleged violation of environmental law; and
  5. (E) Pay the expense of any inspection, review, abatement, or remedial action to comply with environmental law;
14. (14) Pay or contest any claim, settle a claim by or against the trust, and release, in whole or in part, a claim belonging to the trust;
15. (15) Pay taxes, assessments, compensation of the trustee and of employees and agents of the trust, and other expenses incurred in the administration of the trust;
16. (16) Exercise elections with respect to federal, state, and local taxes;
17. (17) Select a mode of payment under any employee benefit or retirement plan, annuity, or life insurance payable to the trustee, exercise rights thereunder, including exercise of the right to indemnification for expenses and against liabilities, and take appropriate action to collect the proceeds;
18. (18) Make loans out of trust property, including loans to a beneficiary on terms and conditions the trustee considers to be fair and reasonable under the circumstances, and the trustee has a lien on future distributions for repayment of those loans;
19. (19) Pledge trust property to guarantee loans made by others to the beneficiary;
20. (20) Appoint a trustee to act in another jurisdiction with respect to trust property located in the other jurisdiction, confer upon the appointed trustee all of the powers and duties of the appointing trustee, require that the appointed trustee furnish security, and remove any trustee so appointed;
21. (21) Pay an amount distributable to a beneficiary who is under a legal disability or who the trustee reasonably believes is incapacitated, by paying it directly to the beneficiary or applying it for the beneficiary's benefit, or by:
  1. (A) Paying it to the beneficiary's conservator or, if the beneficiary does not have a conservator, the beneficiary's guardian;
  2. (B) Paying it to the beneficiary's custodian under the Uniform Transfers to Minors Act, compiled in title 35, chapter 7, part 2, and, for that purpose, creating a custodianship or custodial trust;
  3. (C) If the trustee does not know of a conservator, guardian, custodian, or custodial trustee, paying it to an adult relative or other person having legal or physical care or custody of the beneficiary, to be expended on the beneficiary's behalf; or
  4. (D) Managing it as a separate fund on the beneficiary's behalf, subject to the beneficiary's continuing right to withdraw the distribution;
22. (22) On distribution of trust property or the division or termination of a trust, make distributions in divided or undivided interests, allocate particular assets in proportionate or disproportionate shares, value the trust property for those purposes, and adjust for resulting differences in valuation and basis for income tax purposes;
23. (23) Resolve a dispute concerning the interpretation of the trust or its administration by mediation, arbitration, or other procedure for alternative dispute resolution;
24. (24) Prosecute or defend an action, claim, or judicial proceeding in any jurisdiction to protect trust property and the trustee in the performance of the trustee's duties;
25. (25) Sign and deliver contracts and other instruments that are useful to achieve or facilitate the exercise of the trustee's powers; and
26. (26) On termination of the trust, exercise the powers appropriate to wind up the administration of the trust and distribute the trust property to the persons entitled to it.
27. (27) [Deleted by 2021 amendment.]
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  - 35-15-1201(a)(14)
(c) [Deleted by 2023 amendment.]

§ 35-15-817. Distribution upon termination, partial termination, or fiduciary removal or resignation — Discharge of fiduciary liability — Notice.

(a) Upon the occurrence of an event terminating or partially terminating a trust, or upon the trustee's removal or resignation, the trustee shall proceed to distribute the trust property to the persons entitled to it within a reasonable period of time, subject to the right of the trustee to retain a reasonable reserve for the payment of debts, expenses, attorney fees, and taxes.
(b) A trustee may send a notice pursuant to this section seeking to be relieved from liability upon such trustee's removal or resignation, or upon the full or partial termination of the trust.
(c) A notice sent by a trustee under this section must include:
1. (1) A statement of the fair market value of the trust's assets and the trust's liabilities, known to the trustee, as of a date specified in the notice, which date must not be more than thirty (30) days prior to the date the notice is sent;
2. (2)
  1. (A) A statement of the following during the time period determined under subdivisions (c)(2)(B)-(D):
    1. (i) The trust's receipts, including the source and the amount of each receipt;
    2. (ii) The amount and recipient of each trust disbursement, including:
      1. (a) Distributions to or for the benefit of one (1) or more beneficiaries; and
      2. (b) All fees, expenses, and taxes paid; and
    3. (iii) A reasonable estimate of the remaining fees and costs to be paid by the trust prior to the removal, resignation, or termination of the trustee sending the notice, as applicable;
  2. (B) A statement required under subdivision (c)(2)(A) must cover the time period that begins with the most recent of:
    1. (i) The date of acceptance of the trusteeship by the trustee sending the notice;
    2. (ii) The ending date of the period for which an accounting was last approved by the court pursuant to § 35-15-205; and
    3. (iii) If a notice was previously sent in compliance with this section by the trustee sending the notice, then the date upon which the time period under subsection (f) terminated and no person timely objected in a writing delivered to the trustee, or, to the extent an objection was timely made in a writing and delivered to the trustee, then the date on which the objections were resolved by nonjudicial settlement agreement under § 35-15-111;
  3. (C) The ending date of the time period covered by a statement required under subdivision (c)(2)(A) must not be more than thirty (30) days prior to the date the notice is sent; and
  4. (D) The time period covered by a statement required under subdivision (c)(2)(A) must not exceed three (3) years;
3. (3) The beginning and ending dates of the time period covered by the statement required under subdivision (c)(2)(A);
4. (4) A proposal for distribution;
5. (5) Notice that the trust is terminating in whole or in part, or that the trustee has resigned or has been removed;
6. (6) Notice that claims against a trustee under §§ 35-15-604 and 35-15-1005, as applicable, are barred if no objections specifically referencing the notice are received in writing by the trustee within forty-five (45) days after receipt of the notice by the person designated in subsections (d) and (e);
7. (7) If the trustee sending the notice is an individual trustee, the name, telephone number, and mailing or electronic mail address of the trustee sending the notice; and
8. (8) If the trustee sending the notice is a corporate trustee, the name, telephone number, and mailing or electronic mail address of a representative of the corporate trustee who may be contacted for additional information.
(d) A notice sent by a trustee under this section must be sent to:
1. (1) The grantor, if living;
2. (2) Each qualified beneficiary or such qualified beneficiary's representative under part 3 of this chapter to the extent there is no material conflict of interest; and
3. (3) All other then-serving trustees, trust advisors, and trust protectors known to the trustee sending the notice.
(e) The trustee may also provide the notice to a person not described in subsection (d) whom the trustee reasonably believes may also have an interest in the trust.
(f) The right of any person described in subsection (d), or to whom the trustee sent a notice pursuant to subsection (e), to object to the notice under this section terminates if the person does not notify the trustee in writing of an objection within forty-five (45) days after the person received the notice.
(g) If the trustee sending the notice complies with this section, and if a person described in subsection (d), or to whom the trustee sent a notice pursuant to subsection (e), does not object within the time period prescribed in subsection (f), then the trustee shall, within a reasonable period of time following the expiration of such period, distribute the trust's assets as provided in the proposal for distribution included in the notice.
(h) If the trustee sending the notice complies with this section, and if a person described in subsection (d) or a person to whom the trustee has distributed a notice pursuant to subsection (e) does not object within the time period prescribed in subsection (f), then the trustee sending the notice is relieved from any liability for the most recent continuous period that the trustee served as trustee of the trust, and the persons who received notice under this section are time barred from:
1. (1) Commencing a judicial proceeding to contest the validity of the trust, except as otherwise provided in § 35-15-604;
2. (2) Commencing a judicial proceeding for a claim of breach of trust against the trustee to the same extent and with the same preclusive effect as if the court had entered a final order approving the trustee's account under § 35-15-205; and
3. (3) Commencing a judicial proceeding for 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 under this section.
(i) A trustee may rely upon the written statement of a person indicating no objection to the notice as a failure to object within the time period prescribed in subsection (f), regardless of whether the time period has terminated.
(j) If the trustee receives a written objection within the period prescribed in subsection (f) from a person to whom the trustee sent a notice, then the trustee may resolve the objection by nonjudicial settlement agreement under § 35-15-111 or seek judicial relief under § 35-15-205.
(k) For the purpose of determining the date a notice was received, if the confirmation of the date of receipt is unavailable, then the notice is presumed to have been received ten (10) business days after the date of mailing.
(l) This section does not preclude a trustee from proceeding under § 35-15-205 to have the trustee's accounts reviewed and settled by the court.
(m) If the person entitled to the trust property under subsection (a) is the trustee of another trust, or the successor trustee of the same trust, and there is a vacancy in the office of that trustee, then the otherwise applicable provisions of this chapter apply, including §§ 35-15-704 and 35-15-707. A vacancy in the office of a trustee, as described in this subsection (m), does not change the notice and time periods required by this section.

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§ 35-15-818. Trustee's power to appoint in trust.

Unless the terms of the instrument expressly provide otherwise:
1. (1) A trustee who has authority, under the terms of a testamentary instrument or irrevocable inter vivos trust agreement, to invade the principal of a trust to make distributions to, or for the benefit of, one (1) or more proper objects of the exercise of the power, may instead exercise that authority by appointing all or part of the principal of the trust in favor of a trustee of a second trust if the exercise of that authority:
  1. (A) Does not reduce any income interest of any income beneficiary of the following trusts:
    1. (i) A trust for which a marital deduction has been taken for federal tax purposes under § 2056 or § 2523 of the Internal Revenue Code (26 U.S.C. § 2056 or § 2523) or for state tax purposes under any comparable provision of applicable state law;
    2. (ii) A charitable remainder trust under § 664 of the Internal Revenue Code; or
    3. (iii) A grantor retained annuity or unitrust trust under § 2702 of the Internal Revenue Code (26 U.S.C. § 2702); and
  2. (B) Is in favor of the proper objects of the exercise of the power;
2. (2)
  1. (A) The second trust must have as beneficiaries only one (1) or more of the beneficiaries of the first trust. For distributions made during the settlor's lifetime, the second trust must not accelerate the beneficial interest of a future beneficiary. For distributions made after the settlor's death, the second trust may accelerate the beneficial interest of a future beneficiary;
  2. (B) For purposes of this subdivision (2):
    1. (i) “Accelerate the beneficial interest” means making a beneficiary eligible to receive distributions of income or principal at a date earlier than the date upon which the beneficiary would otherwise be eligible to receive distributions from the first trust; and
    2. (ii) “Future beneficiary” means a beneficiary who is not currently eligible to receive any distributions of income or principal from the first trust, but is eligible to receive a distribution of income or principal from the first trust at a future time or upon the happening of an event specified under the first trust;
3. (3) A trustee who is a beneficiary of the original trust shall not exercise the authority to appoint property of the original trust to a second trust if under the terms of the original trust or pursuant to law governing the administration of the original trust:
  1. (A) The trustee does not have discretion to make distributions to itself;
  2. (B) The trustee's discretion to make distributions to itself is limited by an ascertainable standard, and under the terms of the second trust, the trustee's discretion to make distributions to itself is not limited by the same ascertainable standard;
  3. (C) The trustee's discretion to make distributions to itself can only be exercised with the consent of a co-trustee or a person holding an adverse interest and under the terms of the second trust the trustee's discretion to make distributions to itself is not limited by an ascertainable standard and may be exercised without consent; or
  4. (D) The trustee of the original trust does not have discretion to make distributions that will discharge the trustee's legal support obligations but under the second trust the trustee's discretion is not so limited;
4. (4) The exercise of the power to invade the principal of the trust under subdivision (a)(1) must be by an instrument in writing, signed by the trustee, and filed with the records of the trust;
5. (5) The exercise of the power to invade principal of the trust under subdivision (a)(1) must not extend the permissible period of the rule against perpetuities that applies to the trust;
6. (6) This section does not abridge the right of a trustee who has a power of invasion to appoint property in further trust that arises under another statute, common law, or pursuant to the applicable instrument governing the first trust;
7. (7) The exercise of the power to appoint principal under subdivision (a)(1) must be considered an exercise of a power of appointment, other than a power to appoint to the trustee, the trustee's creditors, the trustee's estate, or the creditors of the trustee's estate;
8. (8)
  1. (A) A second trust may confer a power of appointment upon a beneficiary of the original trust to whom or for the benefit of whom the trustee has the power to distribute principal of the original trust;
  2. (B) The permissible appointees of the power of appointment conferred upon a beneficiary may include persons who are not beneficiaries of the original or second trust; and
  3. (C) The power of appointment conferred upon a beneficiary must preclude any exercise that would extend the permissible period of the rule against perpetuities that applies to the trust;
9. (9) If any contribution to the original trust qualified for the annual exclusion under § 2503(b) of the Internal Revenue Code (26 U.S.C. § 2503(b)), the marital deduction under § 2056(a) or § 2523(a) of the Internal Revenue Code (26 U.S.C. § 2506(a) or § 2523(a)), or the charitable deduction under § 170(a), § 642(c), § 2055(a), or § 2522(a) of the Internal Revenue Code (26 U.S.C. § 170(a), § 642(c), § 2055(a), or § 2522(a)), is a direct skip qualifying for treatment under § 2642(c) of the Internal Revenue Code (26 U.S.C. § 2642(c)), or qualified for any other specific tax benefit that would be lost by the existence of the authorized trustee's authority under subdivision (a)(1) for income, gift, estate, or generation-skipping transfer tax purposes under the Internal Revenue Code, then the authorized trustee does not have the power to distribute the principal of a trust pursuant to subdivision (a)(1) in a manner that would prevent the contribution to the original trust from qualifying for or would reduce the exclusion, deduction, or other tax benefit that was originally claimed with respect to that contribution;
10. (10) During any period when the original trust owns stock in a subchapter S corporation, as defined in § 1361(a)(1) of the Internal Revenue Code (26 U.S.C. § 1361(a)(1)), an authorized trustee shall not exercise a power authorized by subdivision (a)(1) to distribute part or all of the stock of the S corporation to a second trust that is not a permitted shareholder under § 1361(c)(2) of the Internal Revenue Code (26 U.S.C. § 1361(c)(2));
11. (11) This section applies to any trust that is administered in this state; and
12. (12) For purposes of this section:
  1. (A) “Original trust” means the trust from which principal is being distributed; and
  2. (B) “Second trust” means an original trust after modification or restatement under this section, or a trust to which a distribution of property from an original trust is or may be made under this section; provided, that the exercise of the power to appoint principal under this subsection (a) to a second trust by restatement or modification of the original trust does not require the retitling of property titled to the original trust or a change in a payable on death or beneficiary designation to the original trust, even if the second trust is created by a fiduciary or other person as the nominal settlor.

Part 9 “Uniform Principal and Income Act” and “Tennessee Uniform Prudent Investor Act of 2002” Incorporated

§ 35-15-901. Uniform Principal and Income Act and Tennessee Uniform Prudent Investor Act of 2002 incorporated by reference.

Title 35, chapter 6 and chapter 14 are incorporated in this chapter by reference.

Part 10 Liability of Trustees and Rights of Persons Dealing with Trustee

§ 35-15-1001. Remedies for breach of trust.

(a) A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.
(b) To remedy a breach of trust that has occurred or may occur, the court may:
1. (1) Compel the trustee to perform the trustee's duties;
2. (2) Enjoin the trustee from committing a breach of trust;
3. (3) Compel the trustee to redress a breach of trust by paying money, restoring property, or other means;
4. (4) Order a trustee to account;
5. (5) Appoint a special fiduciary to take possession of the trust property and administer the trust;
6. (6) Suspend the trustee;
7. (7) Remove the trustee as provided in § 35-15-706;
8. (8) Reduce or deny compensation to the trustee;
9. (9) Subject to § 35-15-1012, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and recover the property or its proceeds; or
10. (10) Order any other appropriate relief whether provided elsewhere in this chapter, available at common law or under equity principles.
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- 35-15-706(c)

§ 35-15-1002. Damages for breach of trust.

(a) Except as otherwise provided in § 35-3-117(a)-(d) with regard to investment of trust funds or elsewhere in this chapter, a trustee who commits a breach of trust is liable to the beneficiaries affected for the greater of:
1. (1) The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred; or
2. (2) The profit the trustee made by reason of the breach.
(b) Except as otherwise provided in this subsection (b), if more than one (1) trustee is liable to the beneficiaries for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.

§ 35-15-1003. Damages in absence of breach.

Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.

§ 35-15-1004. Attorney's fees and costs.

(a) In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney's fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.
(b) In a nonjudicial proceeding involving the administration of a trust, the trustee may pay fees, other reasonable costs and expenses from the trust assets where all of the parties to the proceeding agree in writing.
(c) In a mediation or arbitration proceeding involving the administration of a trust, the mediator or arbitrator may award fees, other reasonable costs and expenses against the assets of the trust.

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35-15-205(f)

§ 35-15-1005. Limitation of action for breach of trust against trustee, former trustee, trust advisor, or trust protector.

(a) A beneficiary, trustee, trust advisor, or trust protector shall not commence a proceeding against a trustee, former trustee, trust advisor, or trust protector for breach of trust more than one (1) year after the earlier of:
1. (1) The date the beneficiary, trustee, trust advisor, or trust protector or a representative of the beneficiary, trustee, trust advisor, or trust protector was sent information that adequately disclosed facts indicating the existence of a potential claim for breach of trust; or
2. (2) The date the beneficiary, trustee, trust advisor, or trust protector or a representative of the beneficiary, trustee, trust advisor, or trust protector possessed actual knowledge of facts indicating the existence of a potential claim for breach of trust.
(b) For purposes of this section, facts indicate the existence of a potential claim for breach of trust if the facts provide sufficient information to enable the beneficiary; trustee; trust advisor; trust protector; or the representative of the beneficiary, trustee, trust advisor, or trust protector to have actual knowledge of the potential claim, or have sufficient information to be presumed to know of the potential claim or to know that an additional inquiry is necessary to determine whether there is a potential claim.
(c) If subsection (a) does not apply, a judicial proceeding against a trustee, former trustee, trust advisor, or trust protector for breach of trust must be commenced within three (3) years after the first to occur of:
1. (1) The removal, resignation, or death of the trustee, former trustee, trust advisor, or trust protector;
2. (2) The termination of the beneficiary's interest in the trust; or
3. (3) The termination of the trust.
(d) Notwithstanding subsections (a)-(c), no trustee, trust advisor, or trust protector may commence a proceeding against a trustee or a former trustee if, under subsection (a), (b), or (c), none of the beneficiaries would be entitled to commence a proceeding against a trustee or a former trustee for a breach of trust.
(e) Notwithstanding subsections (a)-(c), no beneficiary, trustee, trust advisor, or trust protector may commence a proceeding against a trustee or former trustee for any matter covered by a final accounting approved by the court under § 35-15-205, or for any matter covered by a notice under § 35-15-817 if the provisions of § 35-15-817 were complied with and no objections were made within the time period prescribed in § 35-15-817.

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§ 35-15-1006. Reliance on trust instrustment.

A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.

§ 35-15-1007. Event affecting administration or distribution.

If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge.

§ 35-15-1008. Exculpation of trustee.

(a) A provision of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it:
1. (1) Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiaries; or
2. (2) Was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship to the settlor.
(b) An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term is fair under the circumstances and that its existence and contents were adequately communicated to the settlor.

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35-15-105(b)(8)

§ 35-15-1009. Beneficiary's consent, release, or ratification.

A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented in writing to the conduct or transaction constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless:
1. (1) The consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee; or
2. (2) At the time of the consent, release, or ratification, the beneficiary did not know of the beneficiary's rights or of the material facts relating to the breach.

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35-15-802(b)(4)

§ 35-15-1010. Limitation on personal liability of trustee.

(a) Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.
(b) Except as otherwise provided in subsection (a) or (c), the debts, obligations and liabilities incurred by a trustee by reason of the ownership, management or control of trust property in the trustee's fiduciary capacity, shall be enforceable solely against the trust and its property, without any obligation or liability personally being borne by any trustee of such trust.
(c) A trustee is personally liable for torts committed in the course of administering a trust only if the trustee is personally at fault on account of the trustee's own willful misconduct proven by clear and convincing evidence.
(d) A claim based on a contract entered into by a trustee in the trustee's fiduciary capacity, on an obligation arising from ownership or control of trust property, or on a tort committed in the course of administering a trust, may be asserted in a judicial proceeding against the trustee in the trustee's fiduciary capacity, whether or not the trustee is personally liable for the claim.

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35-15-105(b)(9)

§ 35-15-1011. Interest as general partner.

(a) Except as otherwise provided in subsection (c) or unless personal liability is imposed in the contract, a trustee who holds an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust's acquisition of the interest if the fiduciary capacity was disclosed in the contract or in a statement previously filed pursuant to the Uniform Partnership Act, compiled in title 61, chapter 1, or the Uniform Limited Partnership Act, compiled in title 61, chapter 2.
(b) Except as otherwise provided in subsection (c), a trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault on account of the trustee's own willful misconduct proven by clear and convincing evidence.
(c) The immunity provided by this section does not apply if an interest in the partnership is held by the trustee in a capacity other than that of trustee.
(d) If the trustee of a revocable trust holds an interest as a general partner, the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner.

§ 35-15-1012. Protection of person dealing with trustee.

(a) A person other than a beneficiary who in “good faith”, as defined in § 47-1-201, assists a trustee, or who in “good faith” and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee's powers is protected from liability as if the trustee properly exercised the power.
(b) A person other than a beneficiary who in “good faith” deals with a trustee is not required to inquire into the extent of the trustee's powers or the propriety of their exercise.
(c) A person who in “good faith” delivers assets to a trustee need not ensure their proper application.
(d) A person other than a beneficiary who in “good faith” assists a former trustee, or who in “good faith” and for value deals with a former trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.
(e) Comparable protective provisions of other laws, see §§ 47-8-101 — 47-8-407, relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.

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§ 35-15-1013. Certification of trust.

(a) Instead of furnishing a copy of the trust instrument to any person to evidence the existence and validity of the trust, the trustee may furnish to such person a certification of trust, signed by the trustee or trustees having signatory authority as identified in subdivision (a)(5) and attested by a notary public and shall contain the following:
1. (1) An affirmation of the current existence of the trust and the date on which the trust came into existence;
2. (2) The identity of the settlor or settlors, the currently acting trustee or trustees, and the named successor trustee or trustees of the trust or a statement that no successor is named;
3. (3) The administrative or managerial powers of the trustee, or both;
4. (4) The revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust;
5. (5) When there are multiple trustees or multiple successor trustees, the signature authority of the trustees indicating whether all or less than all of the currently acting trustees are required to sign in order to exercise various powers of the trustee;
6. (6) Where there are successor trustees designated, a statement detailing the conditions for their succession or a statement that a third party may rely on the authority of one (1) or more successors without proof of their succession;
7. (7) The trust's identification number, whether a social security or an employer identification number, but only if the trust's identification number is essential to the transaction for which the request for the trust document was made;
8. (8) The manner in which trust assets should properly be titled; and
9. (9) A statement that, to the best of the trustee's knowledge, the trust has not been revoked, modified or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.
(b) The certification of trust shall not be required to contain the dispositive provisions of the trust that set forth the distribution of the trust estate.
(c) The trustee offering the certification of trust may provide copies of all or any part of the trust document and amendments, if any. Nothing in this section is intended to require or imply an obligation to provide dispositive provisions of the trust or a copy of the entire trust document and amendments.
(d) A person who acts in reliance on a certification of trust without actual knowledge that the representations contained therein are incorrect is not liable to any person for so acting. A person who does not have actual knowledge that the facts contained in the certification of trust are incorrect may assume without inquiry the existence of the facts contained in the certification of trust. Actual knowledge shall not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying on the trust certification. Nothing contained in this section shall limit the rights of the beneficiaries of the trust against the trustee. Any person relying on the certification of trust shall be indemnified from the assets of the trust to the extent of the share of the trust attributable to the beneficiary or beneficiaries bringing any action against the person for any costs, damage, attorney fees or other expenses incurred in defending any action against the person arising for the transaction to which a certification of trust related.
(e) A person's failure to request a certification of trust does not affect the protections provided that person in this section. No inference that the person has not acted in good faith or that the person was negligent may be drawn from the failure of the person to request a certification of trust. Nothing in this section is intended to create an implication that a person is liable for acting in reliance on a certification of trust under circumstances where the requirements of this section are not satisfied.
(f) Nothing in this section shall be construed to require a third party, when presented with a trust certificate, to enter into a contract with a trustee relating to trust assets or obligations, or to preclude a third party from demanding as a precondition to any contract that the trustee provide additional information in order to clarify any ambiguities or inconsistencies in the trust certificate.
(g) This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.

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§ 35-15-1014. Enforcement of no-contest, in terrorem or forfeiture provisions.

1. (a) For the purposes of this section, “no-contest provision” includes a “no-contest provision,” “in terrorem provision” or “forfeiture provision” of a trust instrument. A “no-contest provision” means a provision that, if given effect, would reduce or eliminate the interest of any beneficiary of such trust who, directly or indirectly, initiates or otherwise pursues:
  1. (1) Any action to contest the validity of the trust or the terms of the trust;
  2. (2) Any action to set aside or vary the terms of the trust;
  3. (3) Any action to challenge the acts of the trustee or other fiduciary of the trust in the performance of the trustee's or other fiduciary's duties as described in the terms of the trust; or
  4. (4) Any other act or proceedings to frustrate or defeat the settlor's intent as expressed in the terms of the trust.
2. (b) Regardless of whether or not the beneficiary sought, received or relied upon legal counsel, a no-contest provision shall be enforceable according to the express terms of the no-contest provision without regard to the beneficiary's good or bad faith in taking the action that would justify the complete or partial forfeiture of the beneficiary's interest in the trust under the terms of the no-contest provision unless probable cause exists for the beneficiary taking such action on the grounds of:
  1. (1) Fraud;
  2. (2) Duress;
  3. (3) Revocation;
  4. (4) Lack of testamentary capacity;
  5. (5) Undue influence;
  6. (6) Mistake;
  7. (7) Forgery; or
  8. (8) Irregularity in the execution of the trust instrument.
3. (c) Subsection (b) shall not apply to:
  1. (1) Any action brought solely to challenge the acts of the trustee or other fiduciary of the trust to the extent that the trustee or other fiduciary has committed a breach of fiduciary duties or breach of trust;
  2. (2) Any action brought by the trustee or any other fiduciary serving under the terms of the trust, unless the trustee or other fiduciary is a beneficiary against whom the no-contest provision is otherwise enforceable;
  3. (3) Any agreement among the beneficiaries and any other interested persons in settlement of a dispute or resolution of any other matter relating to the trust, including without limitation any nonjudicial settlement agreement;
  4. (4) Any action to determine whether a proposed or pending motion, petition, or other proceeding constitutes a contest within the meaning of a no-contest provision;
  5. (5) Any action brought by a beneficiary or on behalf of any such beneficiary for a construction or interpretation of the terms of the trust; or
  6. (6) Any action brought by the attorney general and reporter for a construction or interpretation of a charitable trust or a trust containing a charitable interest if a provision exists in a trust purporting to penalize a charity or charitable interest for contesting the trust if probable cause exists for instituting proceedings.
4. (d) Pursuant to this section, courts shall enforce the settlor's intent as reflected in a no-contest provision to the greatest extent possible.

§ 35-15-1015. Limitation on personal liability of beneficiaries.

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 or which are otherwise imposed upon the holder of the title to the property, including liabilities arising from contracts made by the trustee or torts committed by the trustee in the course of the administration of the trust.

Part 11 Miscellaneous Provisions

§ 35-15-1101. No consideration given to need to promote uniformity of application and construction of law.

(a) Numerous provisions of each of the following have been modified extensively relative to their respective uniform acts as such uniform acts were drafted and have been amended by the Uniform Law Commission, also known as the National Conference of Commissioners of Uniform State Laws:
1. (1) Chapter 6, the Uniform Principal and Income Act;
2. (2) Chapter 14, the Tennessee Uniform Prudent Investor Act of 2002; and
3. (3) Chapter 15, the Tennessee Uniform Trust Code.
(b) These modifications were undertaken deliberately and after significant consideration:
1. (1) Therefore, in applying and construing title 35, no consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states, including any other state that has enacted laws covering the same general subject matter as chapters 9, 14 or 15, either by enacting such respective uniform acts as such uniform acts were originally drafted or as such were originally drafted and subsequently have been amended, or by enacting laws based on or similar to such uniform acts as originally drafted or as such have been amended; and
2. (2) Unless specifically provided otherwise in this chapter, chapter 6 or chapter 14, courts shall not consult, rely on or give any persuasive value to such uniform acts or any respective other state's acts based on or similar to such uniform acts, or any comments accompanying any such uniform acts or any respective other state's acts based on or similar to such uniform acts; none of which have any force or effect relative to trusts governed by the laws of this state.

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35-6-601

§ 35-15-1102. Electronic records and signatures.

The provisions of this chapter governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or performed with the use of such records or signatures, conform to the requirements of section 102 of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. § 7002), and supersede, modify, and limit the requirements of the Electronic Signatures in Global and National Commerce Act. However, the execution of a modification, termination, or settlement agreement pursuant to § 35-15-111, § 35-15-411, or § 35-15-412 is considered a transaction for purposes of § 47-10-103.

§ 35-15-1103. Application to existing relationships.

(a) Except as otherwise provided in this chapter, on July 1, 2004:
1. (1) This chapter applies to all trusts created before, on, or after July 1, 2004;
2. (2) This chapter applies to all judicial proceedings concerning trusts commenced on or after July 1, 2004;
3. (3) This chapter applies to judicial proceedings concerning trusts commenced before July 1, 2004, unless the court finds that application of a particular provision of this chapter would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of this chapter does not apply and the superseded law applies;
4. (4) Any rule of construction or presumption provided in this chapter applies to trust instruments executed before July 1, 2004, unless there is a clear indication of a contrary intent in the terms of the trust; and
5. (5) An act done before July 1, 2004, is not affected by this chapter.
(b) If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before July 1, 2004, that statute continues to apply to the right even if it has been repealed or superseded.

§ 35-15-1104. Alter ego.

(a) Absent clear and convincing evidence, no settlor of an irrevocable trust may be deemed to be the alter ego of a trustee of such trust.
(b) None of the following factors, by themselves or in combination, may be considered sufficient evidence for a court to conclude that the settlor controls a trustee, or is the alter ego of a trustee of such trust:
1. (1) Any combination of the factors listed in § 35-15-1105 regarding dominion and control over a trust;
2. (2) Isolated occurrences where the settlor has signed checks, made disbursements, or executed other documents related to such trust as a trustee, a trust advisor or a trust protector, when in fact the settlor was not such a trustee, trust advisor or trust protector;
3. (3) Making any requests for distributions on behalf of beneficiaries; or
4. (4) Making any requests to the trustee to hold, purchase, or sell any trust property.

§ 35-15-1105. Dominion and control over a trust.

In the event a person challenges a settlor's or a beneficiary's influence over a trust, none of the following factors, alone or in combination, shall enter into a determination that dominion and control over a trust exists:
1. (1) The settlor or a beneficiary is serving as a trustee, a trust advisor, a trust protector or other fiduciary as described in § 35-15-508;
2. (2) The settlor or a beneficiary holds an unrestricted power to remove or replace a trustee, a trust advisor, a trust protector or other fiduciary;
3. (3) The settlor or a beneficiary is a trust administrator, a general partner of a partnership, a manager of a limited liability company, an officer of a corporation, or holds any other managerial function relative to any type of entity specified in this subdivision (3), or relative to any other type of entity not so specified, and part or all of the trust property consists of an interest in such entity;
4. (4) A person related by blood or adoption to the settlor or a beneficiary is appointed as a trustee, a trust advisor, a trust protector or other fiduciary;
5. (5) The settlor's or a beneficiary's agent, accountant, attorney, financial advisor, or friend is appointed as a trustee, a trust advisor, a trust protector or other fiduciary;
6. (6) A business associate is appointed as a trustee, a trust advisor, a trust protector or other fiduciary;
7. (7) A beneficiary holds any power of appointment over any or all of the trust property;
8. (8) The settlor holds a power to substitute property of equivalent value for property held by the trust, regardless of whether such power is:
  1. (A) Held in a fiduciary or nonfiduciary capacity;
  2. (B) Exercisable with or without the approval of any person in a fiduciary capacity; or
  3. (C) Exercisable with or without the approval of any person having an interest adverse to such settlor;
9. (9) A trustee, a trust advisor, a trust protector or other fiduciary has the power to loan trust property to the settlor for less than a full and adequate rate of interest or without adequate security;
10. (10) Any language relative to the power to make any distribution provides for any discretion relative to such distribution;
11. (11) The trust has only one beneficiary eligible for current distributions; or
12. (12) The beneficiary is serving as a cotrustee, or as a trust advisor or trust protector under part 12, or as any other fiduciary.

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35-15-1104(b)(1)

Part 12 Trust Protectors and Trust Advisors

§ 35-15-1201. Powers of trust advisors and trust protectors.

(a) A trust protector or trust advisor is any person, and may be a committee of more than one person, other than a trustee, who under the terms of the trust, an agreement of the qualified beneficiaries, or a court order has a power or duty with respect to a trust, including but not limited to, one or more of the following powers:
1. (1) The power to modify or amend the trust instrument to achieve favorable tax status or respond to changes in any applicable federal, state, or other tax law affecting the trust, including but not limited to, any rulings, regulations, or other guidance implementing or interpreting such laws;
2. (2) The power to amend or modify the trust instrument to take advantage of changes in the rule against perpetuities, laws governing restraints on alienation, or other state laws restricting the terms of the trust, the distribution of trust property, or the administration of the trust;
3. (3) The power to appoint a successor trust protector or trust advisor;
4. (4) The power to review and approve a trustee's trust reports or accountings;
5. (5) The power to change the governing law or principal place of administration of the trust;
6. (6) The power to remove and replace any trust advisor or trust protector for the reasons stated in the trust instrument;
7. (7) The power to remove a trustee, cotrustee, or successor trustee, for the reasons stated in the trust instrument, and appoint a successor;
8. (8) The power to consent to a trustee's or cotrustee's action or inaction in making distributions to beneficiaries;
9. (9) The power to increase or decrease any interest of the beneficiaries in the trust, to grant a power of appointment to one (1) or more trust beneficiaries, or to terminate or amend any power of appointment granted in the trust;
10. (10) The power to perform a specific duty or function that would normally be required of a trustee or cotrustee;
11. (11) The power to advise the trustee or cotrustee concerning any beneficiary;
12. (12) The power to consent to a trustee's or cotrustee's action or inaction relating to investments of trust assets;
13. (13) The power to direct the acquisition, disposition, or retention of any trust investment;
14. (14) The power to appoint under § 35-15-816(b)(27);
15. (15) The power to terminate all or part of a trust;
16. (16) The power to veto or direct all or part of any trust distribution;
17. (17) The power to borrow money with or without security, and mortgage or pledge trust property for a period within or extending beyond the duration of the trust;
18. (18) The power to make loans out of trust property, including but not limited to, loans to a beneficiary on terms and conditions, including without interest, considered to be fair and reasonable under the circumstances;
19. (19) The power to vote proxies and exercise all other rights of ownership relative to securities and business entities held by the trust;
20. (20) The power to select one (1) or more investment advisors, managers or counselors, including but not limited to, a trustee and delegate to them any of its powers; and
21. (21) The power to direct the trustee with respect to any additional powers and discretions over investment and management of trust assets provided in the trust instrument.
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- 35-15-103(35)
- 35-15-103(37)
(b) The exercise of a power by a trust advisor or a trust protector shall be exercised in the sole and absolute discretion of the trust advisor or trust protector and shall be binding on all other persons.
(c) Any power of a trust advisor or trust protector to directly or indirectly modify a trust may be granted notwithstanding §§ 35-15-410 — 35-15-412 and 35-15-414.
(d) An excluded fiduciary may continue to follow the direction of a trust protector or trust advisor upon the incapacity or death of the grantor of a trust to the extent provided in the trust instrument.
(e) Notwithstanding anything in this section to the contrary, no modification, amendment or grant of a power of appointment with respect to a trust all of whose beneficiaries are charitable organizations may authorize a trust protector or trust advisor to grant a beneficial interest in such trust to any noncharitable interest or purpose.

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§ 35-15-1202. Trust advisors and trust protectors as fiduciaries.

(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 any power or refraining from exercising any power, a trust advisor or trust protector 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 with respect to each power granted or reserved exclusively to any one or more other trustees, trust advisors, or trust protectors.

§ 35-15-1203. Trust advisor and trust protector subject to court jurisdiction.

By accepting appointment to serve as a trust advisor or trust protector, the trust advisor or the trust protector submits personally to the jurisdiction of the courts of this state even if investment advisory agreements or other related agreements provide otherwise, and the trust advisor or trust protector may be made a party to any action or proceeding relating to a decision, action, or inaction of the trust advisor or trust protector.

§ 35-15-1204. No duty to review actions of trustee, trust advisor, or trust protector.

(a) Whenever, pursuant to the terms of a trust, an agreement of the qualified beneficiaries, or a court order, an excluded fiduciary is to follow the direction of a trustee, trust advisor, or trust protector with respect to investment decisions, distribution decisions, or other decisions of the non-excluded fiduciary, then, except to the extent that the terms of the trust, the agreement of the qualified beneficiaries, or the court order provide otherwise, the excluded fiduciary shall have no duty to:
1. (1) Review, evaluate, perform investment reviews, suitability reviews, inquiries, or investigations, or in any other way monitor the conduct of the trustee, trust advisor, or trust protector;
2. (2) Make recommendations or evaluations or in any way provide advice to the trustee, trust advisor, or trust protector or consult with the trustee, trust advisor, or trust protector; or
3. (3) Communicate with or warn or apprise any beneficiary or third party concerning instances in which the excluded fiduciary would or might have exercised the excluded fiduciary's own discretion in a manner different from the manner directed by the trustee, trust advisor, or trust protector.
(b) Absent provisions in the trust instrument to the contrary, the actions of the excluded fiduciary pertaining to matters within the scope of the trustee, trust advisor, or trust protector's authority, including but not limited to, confirming that the trustee, trust advisor, or trust protector's directions have been carried out and recording and reporting actions taken at the trustee, trust advisor, or trust protector's direction or other information pursuant to § 35-15-813, shall be deemed to be administrative actions taken by the excluded fiduciary solely to allow the excluded fiduciary to perform those duties assigned to the excluded fiduciary under the terms of the trust, the agreement of the qualified beneficiaries, or the court order; such administrative actions, as well as any communications made by the excluded fiduciary to the trust advisor, trust protector or any of their agents or persons they have selected to provide services to the trust, shall not be deemed to constitute an undertaking by the excluded fiduciary to monitor the trustee, trust advisor, or trust protector or otherwise participate in actions within the scope of the trustee, trust advisor, or trust protector's authority.

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35-15-716(c)

§ 35-15-1205. Fiduciary's liability for action or inaction of trustee, trust advisor, and trust protector.

An excluded fiduciary is not liable, either individually or as a fiduciary, for:
1. (1) Any loss resulting from compliance with a direction of a trustee, trust advisor or trust protector, including but not limited to, any loss from the trustee, trust advisor or trust protector breaching fiduciary responsibilities or acting beyond the trustee's, trust advisor's or trust protector's scope of authority;
2. (2) Any loss resulting from any action or inaction of a trustee, trust advisor, or trust protector; or
3. (3) Any loss that results from the failure of a trustee, trust advisor, or trust protector to take any action proposed by the excluded fiduciary where such action requires the authorization of the trustee, trust advisor, or trust protector; provided, that an excluded fiduciary who had a duty to propose such action timely sought but failed to obtain the authorization.

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35-15-716(c)

§ 35-15-1206. [Repealed]

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34-1-115(g)

Part 13 Special Purpose Entity

§ 35-15-1301. Special purpose entity.

(a) As used in this part:
1. (1) “Corporate trustee” means a Tennessee trust company, a Tennessee bank with trust powers, or a national bank with trust powers and with a physical presence in Tennessee;
2. (2) “Department” means the department of financial institutions;
3. (3) “Designated ancestor” means one (1) or more ancestors of the family designated as such in the entity's governing documents. A designated ancestor may be either living or deceased. If two (2) designated ancestors are designated, they must be or have been spouses to each other, and if more than such first two (2) designated ancestors are designated, each such additional designated ancestor must be or have been a spouse of either of the first two (2) designated ancestors;
4. (4) “Entity” means a corporation or a limited liability company organized in this state;
5. (5)
  1. (A) “Family member” means a designated ancestor and:
    1. (i) An individual within the twelfth degree of lineal kinship of a designated ancestor;
    2. (ii) An individual within the eleventh degree of collateral kinship of a designated ancestor;
    3. (iii) A spouse or former spouse of a designated ancestor or of an individual defined as a family member in subdivision (a)(5)(A) or (a)(5)(B); and
    4. (iv) An individual who is a relative of a spouse or former spouse specified in subdivision (a)(5)(C) who is within the fifth degree of lineal or collateral kinship of the spouse or former spouse;
  2. (B) For purposes of determining whether a person is a family member as defined in this subdivision (a)(5):
    1. (i) A legally adopted person shall be treated as a natural child of the adoptive parents;
    2. (ii) A stepchild shall be treated as a natural child of the individual who is or was the stepparent of that child;
    3. (iii) A foster child, or an individual who was a minor when an adult became the individual's legal guardian, shall be treated as a natural child of the adult appointed as foster parent or guardian;
    4. (iv) A child of a spouse or former spouse of an individual shall be treated as a natural child of that individual;
    5. (v) Degrees are calculated by adding the number of steps from a relevant designated ancestor through each individual to the family member either directly, in case of lineal kinship, or through a designated ancestor, in the case of collateral kinship; and
    6. (vi) A person who was a family member at the time of the special purpose entity's engagement as trust protector or trust advisor shall not cease to be a family member solely due to a death, divorce, or other similar event; and
6. (6) “Special purpose entity” means an entity that meets the requirements provided under subsection (b).
(b) A special purpose entity shall not be subject to chapters 1 and 2 of title 45 regulating fiduciary activity if:
1. (1) The entity is established for the exclusive purpose of acting as a trust protector or trust advisor as defined by § 35-15-1201, or any combination of such purposes;
2. (2) The entity is acting in such capacity solely under the terms of trusts in which the grantor or beneficiary is a family member, and under which a corporate trustee is serving as trustee;
3. (3) The entity is not engaged in trust company business as a private trust company under title 45, chapter 2, part 20, or with the general public as a public trust company;
4. (4) The entity does not hold itself out as being in the business of acting as a fiduciary for hire as either a public or private trust company;
5. (5) The entity files an annual report with the secretary of state;
6. (6) The entity agrees to be subject to examination by the department at the discretion of the department solely for the purpose of determining whether the entity satisfies all requirements for qualification under this part;
7. (7) The entity agrees to pay the department the actual expenses of the examination at the time of the examination described in subdivision (b)(6);
8. (8) The entity does not use the word “trust” or “trustee” in the entity's name in any manner;
9. (9) The governing documents of the entity, as such governing documents may be amended from time to time, limit the entity's authorized activities to the functions permitted to a trust protector or trust advisor, or any combination of such functions, and limit the performance of those functions with respect to trusts in which a grantor or beneficiary of such trust is a family member with respect to a designated ancestor specifically named in the entity's governing documents;
10. (10) The entity does not act as a fiduciary other than as provided in this part; and
11. (11) On or before the date that is sixty (60) days after the date on which the entity's initial formation documents are filed with the secretary of state, the entity or the entity's organizers:
  1. (A) Provide notice to the department of:
    1. (i) The entity's intention to act as a special purpose entity;
    2. (ii) The name, address, and telephone number of each organizer of the entity;
    3. (iii) The address of the entity's principal office; and
    4. (iv) The name of each current and prospective corporate trustee for each separate trust for which such entity is or will be engaged as a trust protector or trust advisor; and
  2. (B) Pay a one-time fee of one thousand dollars ($1,000) to the department.
12. (12) [Deleted by 2022 amendment.]
(c) An entity that fails to meet any of the requirements set forth in subsection (b) is not a special purpose entity and is not authorized to act as a special purpose entity in this state.
(d) Notwithstanding subsection (c), an entity that meets all of the requirements of subsection (b) other than the notice and fee requirements of subdivision (b)(11) is deemed to have satisfied all of the requirements of subsection (b) and is deemed to be a special purpose entity under this section; provided, that the entity provides the notice and fee specified in subdivision (b)(11) to the department on or before August 1, 2022.

Chapter 16 Tennessee Investment Services Act of 2007

§ 35-16-101. Short title.

This chapter shall be known and may be cited as the “Tennessee Investment Services Act of 2007.”

§ 35-16-102. Chapter definitions.

As used in this chapter, unless the context otherwise requires:
1. (1) “Claim” means a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured;
2. (2) “Creditor” means, with respect to a transferor, a person who has a claim;
3. (3) “Debt” means liability on a claim;
4. (4) “Disposition” means a transfer, conveyance or assignment of property, including a change in the legal ownership of property occurring upon the substitution of one (1) trustee for another or the addition of one (1) or more new trustees. “Disposition” also includes the exercise of a power so as to cause a transfer of property to a trustee or trustees, but shall not include the release or relinquishment of an interest in property that, until the release or relinquishment, was the subject of a qualified disposition;
5. (5) “Investment advisor” means a person given authority by the terms of an investment services trust to direct, consent to or disapprove a transferor's actual or proposed investment decisions, distribution decisions or other decisions of the transferor;
6. (6) “Investment decision” means the retention, purchase, sale, exchange, tender or other transaction affecting the ownership of or rights in investments;
7. (7) “Investment services trust” means an instrument appointing a qualified trustee or qualified trustees for the property that is the subject of a disposition, which instrument:
  1. (A) Expressly incorporates the law of this state to govern the validity, construction and administration of the trust;
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    35-16-106(c)
  2. (B) Is irrevocable; and
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    35-16-104(c)
  3. (C) Provides that the interest of the transferor or other beneficiary in the trust property or the income from the trust property may not be transferred, assigned, pledged or mortgaged, whether voluntarily or involuntarily, before the qualified trustee or qualified trustees actually distribute the property or income from the property to the beneficiary;
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    35-16-107
8. (8) “Person” means an individual; corporation; business trust; estate; trust or civil law equivalent of a trust, including a fideicomiso or equivalent, or a foundation of the equivalent; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity;
9. (9) “Property” includes real property, personal property, and interests in real or personal property;
10. (10) “Qualified affidavit” means a sworn affidavit signed by the transferor before a disposition of assets to an investment services trust that meets the requirements of § 35-16-103. In the event of a disposition by a transferor who is a trustee, the affidavit shall be signed by the transferor who made the original disposition to the trustee, or a predecessor trustee, in a form that meets the requirements of subdivisions (7)(B) and (C) and shall state facts as of the time of the original disposition;
11. (11) “Qualified disposition” means a disposition by or from a transferor with or without consideration, to an investment services trust;
12. (12) “Qualified trustee” means a person who:
  1. (A) In the case of a natural person, is a resident of this state, or, in all other cases, is authorized by the law of this state to act as a trustee and whose activities are subject to supervision by the Tennessee department of financial institutions, the federal deposit insurance corporation, the comptroller of the currency, or the office of thrift supervision or any successor to them;
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    34-1-101(7)
    35-16-108(a)
    35-16-110
  2. (B) Maintains or arranges for custody in this state of some or all of the property that is the subject of the qualified disposition, maintains records for the investment services trust on an exclusive or nonexclusive basis, prepares or arranges for the preparation of required income tax returns for the investment services trust, or otherwise materially participates in the administration of the investment services trust; and
  3. (C) Is not the transferor;
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13. (13) “Spouse” or “former spouse” means only persons to whom the transferor was legally married at, or before, the time the qualified disposition is made;
14. (14) “Transferor” means a person who, directly or indirectly, makes a disposition or causes a disposition to be made in such person's capacity:
  1. (A) As an owner of property;
  2. (B) As a holder of a power of appointment that authorizes the holder to appoint in favor of the holder, the holder's creditors, the holder's estate or the creditors of the holder's estate; or
  3. (C) As a trustee; and
15. (15) Unless the context or a provision contained in this chapter provides otherwise, throughout this chapter, any form of the word “trustee,” whether singular or plural means “trustee, cotrustee or any other fiduciary” as fiduciary is defined at § 35-15-103 relative to any power or duty held by such fiduciary that could otherwise be held by a trustee, to the extent that such fiduciary is holding such a power or duty and is not an excluded fiduciary as defined at § 35-15-103 relative to that power or duty.

§ 35-16-103. Qualified affidavit requirements.

A qualified affidavit shall state that:
1. (1) The transferor has full right, title, and authority to transfer the assets to the trust;
2. (2) The transfer of the assets to the trust will not render the transferor insolvent;
3. (3) The transferor does not intend to defraud a creditor by transferring the assets to the trust;
4. (4) The transferor does not have any pending or threatened court actions against the transferor, except for those court actions identified by the transferor on an attachment to the affidavit;
5. (5) The transferor is not involved in any administrative proceedings, except for those administrative proceedings identified on an attachment to the affidavit;
6. (6) The transferor does not contemplate filing for relief under the federal bankruptcy code; and
7. (7) The assets being transferred to the trust were not derived from unlawful activities.

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35-16-102(10)

§ 35-16-104. Restrictions on actions, remedies and claims.

(a) Notwithstanding any law to the contrary, no action of any kind, including, but not limited to, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity for an attachment or other provisional remedy against property that is the subject of a qualified disposition to an investment services trust or for the avoidance of a qualified disposition to an investment services trust, unless the action is brought pursuant to the Uniform Fraudulent Transfer Act, compiled in title 66, chapter 3, part 3, and, in the case of a creditor whose claim arose after a qualified disposition, unless the qualified disposition was also made with actual intent to defraud such creditor.
(b)
1. (1) Notwithstanding § 66-3-310, a creditor's claim under subsection (a) shall be extinguished:
  1. (A) If the person is a creditor when the qualified disposition to an investment services trust is made, unless the action is commenced within the later of eighteen (18) months after the qualified disposition is made or six (6) months after the person discovers or reasonably should have discovered the qualified disposition; or
  2. (B) If the person becomes a creditor after the qualified disposition to an investment services trust is made, unless the action is commenced within eighteen (18) months after the qualified disposition is made.
2. (2) If subdivision (b)(1) applies:
  1. (A) A person shall be deemed to have discovered the existence of a qualified disposition to an investment services trust at the time any public record is made of any transfer of property relative to such qualified disposition, including but not limited to, the conveyance of real property that is recorded in the office of the county register of deeds of the county in which the property is located or the filing of a financing statement under title 47, chapter 9, or the equivalent recording or filing of either with the appropriate person or official under the laws of a jurisdiction other than this state; and
  2. (B) No creditor shall bring an action with respect to property that is the subject of a qualified disposition unless that creditor proves by clear and convincing evidence that the settlor's transfer of such property was made with the intent to defraud that specific creditor.
(c) For purposes of this chapter, a qualified disposition that is made by means of a disposition by a transferor who is a trustee shall be deemed to have been made as of the time, whether before, on or after July 1, 2007, the property that is the subject of the qualified disposition was originally transferred to the transferor acting in the capacity of trustee, or any predecessor trustee, in a form that meets the requirements of § 35-16-102(7)(B) and (C). The transferor's execution of a qualified affidavit creates a rebuttable presumption that the assets disclosed in the affidavit were transferred to the trust on the date of execution of the affidavit. The transferor bears the burden of proving by a preponderance of the evidence the date of transfer of any asset that is not listed on a qualified affidavit.
(d) Notwithstanding any law to the contrary, a creditor, including a creditor whose claim arose before or after a qualified disposition, or any other person shall have only the rights with respect to a qualified disposition that are provided in this section and § 35-16-106, and neither a creditor nor any other person shall have any claim or cause of action against the trustee, or an advisor of an investment services trust, or against any person involved in the counseling, drafting, preparation, execution or funding of an investment services trust. For purposes of this section, counseling, drafting, preparation, execution or funding of an investment services trust includes the counseling, drafting, preparation, execution and funding of a limited partnership or a limited liability company if interests in the limited partnership or limited liability company are subsequently transferred to the investment services trust.
(e) Notwithstanding any law to the contrary, no action of any kind, including, but not limited to, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity against a trustee or an advisor of an investment services trust, or against any person involved in the counseling, drafting, preparation, execution or funding of an investment services trust, if, as of the date such action is brought, an action by a creditor with respect to the investment services trust would be barred under this section.
(f) In circumstances where more than one (1) qualified disposition is made by means of the same investment services trust, then:
1. (1) The making of a subsequent qualified disposition shall be disregarded in determining whether a creditor's claim with respect to a prior qualified disposition is extinguished as provided in subsection (b); and
2. (2) Any distribution to a beneficiary shall be deemed to have been made from the latest qualified disposition.
(g) If, in any action brought against an investment services trust, a court takes any action whereby the court declines to apply the law of this state in determining the effect of a spendthrift provision of the trust, the trustee of the trust shall immediately upon the court's action and without the further order of any court, cease in all respects to be trustee of the trust and a successor trustee shall succeed as trustee in accordance with the terms of the trust or, if the trust does not provide for a successor trustee and the trust would otherwise be without a trustee, a court of this state, upon the application of any beneficiary of the trust, shall appoint a successor trustee upon the terms and conditions it determines to be consistent with the purposes of the trust and this chapter. Upon the trustee's ceasing to be trustee, the trustee shall have no power or authority other than to convey the trust property to the successor trustee named in the trust in accordance with this section.
(h) An investment services trust shall be subject to this section whether or not the transferor retains any or all of the powers and rights described in § 35-16-111 or serves as an investment advisor pursuant to § 35-16-109.
(i)
1. (1) Notwithstanding subsection (a) or (b) to the contrary, the limitations on actions by creditors in law or equity shall not apply and such creditors' claims shall not be extinguished if the transferor is indebted on account of an agreement, judgment or order of a court for the payment of one (1) of the following:
  1. (A) Past due child support;
  2. (B) Past due alimony in solido of a spouse or former spouse;
  3. (C) Past due alimony or support of a spouse or former spouse; or
  4. (D) A written agreement, judgment or order of a court for division of marital property of a spouse or former spouse, but only to the extent of such debt, legally mandated interest and the reasonable cost of collection.
2. (2)
  1. (A) A claim provided under this subsection (i) shall be asserted against a trustee only:
    1. (i) Upon a final nonappealable determination of a Tennessee court or a fully domesticated, final nonappealable order of a court of another state as defined by § 35-15-103 that such debt is past due; and
    2. (ii) After the court has determined that the claimant has made reasonable attempts to collect the debt from any other sources of the transferor or that such attempts would be futile.
  2. (B) Nothing in this subdivision (i)(2) shall be construed to prohibit the court from making the findings required in subdivisions (i)(2)(A)(i) and (ii) in the same proceeding and order.
(j) Subsection (i) shall not apply to any claim for forced heirship, legitime or elective share.
(k) In addition to subsection (j), to the extent subsection (j) applies to the laws of any foreign country:
1. (1) For all purposes under this chapter, the effect of the laws of any foreign country shall be the same as provided in § 35-15-107(b)(3) and (4); and
2. (2) Subsection (a) applies in addition to all other provisions of this chapter.

§ 35-16-105. Powers and rights of transferor.

A transferor shall have only the powers and rights conferred by the investment services trust. The powers and rights conferred by the investment services trust upon the transferor are personal powers and rights that may not be exercised by a creditor or any other person, except as expressly permitted by the trust. Except as permitted by §§ 35-16-109 and 35-16-111, the transferor shall have no rights or authority with respect to the corpus of the investment services trust or the income from the trust, and any agreement or understanding purporting to grant or permit the retention of any greater rights or authority shall be void.

§ 35-16-106. Avoidance of qualified dispositions.

(a) A qualified disposition to an investment services trust shall be avoided only to the extent necessary to satisfy the transferor's debt to the creditor at whose instance the disposition had been avoided, together with costs, including attorneys' fees, that the court may allow.
(b) In the event any qualified disposition shall be avoided as provided in subsection (a), then:
1. (1) If the court is satisfied that a qualified trustee has not acted in bad faith in accepting or administering the property that is the subject of the qualified disposition:
  1. (A) The qualified trustee shall have a first and paramount lien against the property that is the subject of the qualified disposition in an amount equal to the entire cost, including attorneys' fees, properly incurred by the qualified trustee in the defense of the action or proceedings to avoid the qualified disposition;
  2. (B) The qualified disposition shall be avoided subject to the proper fees, costs, preexisting rights, claims and interests of the qualified trustee and of any predecessor qualified trustee that has not acted in bad faith; and
  3. (C) For purposes of this subdivision (b)(1), it shall be presumed that the qualified trustee did not act in bad faith merely by accepting the property; and
2. (2) If the court is satisfied that a beneficiary of an investment services trust has not acted in bad faith, the avoidance of the qualified disposition shall be subject to the right of the beneficiary to retain any distribution made upon the exercise of a trust power or discretion vested in the qualified trustee or qualified trustees of the investment services trust, which power or discretion was properly exercised prior to the creditor's commencement of an action to avoid the qualified disposition. For purposes of this subdivision (b)(2), it shall be presumed that the beneficiary, including a beneficiary who is also a transferor of the trust, did not act in bad faith merely by creating the trust or by accepting a distribution made in accordance with the terms of the trust.
(c) A disposition by a trustee that is not a qualified trustee to a trustee that is a qualified trustee shall not be treated as other than a qualified disposition solely because the trust instrument fails to meet the requirements of § 35-16-102(7)(A).
(d) In the case of a disposition to more than one (1) trustee, a disposition that is otherwise a qualified disposition shall not be treated as other than a qualified disposition solely because not all of the recipient trustees are qualified trustees.

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35-16-104(d)

§ 35-16-107. Spendthrift provisions.

A spendthrift provision as described in § 35-16-102(7)(C) shall be deemed to be a restriction on the transfer of the transferor's beneficial interest in the trust that is enforceable under applicable nonbankruptcy law within the meaning of § 541(c)(2) of the Bankruptcy Code (11 U.S.C. § 541(c)(2)), or any successor provision.

§ 35-16-108. Qualified trustees and advisors.

(a) For purposes of this chapter, neither the transferor nor any other natural person who is a nonresident of this state nor an entity that is not authorized by the law of this state to act as a trustee or whose activities are not subject to supervision as provided in § 35-16-102(12)(A) shall be considered a qualified trustee; however, nothing in this chapter shall preclude a transferor from appointing one (1) or more advisors, including, but not limited to:
1. (1) Advisors who have authority under the terms of the trust instrument to remove and appoint qualified trustees or trust advisors;
2. (2) Advisors who have authority under the terms of the trust instrument to direct, consent to or disapprove distributions from the trust; and
3. (3) Investment advisors, whether or not the advisors would meet the requirements imposed by § 35-16-102(12).
(b) For purposes of subsection (a), “advisor” includes a trust “protector” or any other person who, in addition to a qualified trustee, holds one (1) or more trust powers.

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§ 35-16-109. Transferor as investment advisor.

A person may serve as an investment advisor notwithstanding that the person is the transferor of the qualified disposition.

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§ 35-16-110. Successor trustees.

In the event that a qualified trustee of an investment services trust ceases to meet the requirements of § 35-16-102(12)(A), and there remains no trustee that meets the requirements, the qualified trustee shall be deemed to have resigned as of the time of that cessation, and thereupon the successor qualified trustee provided for in the investment services trust shall become a qualified trustee of the investment services trust, or in the absence of any successor qualified trustee provided for in the investment services trust, then a court of this state shall, upon application of any interested party, appoint a successor qualified trustee.

§ 35-16-111. Revocability of trusts.

An investment services trust shall not be deemed revocable on account of its inclusion of one (1) or more of the following:
1. (1) A transferor's power to veto a distribution from the trust;
2. (2) A power of appointment, other than a power to appoint to the transferor, the transferor's creditors, the transferor's estate or the creditors of the transferor's estate, either exercisable by written instrument of the transferor during the transferor's life or exercisable by will or other written instrument of the transferor effective upon the transferor's death; provided, however, that a trust provision effecting a transfer by reason of the transferor's death to the transferor's estate, another trust, either established during the transferor's lifetime or at the transferor's death, or pursuant to the transferor's last will and testament or other testamentary instrument, is not a power to appoint to the transferor, the transferor's creditors, the transferor's estate, or the creditors of the transferor's estate;
3. (3) The transferor's potential or actual receipt of income, including rights to the income retained in the trust;
4. (4) The transferor's potential or actual receipt of income or principal from a charitable remainder unitrust or charitable remainder annuity trust as those terms are defined in § 664 of the Internal Revenue Code of 1986 (26 U.S.C. § 664), and any successor provision;
5. (5) The transferor's receipt each year of an amount specified in the trust, the amount not to exceed five percent (5%) of the initial value of the trust or its value determined from time to time pursuant to the trust;
6. (6) The transferor's potential or actual receipt or use of principal if the potential or actual receipt or use of principal would be the result of a qualified trustee's or qualified trustees' acting:
  1. (A) In the qualified trustee's or qualified trustees' discretion. For purposes of this section, a qualified trustee is presumed to have discretion with respect to the distribution of principal unless the discretion is expressly denied to the trustee by the terms of the trust;
  2. (B) Pursuant to a standard that governs the distribution of principal and does not confer upon the transferor a power to consume, invade or appropriate property for the benefit of the transferor, unless the power of the transferor is limited by an ascertainable standard relating to the health, education, support, or maintenance within the meaning of § 2041(b)(1)(A) or § 2514(c)(1) of the Internal Revenue Code of 1986 (26 U.S.C. § 2041(b)(1)(A) or 26 U.S.C. § 2514(c)(1)), as in effect on July 1, 2007, or as later amended; or
  3. (C) At the direction of an advisor described in § 35-16-108 who is acting:
    1. (i) In the advisor's discretion; or
    2. (ii) Pursuant to a standard that governs the distribution of principal and does not confer upon the transferor a power to consume, invade, or appropriate property for the benefit of the transferor, unless the power of the transferor is limited by an ascertainable standard relating to the health, education, support, or maintenance within the meaning of § 2041(b)(1)(A) or § 2514(c)(1) of the Internal Revenue Code of 1986 (26 U.S.C. § 2041(b)(1)(A) or 26 U.S.C. § 2514(c)(1)), as in effect on July 1, 2007, or as later amended;
7. (7) The transferor's right to remove a trustee or advisor and to appoint a new trustee or advisor; provided, however, that the right shall not include the appointment of a person who is a related or subordinate party with respect to the transferor within the meaning of § 672(c) of the Internal Revenue Code of 1986 (26 U.S.C. § 672(c)), and any successor provision;
8. (8) The transferor's potential or actual use of real property held under a qualified personal residence trust within the meaning of the term as described in § 2702(c) of the Internal Revenue Code of 1986 (26 U.S.C. § 2702(c)), and any successor provision;
9. (9) The transferor's potential or actual receipt of income or principal to pay, in whole or in part, income taxes due on income of the trust if such potential or actual receipt of income or principal is pursuant to a provision in the trust instrument that expressly permits a distribution to the transferor as reimbursement for such taxes and if such distribution would be the result of a qualified trustee's or qualified trustees' acting:
  1. (A) In such qualified trustee's or qualified trustees' discretion or pursuant to a mandatory direction in the trust instrument; or
  2. (B) At the direction of an adviser described in § 35-16-108, who is acting in such adviser's discretion;
10. (10) The ability, whether pursuant to direction in the investment services trust or discretion of a qualified trustee to pay, after the death of the transferor, all or any part of the debts of the transferor outstanding at the time of the transferor's death, the expenses of administering the transferor's estate, or any estate or inheritance tax imposed on or with respect to the transferor's estate; and
11. (11) A qualified trustee's or qualified trustees' authority to make distributions to pay taxes in lieu of or in addition to the power to make a distribution for taxes pursuant to subdivision (3), (6), (9), or (10) by direct payment to the taxing authorities.

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§ 35-16-112. Applicability.

This chapter applies to qualified dispositions to investment services trusts and dispositions by transferors who are trustees made on or after July 1, 2007.

Chapter 17 Tennessee Community Property Trust Act of 2010

§ 35-17-101. Short title.

This chapter shall be known as the “Tennessee Community Property Trust Act of 2010.”

§ 35-17-102. Chapter definitions.

As used in this chapter:
1. (1) “Community property” means property owned by a community property trust during the marriage of the settlor spouses;
2. (2) “Community property trust” means an express trust that complies with § 35-17-103;
3. (3) “Decree” means a judgment or other order of a court;
4. (4) “Dissolution” means either:
  1. (A) Termination of a marriage by a decree of dissolution, divorce, annulment or declaration of invalidity; or
  2. (B) Entry of a decree of legal separation maintenance;
5. (5) “During marriage” means a period that begins at marriage and ends at dissolution or immediately after the death of a spouse;
6. (6) “Qualified trustee” means either:
  1. (A) A natural person who is a resident of this state; or
  2. (B) A company authorized to act as a fiduciary in this state pursuant to § 45-2-1001; and
7. (7) “Settlor spouses” means a married couple that establishes a community property trust.

§ 35-17-103. Requirements for community property trust.

An arrangement is a community property trust if one (1) or both spouses transfer property to a trust, that:
1. (1) Expressly declares that the trust is a Tennessee community property trust;
2. (2) Has at least one (1) trustee who is a qualified trustee whose powers include, or are limited to, maintaining records for the trust on an exclusive or a nonexclusive basis and preparing or arranging for the preparation of, on an exclusive or a nonexclusive basis, any income tax returns that must be filed by the trust. Both spouses or either spouse may be a trustee;
3. (3) Is signed by both spouses; and
4. (4) Contains the following language in capital letters at the beginning of the trust:
  1. THE CONSEQUENCES OF THIS TRUST MAY BE VERY EXTENSIVE, INCLUDING, BUT NOT LIMITED TO, YOUR RIGHTS WITH YOUR SPOUSE BOTH DURING THE COURSE OF YOUR MARRIAGE AND AT THE TIME OF A DIVORCE. ACCORDINGLY, THIS AGREEMENT SHOULD ONLY BE SIGNED AFTER CAREFUL CONSIDERATION. IF YOU HAVE ANY QUESTIONS ABOUT THIS AGREEMENT, YOU SHOULD SEEK COMPETENT ADVICE.

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35-17-102(2)

§ 35-17-104. Agreement establishing community property trust — Amendments and revocation.

(a) In the agreement establishing a community property trust, spouses may agree on:
1. (1) The rights and obligations in the property transferred to the trust, notwithstanding when and where the property is acquired or located;
2. (2) The management and control of the property transferred to the trust;
3. (3) The disposition of the property transferred to the trust on dissolution, death, or the occurrence or nonoccurrence of another event;
4. (4) The choice of law governing the interpretation of the trust; and
5. (5) Any other matter that affects the property transferred to the trust and does not violate public policy or a statute imposing a criminal penalty.
(b)
1. (1) Either spouse may amend a community property trust regarding the disposition of that spouse's one-half (½) share of the community property in the occurrence of such spouse's death.
2. (2) Except as provided in subdivision (b)(1), a community property trust may not be amended or revoked unless the agreement itself provides for amendment or revocation.

§ 35-17-105. Classification of property as community property — Enforcement — Duration — Management and control — Effect of distributions.

(a) Whether or not both, one (1) or neither is domiciled in this state, spouses may transmute any or all of their property to community property by transferring property to a community property trust.
(b) A community property trust is enforceable without consideration.
(c) All property owned by a community property trust will be community property during marriage.
(d) The right to manage and control property that is transferred to a community property trust is determined by the terms of the trust.
(e) When property is distributed from a community property trust, it shall no longer constitute community property.

§ 35-17-106. Satisfaction of obligations.

(a) An obligation incurred by only one (1) spouse before or during marriage may be satisfied from that spouse's one-half (½) share of a community property trust.
(b) An obligation incurred by both spouses during marriage may be satisfied from a community property trust of the spouses.

§ 35-17-107. Death of a spouse.

Upon the death of a spouse, one-half (½) of the aggregate value of the property owned by a community property trust established by the spouses reflects the share of the surviving spouse and the other one-half (½) reflects the share of the decedent. Unless provided otherwise in the trust agreement, the trustee has the power to distribute assets of the trust in divided or undivided interests and to adjust resulting differences in valuation. A distribution in kind may be made on the basis of a non pro rata division of the aggregate value of the trust assets, on the basis of a pro rata division of each individual asset, or by using both methods.

§ 35-17-108. Dissolution of marriage.

Upon the dissolution of the marriage of the settlor spouses, the community property trust shall terminate and the trustee shall distribute one-half (½) of the trust assets to each spouse, with each spouse receiving one-half (½) of each asset, unless otherwise agreed to in writing by both spouses.

Chapter 50 Miscellaneous Provisions

§ 35-50-101. Joint control of deposits by principal and surety is lawful.

It is lawful for any party of whom a bond, undertaking or other obligation is required to agree with the party's surety or sureties for the deposit of any or all moneys and assets for which the party and surety or sureties are or may be held responsible, with a bank, savings bank, safe deposit or trust company, authorized by law to do business as such, or with another depository; provided, that the other depository is approved by the court or a judge of the court, if the deposit is otherwise proper, for the safekeeping of the money or assets and in such manner as to prevent the withdrawal of the money or assets or any part of the money or assets, without the written consent of the surety or sureties, or an order of the court, or a judge of the court, made on such notice to the surety or sureties as the court or judge may direct; and provided further, that the agreement shall not in any manner release from or change the liability of the principal or sureties as established by the terms of the bond.

§ 35-50-102. Insurance trusts — Creation — Validity.

Any trust previously or subsequently established by the depositing with or transferring to a trustee of any life, accident or health insurance policies with proceeds assigned or otherwise made payable to the trustee, irrespective of whether the designation of policy beneficiary is revocable or irrevocable, or whether the insured reserves loan privileges, the right to receive the cash surrender values under any of the policies, the right to receive dividends, or any other or all benefits under any of the policies and/or avails the insured thereof, and irrespective also of whether or not the creator of the trust reserves to the creator the right to modify the trust or withdraw part or all of the property from the trust, shall be valid and legally effective as to all the property and the disposition of the property, except any that may have been affected by the exercise of any of the reserved rights, and it shall not be necessary to the validity of the trust that the instrument creating the trust be executed according to the formalities prescribed for the execution of wills.

§ 35-50-103. Life insurance proceeds payable to trustee.

(a) Life insurance may be made payable to a trustee to be named as beneficiary in the policy, and the proceeds of that insurance shall be paid to the trustee and shall be held and disposed of by the trustee as provided in a trust agreement made by the insured during the insured's lifetime. It shall not be necessary to the validity of any such trust agreement or declaration of trust that it have a trust corpus other than the right of the trustee to receive the insurance proceeds as beneficiary.
(b) A policy of life insurance may designate as beneficiary a trustee or trustees named by will, if the designation is made in accordance with the policy and the requirements of the insurance company. Upon probate of the will, the proceeds of such insurance shall be payable to the trustee or trustees to be held and disposed of under the terms of the will as they exist as of the date of the death of the testator and in the same manner as other testamentary trusts are administered; but if no qualified trustee makes claim to the proceeds from the insurance company within eighteen (18) months after the death of the insured, or if satisfactory evidence is furnished to the insurance company within the eighteen-month period showing that there is or will be no trustee to receive the proceeds, payment shall be made by the insurance company to the executors, administrators or assigns of the insured, unless otherwise provided by agreement with the insurance company during the lifetime of the insured.
(c) The proceeds of the insurance as received by the trustee or trustees shall not be subject to debts of the insured.
(d) Insurance proceeds so held in trust shall not be considered part of the insured's estate for administration purposes.
(e) Insurance proceeds so held in trust may be commingled with any other assets that may properly come into the trust.
(f) Nothing in this section shall affect the validity of any life insurance policy beneficiary designation previously made naming trustees of trusts established by living trust or by will.

§ 35-50-104. Purchase of annuity contract.

(a) In order to relieve estates and trusts of the burden of an annuity, the chancery court, on petition of one (1) or more of the beneficiaries in remainder in the estate or trust, or any portion of the estate or trust, is empowered, when not in terms prohibited by the will or trust instrument, to decree the purchase, in behalf of the annuitant, of an annuity contract of some insurance company, or insurer, that will afford the accordant definite income, for the stated term of life, stipulated for the annuitant by the law, or provision of the will or trust.
(b) The cost of the annuity contract shall be paid out of the funds of the estate or trust; provided, that the contract shall be purchased only from a company or insurer admitted to do business in the state; and provided further, that all persons in interest, including the trustee or other fiduciary, complainant or defendant, shall be parties to the petition, and that the annuitant shall consent to the purchase and to the release of the annuitant's claim upon the estate or trust; or the court in the annuitant's behalf, if the annuitant is a minor or incompetent.
(c) The annuity contract shall be one issued by a company or insurer, selected by, or for as aforementioned, the annuitant and approved by the court.
(d) Should any beneficiary of a remainder interest not concur, that person's interest in the estate or trust shall not be distributed until the death of the annuitant or expiration of the term stipulated, nor charged with any part of the cost of the contract. In that event, however, the beneficiary or beneficiaries of the remainder interest concurring shall be entitled to distribution of their respective interests, upon paying the cost of an annuity contract as will be productive of an income to the annuitant proportionate to their interest in the entire remainder estate, and paying all costs of the application.
(e) Nothing in this section shall be construed to authorize the acceleration of distribution except where it appears to the court that the payment of an annuity, or its equivalent, is the sole remaining purpose of the trust's continuance.

§ 35-50-105. Fiduciaries may effect liability and accident insurance on property.

(a) All guardians, executors, administrators and trustees are authorized to effect liability and accident insurance, in such amount as may be reasonable and proper, on any or all real or personal property under their management and control.
(b) Premiums paid on insurance effected according to subsection (a) shall be a proper charge against the estate under management or control, and shall be allowed as a credit on settlements made.

§ 35-50-106. Trusts for employees' benefit — Rule against perpetuities.

No trust previously or subsequently created by an employer as a part of a pension, stock bonus, disability, death benefit, profit sharing or similar plan for the exclusive benefit of some or all of the employer's employees or their beneficiaries to which contributions are made by the employer or employees, or both employer and employees, for the purpose of distributing to the employees or their beneficiaries, the earnings or principal or both earnings and principal, of the trust, shall be deemed to be invalid by reason of any existing law or rule against perpetuities or suspension of the power of alienation; but the trust may continue for such time as may be necessary to accomplish the purposes for which it may be created. The income arising from any property held in trust may be permitted to accumulate for the length permitted by the instrument creating the trust, or, if no time is so specified, for the time the trustee or trustees deem necessary to accomplish the purposes of the trust.

§ 35-50-107. Limitations on appointment of nonresident fiduciary.

(a)
1. (1) Any person who is not a resident of this state or any corporation that is authorized to exercise fiduciary powers, but is not authorized to do business in this state and does not actually maintain an office in this state, shall not be appointed or allowed to serve as trustee of a corporate or personal trust, personal representative of an estate, guardian, conservator for an incompetent person, guardian for a minor or in any other fiduciary capacity, unless there is also appointed as a fiduciary to serve with such nonresident fiduciary, a person resident in this state or corporation authorized to do business in this state and that maintains an office in this state, except as provided in subdivision (a)(2). In the event the resident cofiduciary ceases for any reason to act, then a new resident cofiduciary shall be appointed.
2. (2) The following nonresident persons or corporations may serve as fiduciaries, whether the appointment is by will, deed, trust agreement, court order or decree or otherwise:
  1. (A) Except as provided in subdivision (a)(2)(C), a bank or trust company organized and doing business under the laws of any state or territory of the United States, including the District of Columbia, other than this state, or a national bank or trust company, duly authorized so to act, may be appointed and may serve in this state as a fiduciary, when and to the extent that the state, territory or District of Columbia in which the bank or trust company is organized or has its principal place of business grants authority to serve in like fiduciary capacities to a bank or trust company organized and doing business under the laws of this state or a national bank or trust company having its principal office in this state;
  2. (B) Any resident or nonresident person may serve as a personal representative of the estate of a decedent;
  3. (C) Any corporation that is authorized to exercise fiduciary powers may serve as trustee of an inter vivos personal or corporate trust, regardless of the residence of the trustee;
  4. (D) Any person may serve as trustee of a trust, regardless of the residence of the trustee;
  5. (E) Any person may serve as the guardian of the person of a minor, regardless of the residence of the guardian;
  6. (F) Any person may serve as the conservator of the person of an incompetent person, regardless of the residence of the conservator;
  7. (G) Any person or corporation authorized to exercise fiduciary powers may serve as agent or attorney-in-fact under a power of attorney, regardless of the residence of the agent or attorney-in-fact; and
  8. (H) A trust company that is organized under the laws of another state as a bank, trust company or savings bank that:
    1. (i) Has an office in this state that is not its principal office, meets the definition of a trust institution under 12 U.S.C. § 1841(c)(2)(D), and is a direct or indirect subsidiary of a bank holding company that has a direct or indirect bank, trust company or savings bank subsidiary that has an office in this state in which deposits are accepted; or
    2. (ii) Has an office in this state that is not its principal office and accepts deposits at its office in this state.
(b)
1. (1) All fiduciaries appointed and serving under this section who are not residents of this state shall be subject to the jurisdiction of the courts of this state as to any action or claim for relief arising from any estate or trust within this state for which such nonresident person is acting as fiduciary in the manner described in §§ 20-2-214 — 20-2-219 or in any other manner or matter involving an estate or trust being administered in this state.
2. (2) Any nonresident person, bank or trust company shall not act in any such capacities, until it has appointed in writing the secretary of state as its agent for service of process, upon whom all process in any suit or proceeding against it may be served in any action or proceeding relating to any trust, estate or matter within this state in respect of which such person, bank or trust company is acting in any such fiduciary capacity, and in the writing shall agree that any process against it, which shall be served upon the secretary of state, shall be of the same legal force and validity as if served on the person, bank or trust company. The appointment must identify the specific trust, estate, or person for which the fiduciary has been appointed, state the name and street address, including zip code, of the fiduciary and be accompanied by a ten dollar ($10.00) filing fee. This appointment shall continue so long as any liability remains outstanding against the person, bank or trust company pertaining to any such matters. Upon receipt of any such process, it is the duty of the secretary of state forthwith to forward the process by registered or certified mail to the person, bank or trust company at the address furnished in the writing. It shall be the responsibility of the nonresident personal representative to secure appointment of the secretary of state as agent for service of process and to provide the court with a copy of the receipt from the secretary of state.
(c) Unless otherwise provided in the trust agreement or will or by § 30-1-201, the court having jurisdiction shall require the person, bank or trust company to give bond for the performance of the fiduciary relationship, in which case the statute in such cases shall apply. Even if bond is otherwise waived, the court may, in its discretion, require a nonresident person qualifying as personal representative according to subdivision (a)(2)(B) to furnish bond in an amount equal to the value of assets of the personal estate being removed from this state during the period of estate administration. In the case of intestate succession, no nonresident person qualifying as a personal representative according to subdivision (a)(2)(B) shall be eligible to serve in that capacity without giving bond, unless all heirs at law join in a petition authorizing the person to so serve.
(d) Nothing contained in this section shall apply to trust agreements executed for the purpose of securing loans and guaranties thereof. No out-of-state or foreign corporate fiduciary shall have any more powers or privileges to conduct business or serve in a fiduciary capacity in this state than the laws of the state in which the foreign corporation is organized confer like powers upon corporations organized and doing business under the laws of this state or having their principal office in this state.
(e) No lack of compliance with this section by any nonresident fiduciary acting as an attorney-in-fact under the power of attorney otherwise executed in accordance with the laws of this state shall be construed to affect the title to any real estate constituting the subject matter of the power of attorney.

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§ 35-50-108. Designation of beneficiaries of employee pension, stock bonus or investment plans.

(a) If a person, entitled to receive payment in money, securities, or other property under a pension, retirement, death benefit, stock bonus, profit-sharing or employees' savings and investment plan, system or trust, designates, as provided in this section, a payee or beneficiary to receive payment of the money, securities, or other property upon death of the person making the designation or to receive payment of the money, securities, or other property upon the death of any other person, the right of the person or persons so designated to receive payment in accordance with the designation, and the ownership of the money, securities or other property so received, shall not be defeated or impaired by any statute or rule of law governing the transfer of property by will or gift or on intestacy.
(b) This section is applicable to a designation even though it is revocable or subject to change by the person who makes it, and even though the money, securities or other property under the designation are not yet payable at the time the designation is made or the money, securities or other property are subject to withdrawal, collection or assignment by the person making the designation.
(c) A person entitled to receive payment includes:
1. (1) An employee or participant in a pension, retirement, death benefit, stock bonus, profit-sharing or employees' savings and investment plan, system or trust; and
2. (2) Any person entitled to receive payment by reason of a payee or beneficiary designation described in this section.
(d) A designation of a beneficiary or payee to receive payment upon death either of the person making the designation or of any other person must be made in writing and signed by the person making the designation, and must be agreed to by the employer or be made in accordance with rules prescribed for the pension, retirement, death benefit, stock bonus, profit-sharing or employees' savings and investment plan, system or trust.
(e) This section shall not alter, abridge or limit title 29, chapter 12; title 31, chapter 1; title 66, chapter 3; or title 67, chapter 8, parts 2-4.

§ 35-50-109. Incorporation of § 35-50-110 in will or trust instrument.

(a) By a clearly expressed intention of the testator or settlor so to do contained in a will, or in an instrument in writing by which a trust estate is created inter vivos, the language contained in the introductory paragraph of § 35-50-110, and in any one (1) or more of subdivisions (1)-(33) of that section, may be, by appropriate reference made to that language, incorporated in the will or other written instrument, to be applicable either to the fiduciary authorized to administer the estate of the testator, or to the fiduciary authorized to administer a trust estate established or to be established pursuant to the terms of the will or other written instrument, or to both types of fiduciaries, with the same effect and subject to the same judicial interpretation and control in appropriate cases as though the language were set forth verbatim in the instrument; provided, that the language contained in § 35-50-110(1)-(4) is appropriate only with respect to powers to be vested in the one (1) or more executors of the estate of a decedent, and is available only for incorporation by reference in a will, as powers of the executor or executors of the will.
(b)
1. (1) “Estate,” as used in any subdivision of § 35-50-110, is construed to mean the estate of the decedent if by reference to the subdivision it has been made applicable to the executor or executors of a will, and is construed to mean the trust estate if by reference to the subdivision it has been made applicable to the trustee or trustees of such an estate.
2. (2) As used in this section and § 35-50-110, “fiduciary,” and the masculine singular form of the pronoun referring to the fiduciary, are construed to mean the one (1) or more executors, whether male, female or corporate, of the estate of a decedent, or the one (1) or more trustees, whether male, female or corporate, of a testamentary or inter vivos trust estate, whichever in a particular case is appropriate.
(c) Nothing contained in this section and § 35-50-110 shall be construed to limit the power of a court of competent jurisdiction to prohibit a fiduciary from taking any action, or to restrain a fiduciary in the taking of any action, notwithstanding the authorizations or powers vested in the fiduciary by any written instrument in which all or any part of § 35-50-110 is incorporated by reference.

§ 35-50-110. Specifically enumerated fiduciary powers that may be incorporated by reference.

Without diminution or restriction of the powers vested in the fiduciary by law, or elsewhere in the instrument, and subject to all other provisions of the instrument, the fiduciary, without the necessity of procuring any judicial authorization, or approval, shall be vested with, and in the application of the fiduciary's best judgment and discretion in behalf of the beneficiaries of the instrument shall be authorized to exercise, the powers specifically enumerated in this section:
1. (1) In behalf of the estate, to join the testator's or settlor's spouse (if living), or the personal representative of the estate of the testator's or settlor's spouse (if deceased), in the execution and filing of a joint income tax return to the United States, or to the state of Tennessee, or any other governmental taxing authority (or a joint gift tax return, if and when such a joint return is authorized by law), if the fiduciary, in the exercise of the fiduciary's best judgment, believes that action to be for the best interests of the estate, or will result in a benefit to the testator's or settlor's spouse (or the estate of the testator's or settlor's spouse) exceeding in amount any monetary loss to the estate that may be caused by the filing;
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  - 35-50-109(a)
2. (2) To continue, to the extent and so long as in the exercise of the fiduciary's best judgment it is advisable and for the best interests of the estate so to do, the operation or participation in the operation of any farming, manufacturing, mercantile and/or other business activity or enterprise in which at the time of death the testator or settlor is engaged, either alone or in unincorporated association with others;
3. (3) In behalf of the estate, to perform any and all valid executory contracts to which at the time of the testator's or settlor's death the testator or settlor is a party, and that at the time of the testator's or settlor's death have not been fully performed by the testator or settlor, and to discharge all obligations of the estate arising under or by reason of such contracts;
4. (4) Pending the administration of the estate, to permit any beneficiary or beneficiaries of the will to have the use, possession and enjoyment, without charge made for the use, possession and enjoyment, (and without the fiduciary thereby relinquishing control of the property), of any real property or tangible personal property of the estate which, upon completion of the administration of the estate, will be distributable to that beneficiary or beneficiaries when, if, and to the extent that, that action will not adversely affect the rights and interests of any creditor of the estate, and in the judgment of the fiduciary it is appropriate that the beneficiary or beneficiaries have the use and enjoyment of the property, notwithstanding that it may be subjected to depreciation in value by reason of the use. The exercise of this power will not constitute a distribution of the property with respect to which it is exercised; and, whether or not exercised, neither the power nor the exercise of the power shall be deemed a constructive or actual distribution of the property to which it relates;
5. (5) During the fiduciary's administration of the estate, and subject to all the other provisions of the instrument, to receive and receipt for all of the assets of the estate, and to have exclusive possession and control of those assets;
6. (6) By public or private sale or sales, and for the consideration, on the terms and subject to the conditions, if any, that in the judgment of the fiduciary are for the best interests of the estate and the beneficiaries of the estate, to sell, assign, transfer, convey, or exchange any real or personal property of the estate, or the estate's undivided interest in that property, or any specific part of or interest in that property, including, but not limited to, standing timber, rock, gravel, sand, growing crops, oil, gas and other minerals or mineral rights or interests, and to grant easements on real property of the estate, and to participate in the partition of real or personal property in which the estate has an undivided interest; and to accomplish any such transactions by contracts, endorsements, assignments, bills of sale, deeds or other appropriate written instruments executed and delivered by the fiduciary in behalf of the estate, and to acknowledge the execution of those instruments in the manner provided by law for the acknowledgment of the execution of deeds when such acknowledgments are required or appropriate;
7. (7) For the consideration, on the terms and subject to the conditions, if any, that in the judgment of the fiduciary are for the best interests of the estate and the beneficiaries of the estate, to lease, for terms which may exceed the duration of the estate, any real or tangible personal property of the estate, or any specific parts of that property or interests in that property, including, but not limited to, oil, gas and other mineral leases; and to accomplish those leases by appropriate written instruments executed and delivered by the fiduciary in behalf of the estate, and acknowledge the execution of those instruments in the manner provided by law for the acknowledgment of the execution of deeds when such acknowledgments are required or appropriate;
8. (8) In behalf of the estate, to borrow money; evidence those loans by promissory notes or other evidences of indebtedness signed by the fiduciary in the fiduciary's fiduciary capacity, to be binding upon the assets of the estate but not upon the fiduciary in the fiduciary's individual capacity; secure those loans by assigning or pledging personal property of the estate, or by mortgages or deeds of trust or other appropriate instruments imposing liens upon real property or tangible personal property of the estate; and repay those loans, including principal and interest due thereon;
9. (9) In behalf of the estate, to borrow money from the fiduciary in the fiduciary's individual capacity and secure those loans in the same manner as though they were made by a third person;
10. (10) To enter into contracts binding upon the estate, but not upon the fiduciary in the fiduciary's individual capacity, that are reasonably incident to the administration of the estate, and that the fiduciary in the exercise of the fiduciary's best judgment believes to be for the best interests of the estate;
11. (11) To settle, by compromise or otherwise, claims or demands against the estate, or held in behalf of the estate;
12. (12) To release and satisfy of record, in whole or in part, and enter of record credits upon, any mortgage or other lien constituting an asset of the estate;
13. (13) To abandon and charge off as worthless, in whole or in part, claims or demands held by or in behalf of the estate that, in the judgment of the fiduciary, are in whole or in part uncollectible;
14. (14) To pay taxes and excises lawfully chargeable against the assets of the estate that are in the possession or under the control of the fiduciary, including, but not limited to, ad valorem taxes upon real and personal property of the estate that became due and payable prior to the property coming into the hands of the fiduciary, or that become due and payable while the property remains in the fiduciary's possession or under the fiduciary's control; excluding, however, income taxes payable by distributees, assessed with respect to income that has been distributed by the fiduciary pursuant to the instrument;
15. (15) To repair and maintain in good condition real and tangible personal property of the estate so long as the property remains in the possession or under the control of the fiduciary;
16. (16) To invest liquid assets of the estate, and from time to time exchange or liquidate and reinvest such assets, pending distribution thereof, if and when such investments in the judgment of the fiduciary will not impede or delay distribution thereof pursuant to this instrument or as otherwise by law required, and in the judgment of the fiduciary are advisable and for the best interests of the estate and the beneficiaries thereof. In making such investments, the fiduciary shall be guided by the prudent investor rule, as authorized and defined in title 35, chapter 14; and the investments thus authorized shall be understood to include, but not to be limited to, loans secured by mortgages, or liens otherwise imposed, upon real or personal property;
17. (17) Subject to the making and keeping of appropriate records with respect to the investments, which will at all times clearly identify the equitable rights and interests of the estate in the investments, to invest funds of the estate in undivided interests in negotiable or nonnegotiable securities, or other assets, the remaining undivided interests in which are held by the fiduciary in a fiduciary capacity for the use and benefit of other beneficiaries;
18. (18) To retain investments that initially come into the hands of the fiduciary among the assets of the estate, without liability for loss or depreciation or diminution in value resulting from the retention, so long as in the judgment of the fiduciary it is not clearly for the best interests of the estate, and the distributees of the estate, that those investments be liquidated, although the investments may not be productive of income or otherwise may not be such as the fiduciary would be authorized to make;
19. (19) At any time and from time to time, to keep all or any portion of the estate in liquid form, uninvested, for such time as the fiduciary may deem advisable, without liability for any loss of income occasioned by so doing;
20. (20) To deposit funds of the trust in one (1) or more accounts carried by the fiduciary, in a clearly specified fiduciary capacity, in any one (1) or more banks and/or trust companies whose deposits are insured under the Federal Deposit Insurance Act as now constituted or as that act may be amended; and if the fiduciary is itself a bank or a trust company, and is otherwise qualified, the fiduciary may serve as the depository;
21. (21) To deposit for safekeeping with any bank or trust company, including the fiduciary itself if the fiduciary is a bank or trust company, any negotiable or nonnegotiable securities or other documents constituting assets or records of the estate;
22. (22) To bring and prosecute or defend actions at law or in equity for the protection of the assets or interests of the estate or for the protection or enforcement of the instrument;
23. (23) To employ attorneys, accountants, investment managers and delegate investment authority to them or other persons whose services may be necessary or advisable, in the judgment of the fiduciary, to advise or assist the fiduciary in the discharge of the fiduciary's duties, or in the conduct of any business constituting an asset of the estate, or in the management, maintenance, improvement, preservation or protection of any property of the estate, or otherwise in the exercise of any powers vested in the fiduciary;
24. (24) To procure and pay premiums on policies of insurance to protect the estate, or any of the assets of the estate, against liability for personal injuries or property damage, or against loss or damage by reason of fire, windstorm, collision, theft, embezzlement or other hazards against which such insurance is normally carried in connection with activities or on properties such as those with respect to which the fiduciary procures such insurance;
25. (25) To allocate items of receipts or disbursements to either corpus or income of the estate, as the fiduciary in the exercise of the fiduciary's best judgment and discretion deems to be proper, without thereby doing violence to clearly established and generally recognized principles of accounting;
26. (26) In behalf of the estate, to purchase or otherwise lawfully acquire real or personal property, or undivided interests in property, the ownership of which, in the judgment of the fiduciary, will be advantageous to the estate, and the beneficiary or beneficiaries of the estate;
27. (27) To construct improvements on real property of the estate, or remove or otherwise dispose of improvements, when that action is in the judgment of the fiduciary advisable and for the best interests of the estate;
28. (28) To exercise in person or by proxy, with or without a power of substitution vested in the proxy, all voting rights incident to the ownership of corporate stock or the other securities constituting assets of the estate; and exercise all other rights and privileges incident to the ownership of those securities, including, but not limited to, the right to sell, exchange, endorse or otherwise transfer the securities, consent to, or oppose, reorganizations, consolidations, mergers or other proposed corporate actions by the issuer of the securities, exercise or decline to exercise options to purchase additional shares or units of the securities or of related securities, and pay all assessments or other expenses necessary in the judgment of the fiduciary for the protection of the securities or of the value of the securities;
29. (29) To employ any bank or trust company to serve as custodian of any securities constituting assets of the estate, and cause the securities (if they are nonassessable) to be registered in the name of the custodian or of its nominee, without disclosure that they are held in a fiduciary capacity; authorize the bank or trust company, as agent and in behalf of the fiduciary, to collect, receive and receipt for income derived from the securities, or the proceeds of sales, assignments or exchanges of the securities made by authority and under the direction of the fiduciary, and to remit to the fiduciary such income or other proceeds derived from the securities; and pay to the custodian reasonable and customary charges made by it for the performance of these services; provided, that any such action taken by the fiduciary shall not increase, decrease or otherwise affect the fiduciary's liability, responsibility or accountability with respect to the securities;
30. (30) To register nonassessable securities constituting assets of the estate in the name of the fiduciary or of the fiduciary's nominee, without disclosure that the securities are held in a fiduciary capacity, or hold the securities unregistered or otherwise in such form that the title thereto will pass by delivery, without, in any such case, increasing, decreasing or otherwise affecting the fiduciary's liability, responsibility or accountability with respect to the securities;
31. (31) In making distribution of capital assets of the estate to distributees of the estate under the instrument, except when otherwise required by other provisions of the instrument, to make the distribution in kind or in cash, or partially in kind and partially in cash, as the fiduciary finds to be most practicable and for the best interests of the distributees; distribute real property to two (2) or more distributees in division, or to partition real property for the purpose of distribution, as the fiduciary in the exercise of the fiduciary's best judgment finds to be most practicable and for the best interests of the distributees; and determine the value of capital assets for the purpose of making distribution of the assets if and when there is more than one (1) distributee of the assets, which determination shall be binding upon the distributees unless clearly capricious, erroneous and inequitable;
32. (32)
  1. (A)
    1. (i) To inspect and monitor property to which the fiduciary takes legal title, including interests in sole proprietorships, partnerships, or corporations and any assets owned by such business enterprises, for the purpose of determining compliance with environmental laws affecting the property, and respond or take any other action necessary to prevent, abate or clean up, on behalf of the trust or estate as is necessary, before or after the initiation of enforcement action by any governmental body, any actual or threatened violation of any environmental laws affecting property held by the fiduciary relating to hazardous substances or environmental laws;
    2. (ii) To refuse to accept property in trust if the fiduciary determines that any property to be donated to a trust estate is contaminated by any hazardous substances, or the property is being used or has been used for any activities, directly or indirectly involving hazardous substances, that could result in liability to the trust or estate or otherwise impair the value of the assets held in the trust;
    3. (iii) To settle or compromise, at any time, any and all claims against the estate or trust that may be asserted by any governmental body or private party involving the alleged violation of any environmental laws affecting property held in the estate or trust;
    4. (iv) To disclaim any power granted by any document or any statute or rule of law that, in the sole discretion of the fiduciary, may cause the fiduciary to incur personal liability under any environmental laws; and
    5. (v) To decline to serve as fiduciary if the fiduciary reasonably believes that there is or may be a conflict of interest between it in its fiduciary capacity and in its individual capacity because of potential claims or liabilities that may be asserted against it on behalf of the estate or trust resulting from the type or condition of assets held therein;
  2. (B)
    1. (i) The fiduciary shall be entitled to charge the cost for any inspection, insurance, review, abatement, response or cleanup, or any other remedial action, as authorized in this subdivision (32), against the income or principal of the estate or trust and shall not be personally responsible for that cost. The fiduciary shall not be personally liable to any beneficiary or any other party for any decrease in value or exhaustion of assets in the estate or trust by reason of the fiduciary's compliance with any environmental laws, specifically including any reporting requirements under environmental laws;
    2. (ii) While acting in good faith and according to traditional fiduciary standards, the fiduciary shall not be considered an “owner,” “operator” or other party otherwise liable for violation of environmental laws unless the fiduciary has actually caused or contributed to the violation;
  3. (C) For the purposes of this subdivision (32), “hazardous substances” means any substance defined as hazardous or toxic or otherwise regulated by any federal, state or local law, rule or regulation relating to the protection of the environment or human health. Such laws are referred to in this subdivision (32) as “environmental laws”; and
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  - 35-50-123
  - 68-212-407
33. (33) To do any and all other things, not in violation of any other terms of the instrument, that, in the judgment of the fiduciary, are necessary or appropriate for the proper management, investment and distribution of the assets of the estate in accordance with the instrument, and in the fiduciary's judgment are for the best interests of the estate and its beneficiaries.

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§ 35-50-111. Fiduciary bond on interest.

Whenever a fiduciary, as defined in § 35-2-102, is required by law to execute a bond for assets placed with a financial institution in the form of a bank, trust company or savings and loan association, and the fiduciary agrees with the institution not to withdraw the principal of the assets, the bond required of the fiduciary shall be for the amount of the interest. No bond adjustment is necessary if the principal, or a portion of the principal, is withdrawn with court approval. The authorization for elimination of bond on the principal so deposited with the financial institution shall not apply unless the agreement by the fiduciary with the institution is approved by the court charged with administering the funds or the estate of the minor, and unless the agreement is filed in and enforced by the court.

§ 35-50-112. Impairment of marital deduction prohibited.

No executor, trustee or other fiduciary may take, or refuse to take, any action, or make or retain any investment, the result of which would defeat an otherwise available marital deduction under the Internal Revenue Code (26 U.S.C.), or under the laws of this state, if the obvious and expressed intent of the testator or settlor was to take advantage of this deduction. After May 23, 1977, this section applies to all acts or investments, by all executors, trustees or other fiduciaries, as to all wills and trusts, whenever these instruments were executed or created.

§ 35-50-113. Powers exercisable by majority — Liability.

(a) Unless it is otherwise provided by an instrument under which the fiduciaries are acting, or an amendment of the instrument, or by court order, any power vested in three (3) or more fiduciaries, other than the power to remove a fiduciary, may be exercised by a majority of those fiduciaries; but no fiduciary who has not joined in exercising a power shall be liable to the beneficiaries or to others for the consequences of that exercise, nor shall a dissenting fiduciary be liable for the consequences of an act in which that fiduciary joins at the direction of the majority fiduciaries, if the fiduciary expressed the dissent in writing to the cofiduciaries at or before the time of the joinder.
(b) Nothing in this section excuses a cofiduciary from liability for inactivity in the administration of the estate or trust nor for failure to attempt to prevent a breach of trust.
(c) As used in this section, “fiduciary” is construed to mean the one (1) or more personal representatives, whether male, female or corporate, of a testamentary estate.
(d) This section is effective with regard to all estates and trusts under administration on or after April 8, 1985, regardless of the date of the instruments under which administration is being carried out or when administration began.

§ 35-50-114 – 35-50-119. [Reserved.]

§ 35-50-120. Blind trust.

(a) A trust shall be considered a “blind trust” if the trust is created to benefit an individual, the individual's spouse or any dependent child and is under the management and control of a trustee who is a bank or trust company authorized to exercise fiduciary powers, a licensed attorney or a broker who:
1. (1) Is independent of and not associated with any party interested in the trust;
2. (2) Is not or has not been an employee of any interested party or any organization affiliated with any interested party, and is not a partner of, or involved in any joint venture or other investment with any interested party; and
3. (3) Is not a relative of any party.
(b) There shall be no communications direct or indirect between the trustee and an interested party with respect to the trust unless the communication is in writing, except for communications that solely consist of requests for distributions of cash or other unspecified assets of the trust. The written communications shall be limited to the general financial interest and needs of the interested party including, but not limited to, an interest in maximizing income or long-term capital gain.
(c) The interested parties shall make no effort to obtain information with respect to the holdings of the trust, including obtaining a copy of any trust tax return filed or any information relating to the trust, except as may be needed by the interested parties in order to file tax returns.
(d) Any trustee of a trust as provided in this section for an interested party that is required to make disclosures under title 8, chapter 50, part 5, shall make to the best of the trustee's knowledge such disclosures as are required or be subject to the penalties provided in § 8-50-505.
(e) This section does not apply to any “blind trust” or other trust or financial arrangement or agreement having the same effect or status as a “blind trust” in existence prior to May 12, 1988. All such trusts, arrangements or agreements shall continue to operate in accordance with the terms and conditions under which they were created.

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§ 35-50-121. Delayed receipt of trust corpus.

Any trust agreement or declaration of trust may be valid even if no corpus is delivered to the trustee at the time of execution of the instrument if the trustee has the right to receive corpus at a later time or times from the trustor, the trustor's estate or other persons or sources.

§ 35-50-122. Generation-skipping tax — Definitions.

(a) As used in this section, unless the context otherwise requires:
1. (1) “Generation-skipping tax” means the generation-skipping transfer tax imposed by chapter 13 of the Internal Revenue Code (26 U.S.C. §§ 2601 et seq.);
2. (2) “Internal Revenue Code” means the Internal Revenue Code of 1986 and successor provisions and codifications of that Code;
3. (3) “Trust” means any express trust, with additions, wherever and however created, or any separate share of a trust, and includes any arrangement, other than an estate, that, although not a trust, has substantially the same effect as a trust; and
4. (4) “Trustee” means an original, additional or successor trustee, whether or not appointed or confirmed by a court, and, in the case of an arrangement that is not a trust but is treated as a trust for purposes of the generation-skipping tax, includes the person in actual or constructive possession of the property subject to the arrangement.
(b) A trustee is authorized, but not required, to divide any trust into two (2) or more separate trusts, of equal or unequal value, in order to create one (1) or more trusts entirely exempt from the generation-skipping tax and one (1) or more trusts entirely subject to the generation-skipping tax. Other terms and provisions of both trusts will remain substantially identical in all respects to the original trust.
(c) The purpose of this section is to authorize a trustee to take appropriate action to preclude or minimize to the extent possible the imposition of the generation-skipping tax, and this section shall be broadly construed to carry out this purpose.
(d) A trustee may exercise the authority granted in this section without prior approval or leave of any court.
(e) Any trustee who in good faith acts or fails to act shall not be liable to any person for taking or failing to take any action authorized by this section.
(f) This section applies to any trust that may be subject to chapter 13 of the Internal Revenue Code.

§ 35-50-123. Powers of fiduciaries.

Each fiduciary, as defined in § 35-2-102, has the powers enumerated in § 35-50-110(32).

§ 35-50-124. Limited power of trustee — Beneficiary — Application.

(a)
1. (1) Due to the potential conflict of interest that exists between a trustee who is a beneficiary and other beneficiaries of the trust, any power conferred upon a trustee, other than the settlor of a revocable or amendable trust:
  1. (A) To make discretionary distributions of either principal or income to or for the benefit of the trustee, except to provide for that trustee's health, education, maintenance, or support as described under Internal Revenue Code §§ 2041 and 2514 (26 U.S.C. §§ 2041 and 2514);
  2. (B) To make discretionary allocations of receipts or expenses as between principal and income, unless the trustee acts in a fiduciary capacity whereby the trustee has no power to enlarge or shift any beneficial interest except as an incidental consequence of the discharge of the trustee's fiduciary duties;
  3. (C) To make discretionary distributions of either principal or income to satisfy any legal support obligations of the trustee; or
  4. (D) To exercise any other power, including the right to remove or to replace any trustee, so as to cause the powers enumerated in subdivision (a)(1)(A), (a)(1)(B) or (a)(1)(C) to be exercised on behalf of, or for the benefit of, a beneficiary who is also a trustee,
  5. cannot be exercised by that trustee.
2. (2) Any of the foregoing proscribed powers that are conferred upon two (2) or more trustees may be exercised by the trustees who are not so disqualified. If there is no trustee qualified to exercise the power and the document creating the trust does not include authority for the appointment of an independent trustee, any party in interest, as defined in subsection (c), may apply to a court of competent jurisdiction to appoint an independent trustee and the power may be exercised by the independent trustee appointed by the court.
(b) This section applies to any trust unless application of the statute would cause the loss of a marital or charitable deduction or loss of generation skipping transfer tax exemption or the terms of the trust either:
1. (1) Refer specifically to this section and provide expressly to the contrary;
2. (2) Clearly indicate an intent by the settlor of the trust or testator of a will to grant the trustee who is also a beneficiary the power in question to accomplish a particular beneficial tax result; or
3. (3) Contain language similarly limiting the powers of a trustee who is also a beneficiary.
(c) For the purpose of subsection (a) or (b):
1. (1) If the trust is revocable or amendable and the settlor is not incapacitated, the party in interest is the settlor;
2. (2) If the trust is revocable or amendable and the settlor is incapacitated, the party in interest is the settlor's legal representative under applicable law or the settlor's donee under the durable power of attorney that is sufficient to grant such authority;
3. (3) If the trust is not revocable or amendable, the parties in interest are:
  1. (A) Each trustee then serving;
  2. (B) Each income beneficiary then in existence or, if any such beneficiary has not attained majority or is otherwise incapacitated, the beneficiary's natural guardian or other legal representative under applicable law or the beneficiary's donee under a durable power of attorney that is sufficient to grant such authority; and
  3. (C) Each remainder beneficiary then in existence or, if any such remainder beneficiary has not attained majority or is otherwise incapacitated, the beneficiary's natural guardian or other legal representative under applicable law or the beneficiary's donee under a durable power of attorney that is sufficient to grant such authority.
(d) A person who has the right to remove or replace a trustee does not possess nor may that person be deemed to possess, by virtue of having that right, the powers of the trustee that is subject to removal or to replacement.

§ 35-50-125. Release of personal health information to determine capacity.

Where it is necessary, under the terms of a trust to determine the mental or physical incapacity of a patient, a healthcare provider may release personal health information to a licensed physician or licensed attorney at law if the physician or attorney at law signs and furnishes the healthcare provider with an affidavit that the release of information is necessary to determine the mental or physical incapacity of the patient, or of the settlor, or of the donor, or of the trustee, or of the agent or other fiduciary under a trust that was signed by the patient where incapacity causes the document to come into effect, discontinues its effect or calls for a change in a fiduciary acting under the document.