APPOINTMENT OF PUBLIC TRUSTEE If a person entitled to serve as trustee under an inter vivos or testamentary instrument dies, declines to serve, or resigns and (i) there is no individual or corporate successor or substitute trustee designated by the instrument who is willing and qualified to serve, (ii) the instrument does not contain provisions for the appointment of a successor or substitute and no adult income beneficiary or vested remainderman petitions for the appointment of a successor or substitute trustee within three months after there is a vacancy in office or all sooner waive this right, or (iii) the court, in its discretion, in a proceeding to modify or terminate an uneconomic trust determines that a small trust should not be terminated but a successor trustee should be appointed, then present law authorizes the court to appoint a public trustee who must be granted letters of trusteeship and immediately enter into the administration of the trust if the market value of the trust estate does not exceed $100,000. This bill revises this provision in the following ways:  Makes this provision also applicable to persons currently serving as trustees who die, decline to serve, or resign.  Removes the requirement that the market value of the trust estate does not exceed $100,000.  Revises (ii) above to, instead, provide that the instrument does not contain provisions for the appointment of a successor or substitute, or such provision is unable to be implemented, and the then-serving trustee does not, or an adult income beneficiary or vested remainderman do not, petition for the appointment of a successor or substitute trustee within three months after there is a vacancy in office or all sooner waive this right. TENNESSEE UNIFORM TRUST CODE Knowledge of Facts Involving a Trust Present law provides that an organization that conducts activities through employees has notice or knowledge of a fact involving a trust only from the time the information was received by an employee having responsibility to act for the trust, or would have been brought to the employee's attention if the organization had exercised reasonable diligence. A person has knowledge of a fact if the person (i) has actual knowledge of it, (ii) has received a notice or notification of it, or (iii) from all the facts and circumstances known to the person at the time in question, has reason to know of it. This bill adds that a person also has knowledge of a fact if the person has reason to know of it because the fact is accessible by the person through electronic means, such person provided consent to receive information by electronic means in a record and such consent has not been revoked. Such information is deemed to be accessible by the person through electronic means if the information was available through electronic means for at least 60 days and if (i) the means of electronic access were provided in the record or (ii) it can be shown that the electronic access was actually utilized at any time. Methods and Waiver of Notice The Tennessee Uniform Trust Code requires notice to a person, or the sending of a document to a person, to be accomplished in a manner reasonably suitable under the circumstances and likely to result in receipt of the notice or document. Permissible methods of notice, or for sending a document, include first-class mail, personal delivery, delivery to the person's last known place of residence or place of business, or a properly directed electronic message. This bill adds, as an additional permissible method of notice, providing the notice or document through electronic means when such person provided consent to receive information by electronic means in a record and such consent has not been revoked. A notice or document is deemed to be accessible by the person through electronic means if the means of electronic access were provided in the record or it can be shown that the electronic access was actually utilized at any time. Judicial Proceeding Present law authorizes a person to commence a judicial proceeding to contest the validity of a trust that was revocable immediately preceding the settlor's death within the earlier of the two years after the settlor's death or 120 days after the trustee sent the person a copy of the trust instrument and a notice informing 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. This bill removes this provision. This bill, instead, authorizes a judicial proceeding to contest whether a revocable trust or any amendment thereto, or an irrevocable trust was validly created to be commenced at any time following its execution but prohibits it from being commenced later than the first to occur of the following dates:  Two years after the date of the settlor's death.  120 days after the date that the trustee notified in writing the person who is contesting the trust of the trust's existence, of the trustee's name and address, of whether such person is a beneficiary, and of the time allowed under this bill for commencing a proceeding to contest the validity of the trust. However, a trustee does not have any liability under the trust instrument or to any third party or otherwise for failure to provide any such written notice. For the purposes of this bill, notice has been given when sent to the person to whom notice was given. Absent evidence to the contrary, it is presumed that notice was received by the person seven days after it was sent to such person in accordance with present law.  The date the person's right to contest was precluded by adjudication, consent, or other limitation. Representation This bill authorizes notice, information, accountings, or reports given to a person who may represent and bind another person under the representation provisions of the Tennessee Uniform Trust Code to serve as a substitute for, and have the same effect as, providing notice, information, accountings, or reports directly to the person being represented. Requirements for Valid Lifetime Trust Present law provides that a lifetime trust is valid as to any assets held by the trust to the extent the assets have been transferred to the trust. Assets capable of registration, such as real estate, stocks, bonds, bank and brokerage accounts, and 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 assets not capable of registration, are transferred to the trust through a recital of assignment describing the asset with particularity in the trust instrument. This bill revises the last provision to, instead, provide that the recital of assignment must still describe the asset but not with particularity. This bill adds that tangible personal property other than money, an evidence of indebtedness, a document of title, a security, and property used in a trade or business may be assigned to a trust, either during the grantor's life or after the grantor's death, by delivery of a written instrument that is signed by the transferor, identifies the tangible personal property in general terms, and specifically identifies the trust. This bill provides that all of the above provisions apply to such tangible personal property that is owned when such written instrument is signed, and to property that is subsequently acquired by the transferor. Reimbursement of Expenses Present law provides that an advance of money for the protection of the trust, either by the trustee, trust advisor, or trust protector, or by a person named as a trustee without accepting the trusteeship, gives rise to a lien against trust property to secure reimbursement with reasonable interest. This bill does not require the advance to be for the protection of the trust. Present law provides that a trustee, trust advisor, or trust protector is entitled to be reimbursed out of the trust property, with interest as appropriate, for (i) expenses that were properly incurred in the administration of the trust; and (ii) to the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust. This bill adds that failure to pay to or reimburse a trustee for expenses incurred pursuant to such provision gives rise to a lien against all trust property for the payment of all sums due or to become due for services, expenses, advances, and the costs and expenses of enforcing such payment or reimbursement. Duties and Powers of Trustee Unless the terms of a trust instrument expressly provide that a settlor must not be reimbursed by a trust for the settlor's personal income tax liability attributable to the trust, if the settlor of a trust is treated under federal law as the owner of all or part of the trust, then this bill provides that a disinterested trustee, in the disinterested trustee's sole discretion, or another trustee at the direction of a trust advisor or trust protector who would be treated as a disinterested trustee and otherwise has the power to direct discretionary distributions under the trust instrument, may reimburse the settlor for any amount of the settlor's personal federal, state, local, foreign, or other income tax liability that is attributable to the inclusion of the trust's income, capital gains, deductions, and credits in the calculation of the settlor's taxable income under principals of federal law. The trustee may pay such amount to the settlor directly, or may pay the amount to an appropriate taxing authority on the settlor's behalf, as the trustee determines in the trustee's sole discretion. This power must, in all cases, be exercised in the sole and absolute discretion of a disinterested trustee or trust advisor or protector who would be treated as a disinterested trustee, and a settlor or other person must not compel the exercise of this power or enter into an express or implied agreement or understanding regarding the exercise of such power. A policy of insurance on the settlor's life held in the trust or the cash value of any such policy, or the proceeds of any loan secured by an interest in the policy must not be used to reimburse the settlor or to pay an appropriate taxing authority on the settlor's behalf. Neither the trustee's power to make payments to, or for the benefit of, the settlor under this bill, nor the trustee's decision to exercise such power in favor of the settlor, causes the settlor to be treated as a beneficiary of the trust for any purpose. This bill clarifies that the above provisions do not apply if its application would disqualify a trust for, or reduce the amount of, a marital deduction, a charitable deduction, or another specific tax benefit otherwise available to any person for state or federal income, gift, estate, or generation-skipping transfer tax purposes. Breach of Trust For present law provisions regarding limitations of actions for breach of trust against a trustee, former trustee, trust advisor, or protector, this bill clarifies that a person is deemed to have actual knowledge of information that is accessible by the person through electronic means if the person provided consent to receive information by electronic means in a record and such consent has not been revoked. The information is deemed to be accessible by the person if the means of electronic access were provided in the record or it can be shown that the electronic access was actually utilized at any time. Electronic Records and Signatures Present law provides that the Tennessee Uniform Trust Code governing the legal effect, validity, or enforceability of electronic records or electronic signatures, and of contracts formed or performed with the use of such records or signatures, conform to the requirements of federal law, and supersede, modify, and limit the requirements of federal law. However, the execution of a modification, termination, or settlement agreement is considered a transaction for purposes of determining if it falls within the scope of the Uniform Electronic Transactions Act. This bill adds that the execution of an inter vivos trust instrument, a document to transfer an asset to or from a trust, or a consent, release, or ratification, is also considered such a transaction. Trust Advisors as Fiduciaries Present law provides that a trust advisor or trust protector, other than a beneficiary, is a fiduciary with respect to each power granted to such trust advisor or trust protector. In exercising any power or refraining from exercising any power, a trust advisor or trust protector must act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries. This bill revises this provision to, instead, require a trust advisor or protector, who is acting as a fiduciary, to comply with such good faith requirements. Present law provides that a trust advisor or trust protector is an excluded fiduciary with respect to each power granted or reserved exclusively to any one or more other trustees, trust advisors, or trust protectors. This bill revises this provision to, instead, provide that a trust advisor or protector is an excluded fiduciary regardless of whether the trust advisor or trust protector is serving in a fiduciary capacity. This bill authorizes a trust advisor or trust protector to serve in a nonfiduciary capacity when specifically appointed in such capacity, and, when acting in such capacity, is liable only for acting in bad faith or with reckless indifference. ON MARCH 3, 2025, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 817, AS AMENDED. AMENDMENT #1 makes the following changes:  Removes the provisions that authorized a judicial proceeding to contest whether a revocable trust or any amendment thereto, or an irrevocable trust was validly created at any time following its execution and, instead, keeps in place present law provisions authorizing a person to commence a judicial proceeding to contest the validity of a trust that was revocable immediately preceding the settlor's death.  For purposes of a lifetime trust being valid as to any assets held by the trust to the extent the assets have been transferred to the trust, revises the provision relative to tangible personal property being assigned to a trust by clarifying that (i) such assignment is subject to revocation or amendment pursuant to a written instrument delivered by the transferor to the trustee, either during the transferor's life or following the transferor's death, including pursuant to the terms of the transferor's last will and testament and (ii) that if such revocation or amendment is not delivered to the trustee within six months of transferor's death, then the trustee may presume that such revocation or amendment does not exist.  With regard to a disinterested trustee's power to direct discretionary distributions under the trust instrument and to reimburse the settlor for any amount of the settlor's personal federal, state, local, foreign, or other income tax liability that is attributable to the inclusion of the trust's income, capital gains, deductions, and credits in the calculation of the settlor's taxable income, clarifies that (i) such power becomes exercisable on and after December 31, 2025, and applies to trusts existing before, on, and after such date; (ii) the person otherwise having the power to exercise such discretion may at any time renounce the power in writing and, unless otherwise limited, such renouncement applies permanently with respect to the trust as a whole, such that a person does not have this power with respect to the trust at any time after the renunciation; and (iii) a person is not liable for exercising or failing to exercise such power, or for exercising or failing to exercise the ability to renounce such power.

Statutes affected:
Introduced: 30-1-404(b), 30-1-404, 30-1-404(b)(2), 35-15-104(a), 35-15-104, 35-15-109(a), 35-15-109, 35-15-817(h)(1), 35-15-817, 35-15-301, 35-15-402(d), 35-15-402, 35-15-604, 35-15-709(b), 35-15-709, 35-15-1005, 35-15-1102, 35-15-1202