Tennessee § 35-15-108 - Place of administration — Sufficient nexus for a state jurisdiction provision — Transfer of place of administration.

§ 35-15-108. Place of administration — Sufficient nexus for a state jurisdiction provision — Transfer of place of administration.

Without limiting or precluding other means for establishing a sufficient connection with a jurisdiction, the terms of a trust designating that jurisdiction's laws in a state jurisdiction provision are valid and controlling if: A trustee's principal place of business is located in or a trustee is a resident of the designated jurisdiction; or All or part of the administration occurs in the designated jurisdiction; which such administration, includes but is not limited to: Maintenance of some trust records physically in the designated jurisdiction; and Wholly or partly preparing or arranging for the preparation, either on an exclusive or a nonexclusive basis, in the designated jurisdiction of an income tax return that must be filed by the trust; or Some or all of the trust assets are deposited in the designated jurisdiction or physical evidence of such assets is held in the designated jurisdiction and the trust is being administered by a person defined in subdivision (a)(1). For purposes of this subdivision (a)(3), “deposited in the designated jurisdiction,” includes assets being held in any of a checking account, time deposit, certificate of deposit, brokerage account, trust company fiduciary account, or other similar account or deposit that is located in the designated jurisdiction. Except as otherwise expressly provided by the terms of a governing instrument specifically addressing the governing law for trust administration or by court order, the laws of this state shall govern the administration of a trust while the trust is administered in this state. Without precluding other means for establishing that a trust is administered in this state, if any of the activities described in subsection (a) occur in this state, the trust is administered in this state. A trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries. Without precluding the right of the court to order, approve, or disapprove a transfer, the trustee, in furtherance of the duty prescribed by subsection (c), may transfer the trust's principal place of administration to another state or to a jurisdiction outside of the United States. The trustee shall notify the qualified beneficiaries of a proposed transfer of a trust's principal place of administration not less than sixty (60) days before initiating the transfer. The notice of proposed transfer must include: The name of the jurisdiction to which the principal place of administration is to be transferred; The address and telephone number at the new location at which the trustee can be contacted; An explanation of the reasons for the proposed transfer; The date on which the proposed transfer is anticipated to occur; and The date, not less than sixty (60) days after the giving of the notice, by which the qualified beneficiary must notify the trustee of an objection to the proposed transfer. The authority of a trustee under this section to transfer a trust's principal place of administration terminates if a majority of those qualified beneficiaries described in § 35-15-103 notify the trustee of an objection to the proposed transfer on or before the date specified in the notice. In connection with a transfer of the trust's principal place of administration, the trustee may transfer some or all of the trust property to a successor trustee designated in the terms of the trust or appointed pursuant to § 35-15-704. Acts 2004, ch. 537, § 9; 2013, ch. 390, §§ 9, 10. 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 substantially rewrote the previous subsection (a) of 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(a) of the Uniform Trust Code, as well as the comments thereunder, irrelevant to the current T.C.A. § 35-15-108 . The Tennessee Uniform Trust Code allows any person having the requisite nexus with a jurisdiction to choose that jurisdiction’s law as controlling over a trust. Such requisite nexus is provided in T.C.A. § 35-15-108(a) and is defined in the broadest and most flexible terms. Relative to a state jurisdiction provision, designating the principal place of administration should be distinguished from designating the law to determine the meaning and effect of the trust's terms. A settlor is free in a state jurisdiction provision to designate one jurisdiction as the principal place of administration and another to govern the meaning and effect of the trust's provisions. Moreover, to the extent not otherwise provided in a state jurisdiction provision and to the greatest extent possible, T.C.A. § 35-15-108(b) provides that the principal place of administration of a trust is Tennessee if all or part of such administration takes place in Tennessee. Locating a trust’s principal place of administration may also be important for other matters, such as payment of state income tax. The fixing of a trust's principal place of administration will also determine where the trustee and beneficiaries have consented to suit under T.C.A. §§ 35-15-107 and 35-15-202 , as well as the rules for locating venue under T.C.A. § 35-15-204 . Notwithstanding the above, the remainder of T.C.A. § 35-15-108 provides that a trustee has a continuing duty to administer the trust in a jurisdiction that is appropriate. Moreover, such section provides a relatively simple procedure by which the trustee (or appropriate fiduciary) of a trust may transfer its principal place of administration to another jurisdiction within or without the United States. Use of this procedure is more readily available under the Tennessee Uniform Trust Code than under the Uniform Trust Code. Under the latter, the power to so transfer can be blocked by the objection of a single qualified beneficiary. On the contrary, the Tennessee Uniform Trust Code requires that a majority of the qualified beneficiaries object to such transfer or it will proceed. Unless provided otherwise hereinafter, any reference to “subsection” or “subdivision” means such portion of T.C.A. § 35-15-108 . Subsection (a) provides a non-exclusive list of factors containing the requisite nexus with a jurisdiction to choose that jurisdiction’s law as controlling over a trust. Having chosen such jurisdiction, a settlor can then designate that juris-diction law control law by including a state jurisdiction provision in a trust per T.C.A. § 35-15-107 . Subsection (b) provides that unless expressly specified otherwise in a trust instrument or by court order, Tennessee law governs the administration of a trust while such trust is administered in this state. Without precluding other means to establish that a trust is being administered in this state, the occurrence in Tennessee of any of the factors listed in subsection (a) causes the trust to be administered in Tennessee. Subsection (c) provides that a trustee is under a continuing duty to administer the trust at a place appropriate to its purposes, its administration, and the interests of the beneficiaries. “Interests of the beneficiaries,” defined in T.C.A. § 35-15-103 , means the beneficial interests provided in the terms of the trust. Ordinarily, absent a substantial change or circumstances, the trustee may assume that the original place of administration is also the appropriate place of administration. The duty to administer the trust at an appropriate place may also dictate that the trustee not move the trust. Subsections (d)-(g) provide a procedure for changing the principal place of administration to another state or country. Such changes are often beneficial. A change may be desirable for any number of reasons, the following of which is a non-exhaustive list: to secure a lower state income tax rate; to obtain more favorable creditor protection; to extend any applicable rule against perpetuities; to avoid any prohibition on trust accumulations; to obtain or maintain the traditional common law distinction among mandatory, support and discretionary interests and trusts; to avoid any 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 (e.g., forced heirship); because of relocation of the trustee or beneficiaries; the appointment of a new trustee; or a change in the location of the trust investments. The procedure for transfer specified in this section applies only in the absence of a contrary provision in the terms of the trust. See T.C.A. § 35-15-105 . To facilitate transfer in the typical case, where there is general concurrence that a transfer is either desirable or is at least not harmful, a transfer can be accomplished without court approval unless a majority of qualified beneficiary objects. To allow the qualified beneficiaries described in T.C.A. § 35-15-103 sufficient time to review a proposed transfer, the trustee must give such qualified beneficiaries at least 60 days prior notice of the transfer. Notice must be given not only to qualified beneficiaries as defined in T.C.A. § 35-15-103 but also to those granted the rights of qualified beneficiaries under T.C.A. § 35-15-110 . To assure that those receiving notice have sufficient information upon which to make a decision, minimum contents of the notice are specified. If a majority of the qualified beneficiary described in T.C.A. § 35-15-103 objects, a trustee wishing to proceed with the transfer must seek court approval. In connection with a transfer of the principal place of administration, the trustee may transfer some or all of the trust property to a new trustee located outside of this state. The appointment of a new trustee may also be essential if the current trustee is ineligible to administer the trust in the new jurisdiction. Subsection (g) clarifies that the appointment of the new trustee must comply with the provisions on appointment of successor trustees as provided in the terms of the trust or under T.C.A. § 35-15-704 . Absent an order of succession in the terms of the trust, T.C.A. § 35-15-704 contains separate procedures for appointment of a successor trustee of a noncharitable trust and for appointment of a successor trustee of a charitable trust. While transfer of the principal place of administration will normally change the governing law with respect to administrative matters, a transfer does not normally alter the controlling law with respect to the validity of the trust and the construction of its dispositive provisions. See 5A Austin W. Scott & William F. Fratcher, The Law of Trusts § 615 (4th ed. 1989) as well as 7 A. W. Scott, W. F. Fratcher & M. L. Ascher, Scott and Ascher on Trusts § 45.5.3.2 (5th ed. 2010). 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.