Tennessee § 35-15-506 - Distributions relative to support, mandatory and certain remainder interests.

§ 35-15-506. Distributions relative to support, mandatory and certain remainder interests.

Relative to a support interest, whether or not a trust contains a spendthrift provision: Although a beneficiary of a support interest has enforceable rights under § 35-15-814, those rights do not raise the beneficiary's support interest to the level of a property interest; No creditor or assignee shall reach that support interest until a distribution from the support interest is actually made to the beneficiary; After all or a portion of a support interest is distributed to the beneficiary, no portion of the distribution made from the support interest shall be reached by a creditor or assignee of the beneficiary except to the extent that the distribution made from the support interest exceeds the amount necessary for the health, education, maintenance and support of the beneficiary who received the distribution made from the support interest; In the case of a beneficiary who holds a support interest, the use or enjoyment of property belonging to the trust by that beneficiary shall not be transferred and shall not be reached by creditors or assignees of that beneficiary; Regardless of whether a beneficiary has any outstanding creditors or assignees, a trustee or other fiduciary of a support interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary; and No trustee or other fiduciary is liable to any creditor or assignee for paying the expenses of a beneficiary of a support interest. Relative to a mandatory interest, whether or not a trust contains a spendthrift provision: While a court may order a trustee or other fiduciary to distribute a past due mandatory distribution to its beneficiary, no court shall order a trustee or other fiduciary to distribute such past due mandatory distribution directly to a creditor or assignee; Regardless of whether a beneficiary has any outstanding creditors or assignees, a trustee or other fiduciary of a mandatory interest may directly pay any expense on behalf of such beneficiary and may exhaust the income and principal of the trust for the benefit of such beneficiary; No trustee or other fiduciary is liable to any creditor or assignee for paying the expenses of a beneficiary of a mandatory interest. Although a remainder interest may be an enforceable right, where it is not absolutely certain based on the language of the trust that the remainder interest will be distributed within one (1) year, it shall not be classified as a property interest. This subsection (c) does not affect eligibility for any public assistance program administered by the department of human services. Acts 2004, ch. 537, § 45; 2007, ch. 24, § 25; 2013, ch. 390, § 22. 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. Textbooks. Tennessee Jurisprudence. 22 Tenn. Juris., Spendthrift Trusts, § 1. Section Comment. Unless provided otherwise hereinafter, any reference to “section,” “subsection” or “subdivision” means all, or such portion of, T.C.A. § 35-15-506 . This section addresses the respective rights of creditors and beneficiaries relative to distributions from support, mandatory and certain remainder interests. 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. Subsection (a) only applies to support interests, and it applies to such interests regardless of whether or not the trust creating such interests contains a spendthrift provision. Relative to a support interest: Such support interest is not a property interest. This is true even though a beneficiary of a support interest has certain enforceable rights as provided in T.C.A. § 35-15-814 . A spendthrift provision is not required in order to gain any protective benefits or attributes of a support interest. Such protective benefits an attributes are inherent in such interest. No creditor or assignee (hereinafter in the comments to this section, individually and collectively, simply “creditor”) has the ability to force or otherwise reach a support interest until a distribution from such interest is actually made to a beneficiary. Even after such distribution from a support interest is made to a beneficiary, a creditor can only reach that portion of such distribution that exceeds the amount necessary for the health, education, maintenance and support of such beneficiary who received such distribution. No beneficiary holding a support interest can transfer the use or enjoyment of property belonging to the trust. Moreover, no such use or enjoyment of property may be reached the creditors of such beneficiary. The existence of any creditor of any beneficiary in no way impacts the right or ability of a trustee, cotrustee or other fiduciary (hereinafter in the comments to this section, individually and collectively, simply “fiduciary”) of a support interest to directly pay any expense on behalf of such beneficiary; and such fiduciary may exhaust a trust for the benefit of such beneficiary. In other words a fiduciary need not make a distribution under a support interest to a beneficiary. Instead such fiduciary has the power to directly pay to a third party for any expense for the benefit of such beneficiary and no creditor may reach such payment. If a fiduciary makes such a direct payment, it is not possible for such fiduciary to incur liability to any creditor for so doing. Subsection (b) only applies to mandatory interests, and it applies to such interests regardless of whether or not the trust creating such interests contains a spendthrift provision. Relative to a mandatory interest: A court can only order a fiduciary to distribute any past due mandatory distribution to the beneficiary of that mandatory distribution. A court cannot order a fiduciary to distribute such past due mandatory distribution directly to a creditor. The existence of any creditor of any beneficiary in no way impacts the right or ability of a fiduciary of a mandatory interest to directly pay any expense on behalf of such beneficiary; and such fiduciary may exhaust a trust for the benefit of such beneficiary. In other words a fiduciary need not make a distribution under a mandatory interest to a beneficiary. Instead such fiduciary has the power to directly pay to a third party for any expense for the benefit of such beneficiary and no creditor may reach such payment. If a fiduciary makes such a direct payment, it is not possible for such fiduciary to incur liability to any creditor for so doing. Subsection (c) only applies to remainder interests. Relative to a mandatory interest: Although a remainder interest may be an enforceable right, unless it is absolutely certain based on the language of the trust that such interest will be distributed within one (1) year, it is not a property interest. Regardless, subsection (c) does not affect eligibility for any public assistance program administered by the department of human services. 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.