Concealing or Destroying a Will

It’s a crime under Tennessee law: Any person who destroys or conceals the last will and testament of a testator, or any codicil thereto, with intent to prevent the probate thereof or defraud any devisee or legatee, commits a Class E felony. A Class E felony is punishable by not less than one (1) year nor more than six (6) years. In addition, the jury may assess a fine not to exceed three thousand dollars ($3,000), unless otherwise provided by statute. Relying on an earlier version of this statute, the Tennessee Court of Appeals has indicated that a person in possession of a will has a duty to bring it forward, absent knowledge of any defect in its execution. Sources: T.C.A. […]

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More on the Primacy of Beneficiary Designations

Beneficiary designations trump a will. Tennessee has a statute on it:

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Sales of Personal Property by Executors

How much leeway does an executor have when it comes to selling the personal property of an estate?

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The Right for Trusts to Remain Silent

Under the Tennessee Trust Code, is a trustee required to give beneficiaries information about their trust? Not necessarily.

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Grantor as Alter Ego of Trustee

Should the grantor of an irrevocable trust be treated as the alter ego of the trustee? The IRS and creditors would prefer the answer to be yes, but the Tennessee Trust Code generally says otherwise: Absent clear and convincing evidence, no settlor of an irrevocable trust may be deemed to be the alter ego of a trustee of such trust. What are some of the factors that would provide clear and convincing evidence that the grantor has too much control over the administration of the trust? NOT the following, whether taken alone or in combination: The grantor is serving as a trustee, a trust advisor, a trust protector or other fiduciary; The grantor has an unrestricted power to remove or replace; […]

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Savings Statute for Interested Trustees

Some easy to overlook statutes in the Tennessee Trust Code can save a poorly drafted trust with an interested trustee from inadvertent taxation and creditor exposure. An interested trustee is a trustee who is also a beneficiary of the trust. If the trust instrument gives an interested trustee the power to make distributions to himself, that power should be limited to an “ascertainable standard,” typically health, support, maintenance, and education. Otherwise, the trustee will possess a general power of appointment. Likewise, an interested trustee will be deemed to have a general power of appointment if he can make distributions for the purpose of discharging a legal obligation. This is a problem because assets subject to a general power of appointment are […]

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Pledging a Beneficiary’s Interest in a Spendthrift Trust

The previous post refers to a scenario in which a trustee pledges trust assets to secure a beneficiary’s personal loan. But what if, instead of pledging trust assets, the beneficiary wants to pledge his interest in the trust as security for the loan. Is this possible? Most trusts contain a spendthrift provision. The Tennessee Trust Code defines a spendthrift provision as a “term of a trust which restrains both voluntary and involuntary transfer of a beneficiary’s interest.” Although the spendthrift clause found in most trusts is more verbose, it is legally sufficient to state the interest of the beneficiary is held subject to a spendthrift trust. A beneficiary’s pledge of his interest in the trust is a voluntary transfer. If […]

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Pledging Trust Assets to Secure Beneficiary Loans

The beneficiary of an irrevocable trust wants to take out a personal loan. The lender requires collateral, and the beneficiary has nothing outside the trust that he can pledge. However, the lender is willing to accept trust property as collateral for the debt. The trust says nothing about using trust assets to secure the loans of a beneficiary. Can the trustee do so? Thanks to an easily-overlooked statute in the Tennessee Trust Code, the answer is yes: Unless the terms of the instrument expressly provide otherwise and without limiting the authority conferred by  T.C.A.§ 35-15-815, a trustee may: … Pledge trust property to guarantee loans made by others to the beneficiary. But what if the trust has a spendthrift clause? A […]

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Executors and the Decedent’s Unpaid Taxes: A Trap for the Unwary

An executor is normally not personally liable for the debts of a decedent. However, a special rule applies to federal taxes. Outside the Tax Code, in an obscure corner of federal law, we find the following: A representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government. For this purpose, the term “unpaid claims” is intentionally broad, covering income tax (individual or estate), estate tax, gift tax, and the civil penalty associated with unpaid payroll taxes. Essentially, the government is saying “we get paid […]

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Fiduciaries May Not Impair the Marital Deduction

Tennessee has a statute on it: No executor, trustee or other fiduciary may take, or refuse to take, any action, or make or retain any investment, the result of which would defeat an otherwise available marital deduction under the Internal Revenue Code (26 U.S.C.), or under the laws of this state, if the obvious and expressed intent of the testator or settlor was to take advantage of this deduction. After May 23, 1977, this section applies to all acts or investments, by all executors, trustees or other fiduciaries, as to all wills and trusts, whenever these instruments were executed or created. This statute could prove useful in cases when a non-spouse executor or trustee–typically a child of the decedent and step-child […]

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