Tennessee § 35-15-107 - Governing law.

§ 35-15-107. Governing law.

The validity, construction and administration of a trust are determined by the law of the jurisdiction designated in the terms of the trust instrument, which is called a state jurisdiction provision. When a state jurisdiction provision designates that the law of this state controls: This state and its courts have jurisdiction over a trust created in a foreign jurisdiction; The validity, construction, and administration of a trust are determined by the laws of this state, including but not limited to: The capacity of the settlor; The powers, obligations, liabilities, and rights of the trustees and other fiduciaries; The appointment and removal of the trustees and other fiduciaries; The existence and extent of all powers conferred on a trustee or other fiduciary, including but not limited to, any trustee's or other fiduciary's discretionary powers, as well as the existence and extent of all powers retained by a settlor and the validity of the exercise of any such power, whether conferred on a trustee or other fiduciary or retained by a settlor; Neither a trust nor any disposition made subject to the terms of such trust is subject to the laws of any foreign country, nor is any such trust or such disposition void, voidable, liable to be set aside or defective in any manner for any reason including but not limited to: The law of any foreign country prohibits or does not recognize the concept of a trust; or The trust or disposition avoids or defeats any right, claim, or interest conferred by the law of a foreign country upon any person by reason of a personal relationship to the settlor or by way of heirship rights or contravenes any rule or law of a foreign country or any foreign country's judicial or administrative order or action intended to recognize, protect, enforce, or give effect to such right, claim, or interest; Relative to any foreign country or any interest in property arising or originating under the laws of any foreign country: No form of forced heirship, legitime, forced share or any similar heirship rights or form of transmission or transfer of property from a decedent or from a living person, or any restrictions on transmission or transfer of property from a decedent or a living person is recognized by this state; or No heirship rights described in subdivision (b)(3)(B)(i) conferred under the law of a foreign country shall constitute an obligation or liability, the transfer, conveyance or devise of which, would violate title 66, chapter 3; and Subdivision (b)(3) shall apply to all realty or other forms of immovable property physically in this state, as well as to all personal or movable property wherever situated if owned by a trust containing a state jurisdiction provision designating that the law of this state controls such trust; No judgment or other holding of any judicial body of any foreign country, including but not limited to, any court, administrative body or other entity or organization purportedly having the power to make judicial or administrative decisions of any foreign country, shall be recognized or enforced or give rise to any equitable forms of relief, including but not limited to, estoppel, to the extent such judgment or other holding concerns a trust containing a state jurisdiction provision designating that the law of this state controls such trust or to the extent such judgment or other holding concerns property held by such trust; If, in any action brought against a trustee or other fiduciary of a trust, any judicial body of any foreign country, including but not limited to, any court, administrative body or other entity or organization purportedly having the power to make judicial or administrative decisions of any foreign country, takes any action whereby such judicial body declines to apply the law of this state in determining the validity, construction, or administration of a trust, or the effect of a spendthrift provision or discretionary interest of a trust, the trustee or other fiduciary, as applicable, shall immediately upon the action of the judicial body of the foreign country and without the further order of any court of this state, cease in all respects to be trustee or other fiduciary, as applicable, of the trust and a vacancy in the office of trustee or other fiduciary, as applicable, shall immediately exist: Upon the existence of such vacancy, the trustee or other fiduciary, as applicable, has no power or authority other than to convey the trust property to the successor trustee or other fiduciary who fills such vacancy as provided in subdivision (b)(5)(B); Such vacancy shall be filled in the same manner as would a vacancy in trusteeship that is required to be filled, either as provided by § 35-15-704(c) if the trust is a noncharitable trust, or as provided by § 35-15-704(d) if the trust is a charitable trust; and Section 35-15-704(e) shall also apply relative to such trustee or other fiduciary, as applicable, in the same manner as § 35-15-704(e) applies to trustees and vacancies in trusteeship in general; provided, however, that when exercising its power provided by § 35-15-704(e), the court shall consider the purposes of this subsection (b) and make any such appointments pursuant to § 35-15-704(e) in a manner designed to give full force and effect to this subsection (b) to the maximum extent allowed by the laws of this state or of the United States. In the absence of the existence of a state jurisdiction provision, the laws of the jurisdiction where the trust was executed determine the validity of the trust and the laws of descent, while the laws of the principal place of administration determine the administration of the trust. Acts 2004, ch. 537, § 8; 2013, ch. 390, § 8. Compiler's Notes. Acts 2013, ch. 390, § 55 provided that: (b) Except as otherwise provided in the act, on July 1, 2013: The act applies to all trusts created before, on, or after July 1, 2013; The act applies to all judicial proceedings concerning trusts commenced on or after July 1, 2013; The act applies to judicial proceedings concerning trusts commenced before July 1, 2013, unless the court finds that application of a particular provision of the act would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of the act does not apply and the superseded law applies; Any rule of construction or presumption provided in the act applies to trust instruments executed before July 1, 2013, unless there is a clear and express indication of a contrary intent in the terms of the trust; and An act done before July 1, 2013, is not affected by the act. Section Comment. The 2013 amendments to the Tennessee Uniform Trust Code completely and significantly rewrote this section, leaving the former version inoperative as provided in the enacting and transitional language of Section 55, Pub. Act. 2013, Pub. Ch. 390, 108th Gen. Assemb., Reg. Sess. (Tenn., 2013). Such amendment also made section 107 of the Uniform Trust Code, as well as the comments thereunder, irrelevant to the current T.C.A. § 35-15-107 . The Tennessee Uniform Trust Code is designed to provide significantly more certainty than does the Uniform Trust Code over the law that will control a trust and its administration. This is in accordance with Tennessee’s emphasis on settlor’s intent and freedom of disposition. Therefore, the Tennessee Uniform Trust Code allows any person having the requisite nexus (defined in T.C.A. § 35-15-108 ) with a jurisdiction to choose that jurisdiction’s law as controlling over a trust. A settlor can then designate that controlling law by including a state jurisdiction provision in a trust. The jurisdiction selected need not have any other connection to the trust. Moreover, a settlor is free to select the governing law regardless of where the trust property may be physically located, whether it consists of real or personal property, and whether the trust was created by will or during the settlor’s lifetime. Furthermore and notwithstanding certain provisions contained in the Restatement (Second) Conflicts of Laws, in keeping with the policy of the state of Tennessee and its overriding emphasis on settlor’s intent and of freedom of disposition, the Tennessee Uniform Trust Code rejects the concept that any law governing a trust is in any way controlled by another jurisdiction’s public policy or dependent upon which jurisdiction has the most significant relationship to a matter at issue. Relative to specific provisions of such Restatement (Second) Conflicts of Laws (excluding the comments thereto, such having been disregarded by the Tennessee Uniform Trust Code unless provided otherwise herein): § 268. The Tennessee Uniform Trust Code: is in accord with subsections (1) and (2)(a); but rejects subsection (2)(b) due to such code’s preference for certainty and such code’s provision that in the absence of a state jurisdiction provision, place of execution, and not “the state which the testator or settlor would probably have desired to be applicable,” controls. § 269. The Tennessee Uniform Trust Code: is in accord with clause (a), but only as such clause applies to this state or another state and not to any foreign country; rejects the provisions of clause (b) to the extent they conflict with such code; and specifically rejects all references in clause (b) to “public policy of the state of the testator’s domicile at death,” as well as to references requiring that a state jurisdiction provision have a “substantial relation to the trust,” the necessary nexus for a state jurisdiction provision being provided by T.C.A. § 35-15-108 . § 270. The Tennessee Uniform Trust Code expressly rejects the concept in clause (a) that a state designated in a state jurisdiction provision need have “a substantial relation to the trust,” the necessary nexus for a state jurisdiction provision being provided by T.C.A. § 35-15-108 . Moreover, the Tennessee Uniform Trust Code expressly rejects the requirement in clause (a) that application of the law of the state designated in a state jurisdiction provision “not violate a strong public policy of the state with which, as to the matter at issue, the trust has is most significant relationship.” Under the Tennessee Uniform Trust Code neither the public policy of, nor the relationship of a trust to, another state has any impact on a trust having a state jurisdiction provision. The Tennessee Uniform Trust Code rejects dependence in clause (b) on the “local law of the state with which, as to the matter at issue, the trust has its most significant relation-ship,” a trust’s validity in cases covered by § 270(b) being determined by the laws of the jurisdiction where the trust was executed pursuant to T.C.A. § 35-15-107(c) . Finally, no public policy of, nor the relationship of a trust to, any foreign country is relevant under the Tennessee Uniform Trust Code. § 271. The Tennessee Uniform Trust Code is generally in accord with clause (a), but would strike from such clause the words “as to matters which can be controlled by the terms of the trust,” all matters of administration being subject to the law of the jurisdiction designated in a state jurisdiction provision under such code. The Tennessee Uniform Trust Code rejects clause (b) to the extent such clause provides that, absent a state jurisdiction provision, administration is controlled by any law other than that of the state in which the trust is being principally administered. § 272. The Tennessee Uniform Trust Code is generally in accord with clause (a), but would strike from such clause the words “as to matters which can be controlled by the terms of the trust,” all matters of administration being subject to the law of the jurisdiction designated in a state jurisdiction provision under such code. The Tennessee Uniform Trust Code rejects clause (b) to the extent such clause provides that, absent a state jurisdiction provision, administration is controlled by any law other than that of the state in which the trust is being principally administered. § 273. The Tennessee Uniform Trust Code: is generally in accord with clause (a), but only as it applies to this state or another state and not to any foreign country; rejects the provisions of clause (b) to the extent they conflict with such code; and in cases of trusts not containing a state jurisdiction provision providing for such trust’s place of administration, specifically rejects all references in clause (b) to “the local law of the state to which the administration of the trust is most substantially related,” the place of a trust’s administration being provided for in T.C.A. §§ 35-15-108 and 35-15-107(c) . § 274. The Tennessee Uniform Trust Code rejects all references in this section relative to “the strong public policy of the testator’s domicil at death.” Notwithstanding any provisions of § 274, the Tennessee Uniform Trust Code confirms that a power of appointment: is not a property interest nor a beneficial interest; is held by the person to whom such power has been given, and not by a settler in that person’s capacity as settler; may not be judicially foreclosed; is not reachable by a creditor or assignee at the trust level; and the fact a beneficiary holds a power of appointment is not indicative or determinative of whether a settlor or beneficiary has dominion and control over a trust. To the extent § 274 of such Restatement is in conflict with the immediately preceding sentence, such § 274 is expressly rejected by the Tennessee Uniform Trust Code. When a state jurisdiction provision designates that Tennessee law controls, Tennessee obtains jurisdiction over the trust and its law controls the validity, construction and administration of a trust (or any part thereof, as a settlor desires). In the absence of such a state jurisdiction provision, the laws of the jurisdiction where the trust was executed determine its validity and the laws of descent, while the laws of the trust’s principal place of administration determine its administration. Additionally, when a state jurisdiction provision designates that Tennessee law controls, the Tennessee Uniform Trust Code explicitly provides that no foreign country has any jurisdiction, power or effect over that trust or any disposition under it. Moreover, in such case no foreign country has any power to set the trust or any of its provisions aside, or attempt to do so. Therefore, a foreign country’s failure to recognize trusts, or the fact a trust avoids a foreign country’s laws granting rights to some person relative to property in the trust; such rights being based on a personal relationship to a settlor of, a party to, or beneficiary of, the trust; are irrelevant and are not respected by Tennessee. Any laws of a foreign country relative to forced heirship, legitime, forced share or similar rights are rejected and are unenforceable under the Tennessee Uniform Trust Code. No judgment of any foreign country will be recognized or enforced by Tennessee to the extent such judgment concerns a trust having a state jurisdiction provision designating the law of Tennessee as controlling. Unless provided otherwise hereinafter, any reference to “subsection” or “subdivision” means such portion of T.C.A. § 35-15-107 . Subsection (a) defines a state jurisdiction provision and provides that, when such is included in a trust instrument, it controls validity, construction and administration of that trust. Subsection (b) provides that when a state jurisdiction provision designates that the law of Tennessee controls: Tennessee and its courts have jurisdiction over the trust, even if such trust was created in a foreign jurisdiction. The validity, construction and administration of the trust is determined by the laws of Tennessee. Such laws control items including but not limited to: settlor’s capacity; powers and duties of all fiduciaries; appointment and removal of all fiduciaries; the existence, validity and extent of powers conferred on any fiduciary or retained by a settlor. No law of a foreign country has any force or effect on the trust, regardless of whether such country does or does not recognize the concept of a trust. Tennessee does not in any way recognize any laws of a foreign country granting rights to some person relative to property in the trust; including any rights based on a personal relationship to a settlor of, a party to, or beneficiary of, the trust. Therefore, any laws of a foreign country relative to forced heirship, legitime, forced share or similar rights are rejected and are unenforceable. Relative to any realty or immovable property physically in Tennessee and relative to any personal or movable property regardless of the location of such, foreign law has no force or effect on the trust and such property. No judgment or other holding of any adjudicative body of a foreign country will be recognized, nor will such be enforced or otherwise be granted relief. Should any action be brought against any fiduciary of a trust by any adjudicative body of a foreign country under which action such adjudicative body declines to apply the law of Tennessee to such trust or any provision or interest under such trust, applicable fiduciaries of such trust shall by operation of law immediately cease being such fiduciary and have no further power other than to convey trust property to a successor fiduciary. Such successor fiduciary can be named in the trust instrument, in absence of such will be appointed to office under a statutorily provided mechanism. This provision thwarts a foreign country from obtaining or attempting to obtain jurisdiction over the trust, as well as over any trust property other than immovable property physically present in such foreign country. Subsection (c) provides for fallback governing law in the absence of a state jurisdiction provision. Such fallback governing law is clear, concise and concrete. Moreover, it is in no way dependent on the jurisdiction having the most significant relationship to the matter at issue. For all these reasons, it provides certainty. Regarding the Hague Convention on the Law Applicable to Trusts and on their Recognition. According to ULC – NCCUSL, Uniform Trust Code section 107 (made irrelevant by the 2013 amendments to the Tennessee Uniform Trust Code) is consistent with and was partially based on the Hague Convention on the Law Applicable to Trusts and on their Recognition, signed on July 1, 1985. Despite such section of the Uniform Trust Code being irrelevant, it is important to note that the United States has not (as of May 2013) ratified such convention. Therefore, such convention has no force and effect on the United States, any state or this state (as such terms are defined in T.C.A. § 35-15-103 ). To the extent such convention is in conflict with the Tennessee trust statutes or Tennessee law in general, Tennessee law controls or absence of Tennessee law, the provisions of T.C.A. § 35-15-106 and the comments thereunder control. If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before July 1, 2013, that statute continues to apply to the right even if it has been repealed or superseded.