This week, the Tennessee Governor signed into law HB1186/SB0896 making various updates and improvements to Tennessee’s trust laws. This bill was spearheaded by the Tennessee Bankers Association Trust Committee, chaired by Derek Church, President of Pendleton Square Trust Company, LLC. Adding additional flexibility to the Tennessee Trust Code, the bill clarifies that non-judicial settlement agreements (NJSAs) can be used to establish directed trusts and that all NJSAs may be executed by electronic signature (even when used to modify or terminate a trust).
Of note for those funding self-settled trusts, the bill continues to improve Tennessee’s Asset Protection Trust statute by removing the affidavit requirement for future contributions and shortening the limitations period from 2 years to 1.5 years. It also makes two significant updates to Tennessee’s decanting law by (1) allowing remainder beneficiaries to become current permissible beneficiaries; and (2) allowing for elimination of a current beneficiary’s right to income from the trust in certain cases. In addition, the bill enhances Tennessee’s silent trust provisions, including with respect to directed trusts where a trust protector or advisor has been designated to receive reports on behalf of beneficiaries.
Lastly, the bill provides an optional mechanism for trustees to register trusts relocating to Tennessee from another jurisdiction. This is unique in the United States and of particular interest to those with trusts in civil law regimes such as most European jurisdictions.
With the sunset of Tennessee’s tax on investment income at the end of 2020, these changes continue to place Tennessee in the top tier of U.S. trust jurisdictions. Pendleton Square welcomes the opportunity to work with our advisor partners to outline the many advantages of the Tennessee trust situs.