The 2022 legislative session resulted in several key updates to Tennessee’s Uniform Trust Code, primarily due to SB 2166/HB 2353, which the Tennessee Governor signed into law in mid-April. This bill was pioneered by the Tennessee Bankers Association (“TBA”) Trust Committee, currently chaired by Derek Church, President of Pendleton Square Trust Company, LLC. The TBA’s legislation continues the state’s efforts to remain at the forefront of modernized trust administration.
Among the provisions impacted is Tenn. Code Ann. 35-15-1301, which governs the Tennessee special purpose entity (“SPE”). The SPE is a corporation or limited liability company established for the exclusive purpose of acting as a trust protector or trust advisor for one or more family trusts administered by a Tennessee corporate trustee. Due to the new legislation, the SPE must now be organized in the State of Tennessee. The bill also significantly changes the SPE’s filing requirements with the Tennessee Department of Financial Institutions (“TDFI”). Whereas an SPE was previously required to provide notice to the TDFI after beginning operations, it must now provide notice within 60 days after filing its organizational documents with the State and include: 1) a statement of intent to act as an SPE; 2) the name, address, and phone number of each organizer; 3) its office address; and, 4) the name of the corporate trustee appointed in the associated trust(s). But more significant for those organizing SPEs, the bill has eliminated the TDFI’s annual filing requirement and its annual fee.
The bill also rewrites Tenn. Code Ann. § 35-15-817, which governs the process by which a trustee distributes trust assets and obtains releases upon termination of the trust or upon the trustee’s removal or resignation. The law now provides a mechanism by which fiduciary liability may be discharged via a notice sent to all interested parties. The notice has certain requirements, such as information on gains and losses on trust assets, fees and expenses paid, and a proposal for distribution, to name a few. Any party receiving this notice may make a written objection within 45 days. If no written objection is timely made, the parties waive the right to object, and the trustee is relieved from any fiduciary liability, judicial or otherwise.
Notably, SB 2166/HB 2353 also revises the statutory requirements for trust decanting. Broadly speaking, decanting refers to the process by which a trustee moves some or all the assets from an original trust into a second trust. Prior law required the original trust and the second trust to be separate documents. The bill eliminates this requirement, and now provides that the second trust may be 1) the original trust after modification or restatement, or 2) a new trust. A significant advantage of trust decanting via modification or restatement is that property held by the original trust need not be retitled. The updated decanting provision can be found in Tenn. Code Ann. § 35-15-816.
Finally, the bill updates the law regulating Voting Trusts, codified in Tenn. Code Ann. § 48-17-301. Specifically, it provides a procedure by which stockholders may authorize a voting trustee to act as proxy and vote stock during an agreed-upon period of time.
Taken together, these changes reflect a legislative recognition of the importance of Tennessee’s modernized trust laws and emphasize statutory flexibility for trust administration. Pendleton Square Trust Company, LLC welcomes the opportunity to work with families and their trusted advisors in navigating Tennessee’s updated trust laws.