How a Trust Works in Tennessee
A living trust is an important tool used in estate planning. If you have substantial assets or want to protect the interests of minor beneficiaries, you should consider establishing a trust. Each state has different laws regarding trusts. For residents of Tennessee, the guidelines for creating and managing a trust are established by the Uniform Trust Code.
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Making a Trust
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To create a trust in Tennessee, you must begin by drafting the trust document. Typically called a deed of trust, declaration or trust or trust agreement, this document specifies the names of your beneficiaries and identifies who you wish to serve as trustee. You may also appoint yourself trustee and name a successor trustee to assume control of the trust should you become incapacitated or die. Tennessee requires that trusts be signed in the presence of a notary public. Once the trust document is official, you can begin transferring your property and other assets to the control of the trustee. The type of assets most commonly included in a trust are bank accounts, real estate, stocks, bonds, investment accounts and life insurance policies.
Trusts and Probate
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If you do not have a living trust in Tennessee, your estate will be subject to the probate process after your death. Probate is a legal proceeding in which your assets are inventoried and distributed to your beneficiaries only after the probate fees are assessed and any creditor claims against your estate have been resolved. In Tennessee, probate must last a minimum of four months. If you have a large estate or your will is contested, probate can take much longer. In addition, once your estate enters probate, the terms of your estate become a matter of public record. By establishing a trust, you can avoid the probate process entirely and keep the contents of your estate private.
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Community Property and Joint Trusts
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As of April 2011, Tennessee is one of only two states that allow married couples to convert their assets to community property by establishing a joint trust. Doing so allows both husband and wife to share equally in ownership of any assets held in the trust and potentially enjoy some tax advantages should one spouse die. If you and your spouse transfer your assets to a community property joint trust, state law requires that they be divided equally should you divorce.
Considerations
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If you have assets not transferred in the trust, you need to draft a separate pour-over will to ensure that they are distributed according to your wishes upon your death. A trust does not protect your assets from creditor claims that are initiated during your lifetime. If a creditor is able to obtain a judgment against you, he can legally pursue the assets of the trust to collect payment. Creating a trust does not necessarily guarantee that your beneficiaries will see a reduction in state or federal inheritance and estate taxes that may be due upon your death.
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References
- Justia: 2010 Tennessee Code, Title 35 Chapter 15 Uniform Trust Code
- Nupp Legal: Tennessee Revocable Living Trust; March 2011
- Nolo: Make a Living Trust in Tennessee; Updated November 2007
- Tennessee Estate Planning Law: Tennessee Becomes Second State to Allow Community Property Trusts; Bryan Howard; March 2010
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