Tennessee § 35-15-404 - Trust purposes.

§ 35-15-404. Trust purposes.

A trust may be created only to the extent its purposes are lawful and possible to achieve. A trust and its terms must be for the benefit of its beneficiaries as the interests of such beneficiaries are defined under the terms of the trust. Acts 2004, ch. 537, § 26; 2013, ch. 390, § 50. 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or prejudice the rights of the parties, in which case the particular provision of the act does not apply and the superseded law applies; Any rule of construction or presumption provided in the act applies to trust instruments executed before July 1, 2013, unless there is a clear and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. Unless provided otherwise hereinafter, any reference to “section,” “subsection” or “subdivision” means all, or such portion of, T.C.A. § 35-15-404 . The provisions of this section in some ways diverge significantly from the Uniform Trust Code and the restatements. To the extent this section is in conflict with the Uniform Trust Code, any restatement or any other foreign law, such foreign law is not precedential or controlling and is rejected by the Tennessee Uniform Trust Code. This section requires that the purposes of a trust be lawful and possible to achieve. It also requires that a trust and its terms be for the benefit of its beneficiaries. Unlike the Uniform Trust Code and the restatements, this section does not contain a prohibition of purposes “contrary to public policy.” The Tennessee Uniform Trust Code recognizes that some purposes may be so noxious as to truly offend public policy. However, the existence of an offense rising to such level should not be easily found, and under the Tennessee trust statutes such existence is likely more difficult to find than under the Uniform Trust Code, some other jurisdictions’ laws and the various restatements. This view is in keeping with primary objectives of the Tennessee trust statutes that a settlor’s intent be the lodestar by which a trust is interpreted, that such intent be carried out and that settlors have the freedom to dispose of their assets to whom and in the manner they wish, all to the greatest extent constitutionally allowable, as provided by T.C.A. § 35-15-105 . Moreover, unlike under the Uniform Trust Code, T.C.A. § 35-15-105 requires that a determination of whether a trust and its terms are “for the benefit of its beneficiaries,” be made solely considering how such “interests of such beneficiaries are defined under the terms of the trust .” [emphasis added] Pursuant to T.C.A. § 35-15-402 , a trust must have an identifiable beneficiary unless the trust is of a type that does not have beneficiaries in the usual sense, such as a charitable trust or, as provided in T.C.A. §§ 35-15-408 and 35-15-409 , trusts for the care of an animal or other valid noncharitable purpose. The general purpose of trusts having identifiable beneficiaries is to benefit those beneficiaries in accordance with their interests as such interest is defined in the terms of the trust. While a settlor has considerable latitude in specifying how a particular trust purpose is to be pursued, the administrative and other nondispositive trust terms must reasonably relate to this purpose and not divert the trust property to achieve a trust purpose that is invalid, such as one which is frivolous or capricious. The provision of T.C.A. § 35-15-412 that allows the court to modify administrative terms that are impracticable, wasteful (but relative to the use in this section of the word “wasteful,” see the interpretation given to such word in the section comment to T.C.A. § 35-15-412 , resulting in such word being interpreted to mean “obsolete or ineffective,” such interpretation arguably being applicable to this section as well), or impair the trust’s administration, is a specific application of the requirement that a trust and its terms be for the benefit of the beneficiaries as the interests of such beneficiaries are defined in the terms of the trust. The fact that it is determined that a settlor suggests or directs an unlawful or other inappropriate means for performing a trust does not invalidate the trust if the trust has a substantial purpose that can be achieved by other methods. See Restatement (Third) of Trusts § 28 cmt. e (Tentative Draft No. 2, approved 1999). Persons interpreting T.C.A. §§ 35-15-412 and 35-15-413 to examine if the terms meet the standards therein for modification or termination are directed to this section, T.C.A. §§ 35-15-105 , as well as the overriding emphasis of the Tennessee Uniform Trust Code on settlor’s intent and freedom of disposition. In all of the above ways, the Tennessee Uniform Trust Code diverges significantly from the Uniform Trust Code and from certain portions of the restatements. In all such cases of divergence, Tennessee law controls. 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.