Tennessee § 35-15-103 - Chapter definitions.

§ 35-15-103. Chapter definitions.

As used in this chapter, unless the context otherwise requires: “Action” with respect to an act of a trustee, includes a failure to act; “Another state” or “other state” means any state other than this state; “Ascertainable standard” means a standard relating to an individual’s health, education, support or maintenance within the meaning of § 2041(b)(1)(A) or § 2514(c)(1) of the Internal Revenue Code of 1986 (U.S.C. § 2041(b)(1)(A) and § 2514(c)(1)), as in effect on July 1, 2004, or as later amended; “Beneficial interest” means a distribution interest or a remainder interest; provided, however, that a beneficial interest specifically excludes a power of appointment or a power reserved by a settlor; “Beneficiary” means a person that has a present or future beneficial interest in a trust, vested or contingent; “Charitable trust” means a trust, or portion of a trust, created for a charitable purpose described in § 35-15-405(a); “Conservator” has the same meaning as in § 34-1-101; “Directed trust” means a trust where either through the terms of the trust, an agreement of the qualified beneficiaries or a court order, one or more persons are given the authority to direct or consent to a fiduciary's actual or proposed investment decision, distribution decision, or any other decision of the fiduciary; “Distribution beneficiary” means a beneficiary who is an eligible distributee or permissible distributee of the income or principal of a trust; “Distribution interest” means: An interest, other than a remainder interest, held by a distribution beneficiary under a trust and may be a current distribution interest or a future distribution interest; Relative to a distribution interest: Neither the existence of a distribution interest or the provision of services by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest is relevant in the equitable division of marital property; None of the factors in subdivision (10)(B)(i) or the exercise or non-exercise of any power or discretion by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest (even if that spouse is also a beneficiary of the trust creating the distribution interest) are relevant to, indicative of or effect the transmutation or other conversion of separate property to community property; The expending of any community funds by a spouse in that spouse’s capacity as a fiduciary of the trust creating the distribution interest relative to the operation or maintenance of property related to a distribution interest is not relevant to or indicative of, and does not effect a transmutation or other conversion of separate property to community property; Any funds expended pursuant to subdivision (10)(B)(iii) shall be valid debts of the trust and shall be repaid to the community with appropriate interest; A distribution interest is classified as either a mandatory interest, a support interest or a discretionary interest; and although not the exclusive means to create each such respective distribution interest, absent clear and convincing evidence to the contrary, use of the example language accompanying the following definitions of each such respective distribution interest results in the indicated classification of distribution interest: A mandatory interest means a distribution interest in which the timing of any distribution must occur within one (1) year from the date the right to the distribution arises and the trustee has no discretion in determining whether a distribution shall be made or the amount of such distribution; example distribution language indicating a mandatory interest includes, but is not limited to: All income shall be distributed to a named beneficiary; or One hundred thousand dollars ($100,000) a year shall be distributed to a named beneficiary; The trustee may make distributions for health, education, maintenance, and support; The trustee shall make distributions for health, education, maintenance, and support; provided, however, that the trustee may exclude any of the beneficiaries or may make unequal distributions among them; or The trustee may make distributions for health, education, maintenance, support, comfort, and general welfare; A discretionary interest may also be evidenced by: Permissive distribution language such as “may make distributions”; Mandatory distribution language that is negated by the discretionary distribution language contained in the trust such as “the trustee shall make distributions in the trustee’s sole and absolute discretion”; An interest that includes mandatory distribution language such as “shall” but is subsequently qualified by discretionary distribution language shall be classified as a discretionary interest and not as a support or a mandatory interest; are predeceased or are otherwise not in existence at the time all or any part of the trust terminates; A support interest means a distribution interest that is not a mandatory interest but still contains mandatory language such as “shall make distributions” and is coupled with a standard capable of judicial interpretation; example distribution language indicating a support interest includes, but is not limited to: The trustee shall make distributions for health, education, maintenance, and support; Notwithstanding the distribution language used, if a trust instrument containing such distribution language specifically provides that the trustee exercise discretion in a reasonable manner with regard to a discretionary interest, then notwithstanding any other provision of this subdivision (10) defining distribution interests, the distribution interest shall be classified as a support interest; A discretionary interest means any interest that is not a mandatory or a support interest and is any distribution interest where a trustee has any discretion to make or withhold a distribution; example distribution language indicating a discretionary interest includes, but is not limited to: The trustee may, in the trustee's sole and absolute discretion, make distributions for health, education, maintenance, and support; The trustee, in the trustee’s sole and absolute discretion, shall make distributions for health, education, maintenance, and support; (i) To the extent a trust contains distribution language indicating the existence of any combination of a mandatory, support and discretionary interest, that combined interest of the trust shall be divided and treated separately as follows: The trust shall be a mandatory interest only to the extent of the mandatory distribution language; The trust shall be a support interest only to the extent of such support distribution language; and The remaining trust property shall be held as a discretionary interest; For purposes of this subdivision (10)(D), a support interest that includes mandatory distribution language such as “shall” but is subsequently qualified by discretionary distribution language, shall be classified as a discretionary interest and not as a support interest; “Environmental law” means a federal, state, or local law, rule, regulation, or ordinance relating to protection of the environment; “Excluded fiduciary” means any trustee, trust advisor, or trust protector to the extent that, under the terms of a trust, an agreement of the qualified beneficiaries, or court order: The trustee, trust advisor, or trust protector is excluded from exercising a power, or is relieved of a duty; and The power or duty is granted or reserved to another person; “Fiduciary” means: A trustee, conservator, guardian, agent under any agency agreement or other instrument, an executor, personal representative or administrator of a decedent’s estate, or any other party, including a trust advisor or a trust protector, who is acting in a fiduciary capacity for any person, trust, or estate; Fiduciary also means a trustee as defined in § 35-14-102 ; For purposes of subdivision (13)(A), an agency agreement includes but is not limited to, any agreement under which any delegation is made, either pursuant to § 35-15-807 or by anyone holding a power or duty pursuant to part 12; For purposes of the definition of fiduciary in this subdivision (13), fiduciary does not mean any person who is an excluded fiduciary as such is defined in this section; “Foreign” or “foreign country” means any jurisdiction, subdivision, territory or possession thereof, other than that of the United States of America or of a state; “Foreign jurisdiction” means any jurisdiction, subdivision, territory or possession thereof, other than this state; “Guardian” has the same meaning as in § 34-1-101 . The term does not include a guardian ad litem; “Interests of the beneficiaries” means the beneficial interests provided in the terms of the trust; “Internal Revenue Code” means the Internal Revenue Code of 1986 (26 U.S.C.), as in effect on July 1, 2004, or as later amended; “Jurisdiction” with respect to a geographic area, includes a state or country; “Person” means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity; “Power of appointment” means: An inter vivos or testamentary power to direct the disposition of trust property, other than a distribution decision made by a trustee or other fiduciary to a beneficiary; Powers of appointment are held by the person to whom such power has been given, and not by a settlor in that person’s capacity as settlor; “Power of withdrawal” means a presently exercisable general power of appointment other than a power: Exercisable by a trustee and limited by an ascertainable standard; or Exercisable by another person only upon consent of the trustee or a person holding an adverse interest; “Property” means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein; “Qualified beneficiary” means a beneficiary who, assuming the nonexercise of all powers of appointment and the nonoccurrence of any event not reasonably expected to occur, on the date the beneficiary’s qualification is determined: Is a distributee or permissible distributee of trust income or principal; Would be a distributee or permissible distributee of trust income or principal if the interests of the distributees described in subdivision (24)(A) terminated on that date; or Would be a distributee or permissible distributee of trust income or principal if the trust terminated on that date; Notwithstanding any other provisions of this subdivision (24), no ultimate beneficiary or potential ultimate beneficiary shall be a qualified beneficiary; In determining who is or may be an ultimate beneficiary, all of the following shall be taken into consideration: The terms of the trust naming any ultimate beneficiary or potential ultimate beneficiary and the intention of the settlor relative to any such beneficiary as expressed in such terms; and Any terms or provisions related to the exercise of any power by any person naming any ultimate beneficiary or potential ultimate beneficiary and the intention of the person exercising such power relative to any such beneficiary as expressed in such terms or provisions; Determined as provided in subdivision (24)(D)(i), an ultimate beneficiary or potential ultimate beneficiary is any beneficiary who the settlor or power holder did not reasonably anticipate would take any interest upon termination of all or any part of a trust absent all other beneficiaries or members of classes of beneficiaries named in the trust instrument or in the exercise of the power, respectively, predeceasing or otherwise not being in existence at the time at which such trust or part thereof terminates; By way of example and not in limitation of this subdivision (24)(D), an ultimate beneficiary is a person or persons often included in a trust instrument or under the exercise of a power to take an interest in a trust at the time all or any part of such trust terminates only in a case where all other named beneficiaries or classes of beneficiaries that have or had an affinity through either familial connection or friendship with any of: The settlor; The person holding any power; or Any prior beneficiary or potential beneficiary of the trust; “Reach” means, with respect to a distribution interest or any power held by anyone relative to a trust, to subject such distribution interest or such power to a judgment, decree, garnishment, attachment, execution, levy, creditor’s bill or other legal, equitable, or administrative process, relief, or control of any court, tribunal, agency, or other entity that, by power of law, is provided with powers or jurisdiction similar to those described in this subdivision (25); “Remainder interest” means an interest under which a trust beneficiary will receive property held by a trust outright at some time during the future; relative to a remainder interest: Neither the existence of a remainder interest or the provision of services by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest is relevant in the equitable division of marital property; None of the factors in subdivision (26)(A) or the exercise or non-exercise of any power or discretion by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest (even if that spouse is also a beneficiary of the trust creating the remainder interest) are relevant to, indicative of or effect the transmutation or other conversion of separate property to community property; The expending of any community funds by a spouse in that spouse’s capacity as a fiduciary of the trust creating the remainder interest relative to the operation or maintenance of property related to a remainder interest is not relevant to or indicative of, and does not effect a transmutation or other conversion of separate property to community property; Any funds expended pursuant to subdivision (26)(C) shall be valid debts of the trust and shall be repaid to the community with appropriate interest; “Reserved power” means a power held by a settlor; “Revocable” as applied to a trust, means revocable by the settlor without the consent of the trustee or a person holding an adverse interest; “Settlor” means a person, including a testator, who creates, or contributes property to, a trust. If more than one (1) person creates or contributes property to a trust, each person is a settlor of the portion of the trust property attributable to that person’s contribution except to the extent another person has the power to revoke or withdraw that portion; “Spendthrift provision” means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary's interest; “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band recognized by federal law or formally acknowledged by a state; “Successors in interest” means the beneficiaries under the settlor’s will, if the settlor has a will, or in the absence of an effective will provision, the settlor’s heirs at law; “Terms of a trust” means the manifestation of the settlor’s intent regarding a trust’s provisions as expressed in the trust instrument or as may be established by other evidence that would be admissible in a judicial proceeding; “This state” means the state of Tennessee; “Trust advisor” means any person described in § 35-15-1201(a) ; “Trust instrument” means an instrument executed by the settlor that contains terms of the trust, including any amendments thereto; “Trust protector” means any person described in § 35-15-1201(a) ; and “Trustee” includes an original, additional, and successor trustee, and a cotrustee. Acts 2004, ch. 537, § 4; 2007, ch. 24, §§ 1-3; 2007, ch. 477, § 1; 2013, ch. 390, §§ 3, 49; 2014, ch. 829, § 5. 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. 1. Interest of Beneficiaries. Trustee did not breach a duty under this statute by failing to convey personal assets to a trust in order to avoid probate administration and expenses; it was not shown that the trustee administered the trust in a manner that was inconsistent with the beneficial interest of the beneficiaries. Glass v. Suntrust Bank, 523 S.W.3d 61, 2016 Tenn. App. LEXIS 305 (Tenn. Ct. App. May 4, 2016), appeal denied, — S.W.3d —, 2016 Tenn. LEXIS 710 (Tenn. Sept. 26, 2016). Section Comment. “Action.” A definition of “action” is included for drafting convenience, to avoid having to clarify in the numerous places in the Tennessee Uniform Trust Code where reference is made to an “action” by the trustee that the term includes a failure to act. “Another state or “other state” The Tennessee Uniform Trust Code has always had a definition of “state.” A definition of “another state” or “other state,” along with definitions of “foreign” or “foreign country, “foreign jurisdiction” and “this state” were added by the 2013 amendments to the Tennessee Uniform Trust Code. Throughout the Tennessee trust statutes and comments thereto, all of such terms have the meaning ascribed to them respectively in T.C.A. § 35-15-103 . Statutory definitions of these terms are included for multiple reasons, including but not limited to: Having such statutorily defined terms provides drafting convenience and avoids having to clarify in a document any subject covered by such terms. The Tennessee Uniform Trust Code contains detailed provisions regarding governing law. Under such provisions, neither the laws of any foreign country nor any judgment or similar holding of any foreign country’s tribunals are recognized or enforceable by this state. Therefore, such foreign law and holdings have no force or effect over a trust (or distribution therefrom) when that trust is governed by Tennessee law. The Tennessee Uniform Trust Code also has detailed provisions governing place of administration of a trust and the nexus required to determine such principal place of administration. These provisions regarding nexus also impact the ability for one to make a state jurisdiction provision in a trust. Including the above statutorily defined terms facilitates all such above provisions, as well as other provisions throughout the Tennessee Uniform Trust Code. From time to time the parties to or that have an interest in a trust, the transactions and other matters pertaining to a trust, as well as the provisions of the Tennessee Uniform Trust Code in general, touch more than one domestic jurisdiction or both domestic and foreign jurisdictions. In such cases, having such statutorily defined terms facilitates determination of whether Tennessee law alone applies, or due to constitutional limitations the law of another state or of the United States must be considered. Such statutorily defined terms also facilitate a clear demarcation between limitations or requirements of the U.S. constitution and the chimera and nonbinding nature of comity relative to the laws and holdings of a foreign country. Finally, the comments under “foreign” or “foreign country,” under “foreign jurisdiction,” as well as under “this state,” are incorporated herein by reference. Added by the 2013 amendments to Tennessee Uniform Trust Code “Ascertainable standard.” The 2007 amendments to the Tennessee Uniform Trust Code added a definition of “ascertainable standard,” thereby making it apply generally throughout the Code. “Beneficial interest.” Under the Tennessee Uniform Trust Code, a beneficial interest must either be a distribution interest or a remainder interest as such are defined in T.C.A. § 35-15-103 . The Tennessee trust statutes do not provide for any other form or type of beneficial interest. See below for comments regarding distribution interests and remainder interests. A beneficial interest does not include either: a power of appointment or a reserved power as such are defined in T.C.A. § 35-15-103 . See below for comments regarding powers of appointment and reserved powers. For this reason, under the Tennessee Uniform Trust Code, the holder of a power of appointment is not a beneficiary, such being a divergence from the Uniform Trust Code. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Beneficiary.” This term refers only to a beneficiary of a trust as such is defined in the Tennessee Uniform Trust Code. In addition to living and ascertained individuals, beneficiaries may be unborn or unascertained. Pursuant to T.C.A. § 35-15-402 a trust must have a beneficiary unless the trust is: a charitable trust; for the care of an animal; or for a noncharitable purpose. Moreover, under T.C.A. § 35-15-402 , a trust that requires a beneficiary is valid only if a beneficiary can be ascertained now or in the future. The term “beneficiary” includes not only beneficiaries who received their interests under the terms of the trust but also beneficiaries who received their interests by other means, including by assignment, exercise of a power of appointment, resulting trust upon the failure of an interest, gap in a disposition, operation of an antilapse statute upon the predecease of a named beneficiary, or upon termination of the trust. The fact that a person incidentally benefits from the trust does not mean that the person is a beneficiary. For example, neither a trustee nor persons hired by the trustee become beneficiaries merely because they receive compensation from the trust. See Restatement (Third) of Trusts § 48 cmt. c (Tentative Draft No. 2, approved 1999); Restatement (Second) of Trusts § 126 cmt. c (1959). Tennessee law is consistent with the common law of trusts that the holder of a power of appointment is not considered a trust beneficiary. Contrastingly, ULC - NCCUSL’s position in the Uniform Trust Code, which provides that the holder of a power of appointment is classified as a beneficiary, is in conflict with both Tennessee law and common law in general. The definition of “beneficiary” includes only those who hold beneficial interests in the trust. Because a charitable trust is not created to benefit ascertainable beneficiaries but to benefit the community at large (See section 405(a) [T.C.A. § 35-15-405(a) ]), persons receiving distributions from a charitable trust are not beneficiaries as that term is de-fined in the Tennessee Uniform Trust Code. Notwithstanding the above, a charitable organization expressly designated to receive distributions under the terms of a charitable trust are granted the rights of a qualified beneficiary under the Tennessee Uniform Trust Code, but only if such charitable organization otherwise holds beneficial interests sufficient to satisfy the requirements set forth in T.C.A. § 35-15-110 . For reasons similar to those applying to charitable trusts, neither any animal under a trust for the care of an animal as provided by T.C.A. § 35-15-408 , nor anyone (person, entity or otherwise) benefiting from or having an interest in the purpose for which a trust is established under T.C.A. § 35-15-409 are beneficiaries as that term is defined in the Tennessee Uniform Trust Code. Moreover, relative to trusts controlled by T.C.A. §§ 35-15-408 and 35-15-409 , there are no qualified beneficiaries. Nevertheless, both such Tennessee statutes provide mechanisms under which one or more persons, or a court, can enforce such types of trusts. The Tennessee Uniform Trust Code leaves certain issues concerning beneficiaries to the common law. Any person with capacity to take and hold legal title to intended trust property has capacity to be a beneficiary. See Restatement (Third) of Trusts § 43 (Tentative Draft No. 2, approved 1999); Restatement (Second) of Trusts §§ 116 -119 (1959). Under the Tennessee Uniform Trust Code, the extent of a beneficiary's interest is determined solely by the settlor's intent to the greatest extent constitutionally allowable. Unlike in the Uniform Trust Code and the Restatement (Third) of Trusts, the Tennessee Uniform Trust Code does not require that such intent be limited by public policy. See Restatement (Third) of Trusts § 49 (Tentative Draft No. 2, approved 1999); Restatement (Second) of Trusts §§ 127 -128 (1959); but to the extent either of such restatements are in conflict with Tennessee law, the latter controls. While most beneficial interests terminate upon a beneficiary's death, the interest of a beneficiary may devolve by will or intestate succession the same as a corresponding legal interest. See Restatement (Third) of Trusts § 55(1) (Tentative Draft No. 2, approved 1999); Restatement (Second) of Trusts §§ 140 , 142 (1959). “Charitable trust.” Under the Tennessee Uniform Trust Code, when a trust has both charitable and noncharitable beneficiaries only the charitable portion qualifies as a “charitable trust.” The great majority of the Tennessee Uniform Trust Code’s provisions apply to both charitable and noncharitable trusts without distinction. The distinctions between the two types of trusts are found in the requirements relating to trust creation and modification. Pursuant to sections 405 and 413 [T.C.A. §§ 35-15-405 and 35-15-413 ], a charitable trust must have a charitable purpose and charitable trusts may be modified or terminated under the doctrine of cy pres. Also, section 411 [T.C.A. § 35-15-411 ] allows a noncharitable trust to in certain instances be terminated by its beneficiaries while charitable trusts do not have beneficiaries in the usual sense. To the extent of these distinctions, a split-interest trust is subject to two sets of provisions, one applicable to the charitable interests, the other the noncharitable. “Conservator.” See the comments below under “guardian,” which include comments relative to a conservator. “Directed trust.” This term refers to true directed trusts as provided for in T.C.A. § 35-15-808 as opposed to a delegation of a fiduciary’s duties as provided for in T.C.A. § 35-15-807 . Under a true directed trust, certain powers and duties that were historically and traditionally bundled in a single trustee, or in cotrustees, are removed from such and directed to other fiduciaries. Alternatively, certain other trust advisors or trust protectors are given various powers and duties relative to other fiduciaries (including trustees and cotrustees). To the extent a power or duty is removed from one fiduciary and given to another, the fiduciary from which the power or duty was removed is called an excluded fiduciary. An excluded fiduciary generally has no liability for the powers or duties so removed. Other names for directed trusts include “multi-participant trusts” and “reserved power trusts.” Tennessee has had statutes fully providing for true directed trusts since the late 1980s, such provisions being contained in T.C.A. §§ 35-3-122 and 35-3-123 . However, such statutes were initially only addressed in the other Tennessee trust statutes by reference. As used here, the term directed trust includes trusts controlled by T.C.A. §§ 35-3-122 and 35-3-123 to the extent provided by T.C.A. § 35-15-808 , as well as to other trusts as provided in T.C.A. § 35-15-808 , including those subject to part 12. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Distribution beneficiary.” One who holds a distribution interest under a trust. A distribution beneficiary is a beneficiary who is an eligible or permissible distributee of income or principal under such distribution interest. A distribution beneficiary, in their capacity as a distribution beneficiary, does not hold a remainder interest. This is true regardless of whether such beneficiary holds a remainder interest in some capacity other than as a distribution beneficiary. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Distribution interest.” Before discussing the term distribution interest in detail, it is beneficial to consider why the concept of distribution interest; together with the related concepts expressed by the terms beneficial interest, distribution beneficiary, reach, remainder interest, and to a lesser extent power of appointment and reserved power; are crucial to understanding Tennessee law as it relates to trusts. All of the above terms are in T.C.A. § 35-15-103 and are discussed in these comments. Such terms are essential elements of the Tennessee Uniform Trust Code. Together with other provisions in the Tennessee trust statutes, the concepts behind these terms are designed to assure traditional Tennessee law concepts are preserved regarding spend-thrift, mandatory, support and discretionary trusts, together with their concomitant rights, benefits, creditor and other protections. They are also essential elements of the Tennessee Uniform Trust Code’s emphasis on settlor’s intent, freedom of disposition and certainty of construction and interpretation. Finally, these concepts determine whether an inter-est under a trust does or does not rise to the status of a property interest. Of course, that issue, in itself, has a significant bearing on implementing settlor’s intent and freedom of disposition, as well as on creditor and other protections. Established and traditional common law made clear distinctions among the treatment of spendthrift, mandatory, discretionary and support trusts. Tennessee courts have traditionally followed that traditional, established common law, which is reflected in the Restatement (Second) of Trusts. Some of the effects of these distinctions are noted in the comments to T.C.A. § 35-15-101 , near the end of the section entitled, “Existing Uniform Laws on Trust Law Subjects.” Therein it discusses the effect of T.C.A. § 35-15-106 , which rejects the Restatement (Third) of Trusts §§ 50, 56, 58, 59 or 60, and such sections’ comments. Other effects of these distinctions, including when a distribution interest does or does not rise to the status of a property interest and the effect of same, are noted in the comments to T.C.A. § 35-15-101 in the last paragraph under the heading, “Part 5. Creditor's Claims; Spendthrift and Discretionary Trusts.” The Uniform Trust Code and the Restatement (Third) of Trusts do not make these clear distinctions, leaving settlors without certainty as to the meaning and effect of language used relative to spendthrift, mandatory, support and discretionary trust provisions. Moreover, language in the Restatement (Third) of Trusts indicates that even if the terms of a trust specifically give a trustee “absolute, sole and unfettered” discretion, such Restatement infers a “reasonableness” standard relative to the exercise (or non-exercise) of that discretion. Uniform Trust Code section 814(a), and the comments thereunder (but not T.C.A. § 35-15-814 ), refer one to section 50 of the Restatement (Third) of Trusts. The comments under that section include the “reasonableness” standard mentioned above, thereby infusing the Uniform Trust Code with the Restatement’s “reasonableness” standard. A number of legal authors believe such provisions of the Restatement (Third) of Trusts and the Uniform Trust Code virtually always give any beneficiary an enforceable right to a distribution, thereby eviscerating the meaning of the word “discretionary.” Regardless of how clear and obvious a drafter is regarding a settlor’s intent to create a purely and absolutely discretionary trust, these authors believe such provisions of the Restatement (Third) of Trusts and the Uniform Trust Code result in nothing other than a vague “continuum” of rights and discretion that only lead to uncertainty and needless litigation. Moreover, it would not be illegitimate for one to be concerned that this “continuum” puts one on a slippery slope that could lead to a creditor of a beneficiary being able to reach that beneficiary’s now (under the Restatement (Third) of Trusts) and Uniform Trust Code, potentially enforceable right to a distribution. Of course this significantly reduces the creditor protection traditionally afforded to beneficiaries of third-party discretionary trusts. These are just a few of the reasons that Tennessee law relative to trusts rejects certain portions of the Restatement (Third) of Trusts and the Uniform Trust Code, and in the Tennessee Uniform Trust Code codifies the prior, established and traditional common law. In its broadest terms, a distribution interest is a beneficial interest, other than a remainder interest, held by a distribution beneficiary under a trust. Distribution interests may be current distribution interests or future distribution interests. The fact that a beneficial interest is a distribution interest controls many things relative to that interest. Distribution interests are separate as opposed to marital property for the purposes of an equitable division of marital property and therefore, are not relevant to such division. The fact that a spouse provides services in that spouse’s capacity as a fiduciary of the trust that created the distribution interest (or to such distribution interest) does not change the above and the provision of such services or the results from or effects of such provision do not give rise to marital property. Therefore, neither the provision of such services, nor the results from or effects of such provision of services, are relevant to such division. For the purposes of determining separate versus community property in a jurisdiction recognizing community property as the applicable marital property regime in that jurisdiction: Distribution interests are likewise separate property. Similarly, the fact that a spouse provides services in that spouse’s capacity as a fiduciary of the trust that created the distribution interest (or to such distribution interest) does not change the above and the provision of such services or the results from or effects of such provision do not give rise to marital or community property, nor is any of the above relevant to, indicative of, or does such effect, the transmutation or other conversion of separate property to community property . Moreover, in cases where a spouse is serving in such capacity as trustee of such trust, neither the exercise or non-exercise of any power or discretion by such spouse in such capacity as trustee give rise to marital or community property, nor is such relevant to, indicative of, or does such effect, the transmutation or other conversion of separate property to community property. This remains true even if the spouse is also a beneficiary of the trust that created the distribution interest (or of the distribution interest). Finally, the expending of any community funds by a spouse in such spouse’s capacity as a fiduciary of such trust that created the distribution interest, relative to the operation or maintenance of property related to such distribution interest, is not relevant to or indicative of, and does not effect, a transmutation or other conversion of separate property to community property. Instead any such expending of funds simultaneously creates a correspondingly equal and valid debt of the trust to the community and such debt shall be repaid to the community with appropriate interest from the assets of the trust. Distribution interests can be classified in one of three ways. The first classification is a mandatory interest. At least as to principal, it is also the least likely type of interest one normally encounters under the Tennessee trust statutes. In order to be a mandatory interest, a distribution interest must require distribution within one year of the date the right to the distribution arises and the trustee must have no discretion, whatsoever, relative to the making of or the amount of this distribution. The most common form of mandatory interest occurs when a trust directs that all the income or a specified dollar amount be distributed every year. Even where such mandatory interests exist under a trust, all non-mandatory distribution interests under such trust are either support or discretionary interests. The second classification is a support interest. In order to be a support interest, a distribution interest, though not a mandatory interest, must either contain: mandatory language such as “shall make,” (and as stated below, such mandatory language is not otherwise negated) and be coupled with a standard capable of judicial determination; or must contain specific language that a trustee’s discretion be exercised in a “reasonable” manner. While more common, these are likely not that prevalent either, especially as such relate to principal. The third classification is a discretionary interest. All distribution interests that are not either a mandatory or support distributions, and under which a trustee has any discretion to make or withhold a distribution, are discretionary interests. The fact that a standard, even one referring to “support,” is included in the distribution language will not convert a discretionary interest to a support interest unless the standard is coupled with mandatory language such as “shall make.” Moreover, even where such mandatory language is used, if such is negated (e.g., “shall make in the trustee’s discretion”) or subsequently qualified by discretionary language, the distribution interest is a discretionary interest and not a support or mandatory interest. Finally, should distribution language indicate any combination of a mandatory, support and discretionary interest, the combined interest is to be divided, with each distribution interest treated as the relevant type of distribution interest only to the extent of the respective different distribution language used. For all these reasons, the Tennessee Uniform Trust Code gravitates toward creation of discretionary interests versus support or mandatory interests. Under the definition of distribution interest in T.C.A. § 35-15-103 there are a number of examples of distribution language, which while not exclusive, indicates one of the three types of distribution interests. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Environmental law.” To encourage trustees to accept and administer trusts containing real property, the Tennessee Uniform Trust Code contains several provisions designed to limit exposure to possible liability for violation of environmental law. Section 701(c)(2) [T.C.A. § 35-15-701(c)(2) ] authorizes a nominated trustee to investigate trust property to determine potential liability for violation of environmental law or other law without accepting the trusteeship. Section 816(13) [T.C.A. § 35-15-816(b)(13) ] grants a trustee comprehensive and detailed powers to deal with property involving environmental risks. Finally, unlike Uniform Trust Code section 1010(b), T.C.A. § 35-15-1010 immunizes a trustee from personal liability for violation of environmental law arising from the ownership and control of trust property. “Excluded fiduciary.” This term is included to define any person who would otherwise meet the definition of fiduciary, but who is relieved in one of the prescribed manners from any power or duty normally held by such relevant fiduciary and that power or duty is granted or reserved to another person. Although T.C.A. § 35-15-103 only specifically includes any “trustee,” “trust advisor” or “trust protector” as being potential excluded fiduciaries, such section of the Tennessee Code should be read to include anyone who would otherwise meet the definition of fiduciary contained in T.C.A. § 35-15-103 , but who is relieved in one of the prescribed manners from any power or duty normally held by such relevant fiduciary and that power or duty is granted or reserved to another person. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Fiduciary.” This term is included for several reasons, including but not limited to: To facilitate drafting by providing an all-inclusive word meaning any person having fiduciary powers and duties under the Tennessee trust statutes. To cover trust advisors and trust protectors under part 12, or otherwise, if any of such are serving in a fiduciary capacity as provided in T.C.A. § 35-15-1202 or elsewhere under the Tennessee trust statutes. To assure that any person, regardless of the nomenclature by which that person is called, when holding powers and carrying out duties that are normally fiduciary in nature is a fiduciary, unless that person is an excluded fiduciary. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Foreign” or “foreign country.” The comments under “another state” or “other state” are incorporated herein by reference. The distinctive statutory definition of the word “foreign,” either by itself or followed by the word “country” is included to demarcate the different meaning of those words, particularly “foreign,” in the Tennessee trust statutes from the meaning generally ascribed to the term foreign in state statutes (including the Tennessee Code in places other than under the Tennessee trust statutes) and in state court holdings and similar rulings. Outside the Tennessee trust statutes, the word “foreign” is often used simply to denote another state of the United States. However, the appropriate term for such under the Tennessee trust statutes is “another state” or “other state,” while “foreign” either by itself or followed by “country” means a jurisdiction other than the United States or a state (as such is defined in T.C.A. § 35-15-103 ). Added by the 2013 amendments to Tennessee Uniform Trust Code. “Foreign jurisdiction.” The comments under “another state” or “other state,” under “foreign” or “foreign country,” as well as under “this state,” are incorporated herein by reference. By combining the word “foreign” with “jurisdiction,” the latter word being the generalized term for an area or matter under some domestic or foreign governmental control or authority, this statutory definition includes any jurisdiction (governmental authority) other than that of this state, the state of Tennessee. It is included for similar reasons as those set forth under “foreign” or “foreign country,” above. It is also included for drafting convenience. By simply stating “foreign jurisdiction” a drafter can mean any other jurisdiction than that of this state, Tennessee. Added by the 2013 amendments to Tennessee Uniform Trust Code. “Guardian.” Under the Tennessee Uniform Trust Code, both the term “guardian” and the term “conservator” have the same meaning as they respectfully do in T.C.A. § 34-1-101 . Under such section; guardian means a person or persons appointed by the court to provide partial or full supervision, protection and assistance of the person or property, or both, of a minor; while conservator means a person or persons appointed by the court to provide partial or full supervision, protection and assistance of the person or property, or both, of a disabled person. “Interests of the beneficiaries.” The phrase “interests of the beneficiaries” (subdivision (8)) [T.C.A. § 35-15-103(17) ] is used with some frequency in the Tennessee Uniform Trust Code. The definition clarifies that the interests are as provided in the terms of the trust and not as determined by the beneficiaries. Absent authority to do so in the terms of the trust, section 108 [T.C.A. § 35-15-108 ] prohibits a trustee from changing a trust's principal place of administration if the transfer would violate the trustee's duty to administer the trust at a place appropriate to the interests of the beneficiaries. Section 706(b) [T.C.A. § 35-15-706(b) ] conditions certain of the grounds for removing a trustee on the court's finding that removal of the trustee will best serve the interests of the beneficiaries. Section 801 [T.C.A. § 35-15-801 ] requires the trustee to administer the trust in the interests of the beneficiaries, and section 802 [T.C.A. § 35-15-802 ] makes clear that a trustee may not place its own interests above those of the beneficiaries. Section 808(d) [T.C.A. § 35-15-808(d) ] requires the holder of a power to direct who is subject to a fiduciary obligation to act with regard to the interests of the beneficiaries. T.C.A. § 35-15-1202 provides likewise. Section 1002(b) [T.C.A. § 35-15-1002(b) ] may impose greater liability on a cotrustee who commits a breach of trust with reckless indifference to the interests of the beneficiaries. Section 1008 [T.C.A. § 35-15-1008 ] invalidates an exculpatory term to the extent it relieves a trustee of liability for breach of trust committed with reckless indifference to the interests of the beneficiaries. “Internal Revenue Code.” The definition of “internal revenue code” was added to T.C.A. § 35-15-103 with the 2013 amendments to the Tennessee Uniform Trust Code. The term as now defined in T.C.A. § 35-15-103 appeared in certain sections throughout the Tennessee Uniform Trust Code, while in certain other places in the Tennessee Uniform Trust Code and its comments it was referred to generically as “Internal Revenue Code,” or by similar words or abbreviations therefor. The 2013 amendments included the term’s definition in T.C.A. § 35-15-103 to make it consistently applicable throughout the Tennessee Uniform Trust Code. Nevertheless, it is still appropriate to refer to the Internal Revenue Code by its initials “I.R.C.” or through a full citation to title 26 of the United States Code or an abbreviation thereof. Moreover, a citation to “Treas. Reg. §” is an appropriate way to cite to the regulations under the Internal Revenue Code, as is a full citation to title 26 of the Code of Federal Regulations or an abbreviation thereof. “Jurisdiction.” (subdivision (9) [T.C.A. 35-5-103(19) ], when used with reference to a geographic area, includes a state or country but is not necessarily so limited. Its precise scope will depend on the context in which it is used. “Jurisdiction” is used in sections 107 and 403 [T.C.A. §§ 35-15-107 and 35-15-403 ] to refer to the place whose law will govern the trust. The term is used in section 108 [T.C.A. § 35-15-108 ] to refer to the trust’s principal place of administration. The term is used in section 816 [T.C.A. § 35-15-816 ] to refer to the place where the trustee may appoint an ancillary trustee and to the place in whose courts the trustee can bring and defend legal proceedings. “Person.” The definition in T.C.A. § 35-15-103 is self sufficiently clear and needs no further explanation. “Power of appointment.” A power of appointment as defined in the Tennessee Uniform Trust Code is a matter of state property law and not federal tax law; although there is considerable overlap between the two definitions. A power of appointment is authority to designate the recipients of beneficial interests in property. See Restatement (Second) of Property: Donative Transfers § 11.1 (1986). A power is either general or nongeneral (such sometimes being called “special”) and either presently exercisable or not presently exercisable. A general power of appointment is a power exercisable in favor of the holder of the power, the power holder’s creditors, the power holder’s estate, or the creditors of the power holder’s estate. See Restatement (Second) of Property: Donative Transfers § 11.4 (1986). All other powers are nongeneral (such sometimes being called “special powers of appointment”). A power is presently exercisable if the power holder can currently create an interest, present or future, in an object of the power. A power of appointment is not presently exercisable if exercisable only by the power holder's will or if its exercise is not effective for a specified period of time or until occurrence of some event. See Restatement (Second) of Property: Donative Transfers § 11.5 (1986). Powers of appointment may be held in either a fiduciary or nonfiduciary capacity. The Tennessee Uniform Trust Code makes distinctions among types of powers. Under T.C.A. § 35-15-302 the holder of any type of power of appointment may represent and bind persons whose interests are subject to the power. A “power of withdrawal” is defined as a presently exercisable general power of appointment other than a power exercisable by a trustee and limited by an ascertainable standard, or a power which is exercisable by another person only upon consent of the trustee or a person holding an adverse interest. Finally, the Tennessee Uniform Trust Code makes two things crystal clear: A power of appointment, even when held by a trustee or other fiduciary, is different and distinct from any trustee’s or other fiduciary’s power to make decisions regarding distributions. Moreover, powers of appointment are held by the person to whom such power has been given in the distinct and singular capacity of a power holder. Therefore, if a settlor is given a power of appointment, such settlor holds that power of appointment as a power holder and not in that person’s capacity as settlor. Portions of the above (appropriately amended) were moved from the comment pertaining to beneficiary, while other portion of the above were added, both such types of changes were done to conform with the 2013 amendments to Tennessee Uniform Trust Code, which added a separate definition for “power of appointment.” “Power of withdrawal.” The definition of “power of withdrawal,” was amended in 2007 to exclude a possible inference that the term includes a discretionary power in a trustee to make distributions for the trustee’s own benefit which is limited by an ascertainable standard. This was done to clarify that if a beneficiary is serving as trustee or co-trustee and has discretion to make a distribution to himself or for his own benefit pursuant to an ascertainable standard, then the creditor cannot reach or compel a distribution except to the extent the interest would be subject to a creditor's claim if the beneficiary were not acting as trustee or co-trustee. “Property.” The definition of “property” (subdivision (12)) [T.C.A. § 35-15-103(23) ] is intended to be as expansive as possible and to encompass anything that may be the subject of ownership. Included are choses in action, claims, and interests created by beneficiary designations under policies of insurance, financial instruments, and deferred compensation and other retirement arrangements, whether revocable or irrevocable. Any such property interest is sufficient to support creation of a trust. See section 401 Section Comment [T.C.A. § 35-15-401 ]. “Qualified beneficiary.” Due to the difficulty of identifying beneficiaries whose interests are remote and contingent, and because such beneficiaries are not likely to have much interest in the day-to-day affairs of the trust, the Tennessee Uniform Trust Code uses the concept of “qualified beneficiary” (subdivision (12) [§ T.C.A. 35-15-103(24) ]) to limit the class of beneficiaries to whom certain notices must be given or consents received. The definition of qualified beneficiaries is used in section 705 [T.C.A. § 35-15-705 ] to define the class to whom notice must be given of a trustee resignation. The term is used in section 813 [T.C.A. § 35-15-813 ] to define the class that generally has the right to request from a trustee information regarding the trust’s administration. Section 417 [T.C.A. § 35-15-417 ] requires that notice be given to the qualified beneficiaries before a trust may be combined or divided. Actions which may be accomplished by the consent of the qualified beneficiaries include the appointment of a successor trustee as provided in section 704 [T.C.A. § 35-15-704 ], as well as the appointment of successor trust advisors and trust protectors. Prior to transferring a trust’s principal place of administration, T.C.A. § 35-15-108 requires that the trustee give at least 60 days notice to the qualified beneficiaries. According to ULC - NCCUSL, the qualified beneficiaries consist of the beneficiaries currently eligible to receive a distribution from the trust together with those who might be termed the first-line remaindermen. These are the beneficiaries who would become eligible to receive distributions were the event triggering the termination of a beneficiary’s interest or of the trust itself to occur on the date in question. Such a terminating event will typically be the death or deaths of the beneficiaries currently eligible to receive the income. Should a qualified beneficiary be a minor, incapacitated, or unknown, or a beneficiary whose identity or location is not reasonably ascertainable, the representation and virtual representation principles of part 3 [T.C.A. §§ 35-15-301 – 35-15-305 ] may be employed, including the possible appointment by the court of a representative to represent the beneficiary’s interest. According to ULC - NCCUSL, the qualified beneficiaries who take upon termination of the beneficiary’s interest or of the trust can include takers in default of the exercise of a power of appointment. The term can also include the persons entitled to receive the trust property pursuant to the exercise of a power of appointment. Because the exercise of a testamentary power of appointment is not effective until the testator’s death and probate of the will, the qualified beneficiaries do not include appointees under the will of a living person. Nor would the term include the objects of an unexercised inter vivos power. The Tennessee Uniform Trust Code generally follows ULC - NCCUSL’s position as expressed in the prior two paragraphs. However, the group of persons who potentially qualify as qualified beneficiaries under Tennessee law is meaningfully smaller. Under the Tennessee Uniform Trust Code, as of any (and as of each) point in time at which it is necessary to determine which beneficiaries are qualified beneficiaries you do so assuming the following two things (neither of which are required by the Uniform Trust Code): any and all then existing powers of appointment will not be exercised; and any event then not reasonably expected to occur will not occur. Moreover, under its definition of “qualified beneficiary” the Tennessee Uniform Trust Code provides that no ultimate beneficiary or potential ultimate beneficiary can ever be a qualified beneficiary or have the rights thereof. Additionally, no ultimate beneficiary or potential ultimate beneficiary has the standing to petition to remedy a breach of trust or to enforce a trust; the interests of such beneficiary being too remote. Notwithstanding the preceding portion of this paragraph, if and when the interests of any ultimate, or potential ultimate, beneficiary have ripened to the point that such beneficiary is eligible to receive, or have paid for their benefit, current distributions of income or principal, at such time they will no longer be an “ultimate beneficiary” or “potential ultimate beneficiary.” At such time such beneficiary has all the rights of any other current beneficiary of the same type, charitable or non-charitable. Similarly if a trust for animals or a trust for a noncharitable purpose (individually and collectively, “purpose trust”) is an ultimate, or potential ultimate, beneficiary, the rights of any person provided in [either] T.C.A. § 35-15-408 or § 35-15-409 to enforce the trust under which such purpose trust is an ultimate, or potential ultimate beneficiary will not ripen until such purpose trust is eligible to receive from the trust under which it was previously an ultimate, or potential ultimate, beneficiary, current distributions of income or principal. 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.