Every few years, the Tennessee legislature introduces an “omnibus” probate bill. These bills address a broad range of issues in the areas of wills, estates, and trusts. The most recent omnibus bill just cleared the Senate and House. A summary of the key provisions is as follows:
Sections 3, 4, 5, 6, and 10 are simply housekeeping changes that amend the following statutes to reflect the repeal of the Tennessee inheritance tax on January 1, 2016:
- T.C.A. § 30-2-614(e) [pertaining to apportionment of death taxes]
- T.C.A. § 30-2-713(c) [agreements between personal representatives and beneficiaries or governmental authorities]
- T.C.A. § 30-4-103(5)(A) [small estates]
- T.C.A. § 30-4-104(d) [small estates]
- T.C.A. § 32-3-108(b) [interpretation of marital deduction language in a will]
Sections 1, 2, and 15 establish new rules for when a personal representative files a claim against the estate it is administering. Existing law allows “any party interested in the estate either as a creditor, distributee, heir, or otherwise” to except to a claim. See T.C.A. § 30-2-314. However, existing law does not require the court to give notice of the claim to interested parties. Only the personal representative is entitled to notice, even if the claim belongs to the personal representative. Under the new rules, when a personal representative files a claim, it must provide to the clerk of the court the name and address of each residuary beneficiary. Notably, T.C.A. § 30-1-117(6) only requires the petition for letters to include the beneficiaries’ names and city of residence, not their full addresses. The clerk is then required to send a copy of the claim to each residuary beneficiary within five days.
Section 7 involves disclaimers of lifetime gifts. T.C.A. § 31-1-103(a)(1) states that the donee of a gift, whether outright or in trust, may disclaim all or part of the property. Existing law does not specify what happens to the disclaimed property. Does it pass as if the donee predeceased the donor, or does the gifted property return to the donor? The new law resolves the question by stating the disclaimed property passes back to the donor.
Section 8 significantly revamps Tennessee’s version of the Slayer Statute, T.C.A. § 31-1-106. The details will be addressed in a later post.
Section 9 amends T.C.A. § 31-2-105, which deals with inheritance rights by virtue of a parent/child relationship. The current statute only applies to inheritance as a result of intestacy. The new statute covers inheritance by will, trust, or contract. In addition, the new rule puts a time limit on how long a person may wait before filing a paternity action. Essentially, the rule treats the paternity claimant like a creditor of the estate. Thus the claimant must file a lawsuit (a) within the applicable probate creditor period (i.e., 4 months from the publication of notice or 1 year from date of death, depending on whether the putative heir received actual notice of probate) or (b) one (1) year after the father’s death, whichever is earlier.
Section 11 authorizes the use of a memorandum, separate from a will, to dispose of tangible personal property. Such memorandums are commonly used, but have not been legally recognized until now. The details will be addressed in a later post.
Section 12 corrects a typographical error in T.C.A. § 34-1-117(f), which relates to subject matter jurisdiction for conservatorships, guardianships, and protective proceedings.
Section 13 concerns the funding of revocable trusts. It makes clear that actual steps must be taken to transfer property to the trust; e.g., executing a bill of sale, registering an asset in the name of the trust, or recording a deed. According to the new rule, “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.” Therefore, it will NOT be sufficient simply to declare that certain property is in the trust.
Section 14 was prompted by the decision in Meyers v. First Tennessee Bank, 503 S.W.3d 365 (Tenn. Ct. App. 2016). In that case, the Tennessee Court of Appeals held that, even though the beneficiaries long had knowledge of a potential breach of trust, the statute of limitations never started running because the trustee failed to send the beneficiaries a written report disclosing the breach. The new rule eliminates the written report requirement and adds an actual notice component. Specifically, it states that the statute of limitation starts to run on the date the beneficiary was sent “information” (as opposed to a written report) that adequately disclosed facts indicating the existence of a potential claim for breach of trust or (b) the “date the beneficiary … possessed actual knowledge of facts indicating the existence of a potential claim for breach of trust.”
The changes related to the inheritance tax repeal are effective as of January 1, 2017. The other changes will take effect on July 1, 2017.
Source: SB 0769 (pdf)
Posted by Joel D. Roettger, JD, LLM, EPLS