Tennessee § 35-15-413 - Cy pres.

§ 35-15-413. Cy pres.

Except as otherwise provided in subsection (b), if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, obsolete or ineffective: The trust does not fail, in whole or in part; The trust property does not revert to the settlor or the settlor’s successors in interest; and The court may apply cy pres to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner that fulfills as nearly as possible the settlor’s charitable intent and purposes. A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under subsection (a) to apply cy pres to modify or terminate the trust only if, when the provision takes effect: The trust property is to revert to the settlor and the settlor is still living; or Fewer than twenty-one (21) years have elapsed since the date of the trust’s creation. Acts 2004, ch. 537, § 35; 2013, ch. 390, §§ 13, 14. 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or prejudice the rights of the parties, in which case the particular provision of the act does not apply and the superseded law applies; Any rule of construction or presumption provided in the act applies to trust instruments executed before July 1, 2013, unless there is a clear and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. 6 Tenn. Juris., Charities, §§ 4, 5. Section Comment. Unless provided otherwise hereinafter, any reference to “section,” “subsection” or “subdivision” means all, or such portion of, T.C.A. § 35-15-413 . The provisions of this section in some ways diverge from the Uniform Trust Code and the restatements. To the ex-tent 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) codifies the court's inherent authority to apply cy pres. The power may be applied to modify an administrative or dispositive term. The court may order the trust terminated and distributed to other charitable entities. Partial termination may also be ordered if the trust property is more than sufficient to satisfy the trust's current purposes. Subsection (a), which is similar to Restatement (Third) of Trusts § 67 (Tentative Draft No. 3, approved 2001), modifies the doctrine of cy pres by presuming that the settlor had a general charitable intent when a particular charitable purpose becomes impossible or impracticable to achieve. Traditional doctrine did not supply that presumption, leaving it to the courts to determine whether the settlor had a general charitable intent. If such an intent is found, the trust property is applied to other charitable purposes. If not, the charitable trust fails. See Restatement (Second) of Trusts § 399 (1959). In the great majority of cases the settlor would prefer that the property be used for other charitable purposes. Courts are usually able to find an appropriate charitable purpose to which to apply the property, no matter how vaguely such purpose may have been expressed by the settlor. In keeping with the 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, subsection (a) states if the particular purpose for which the trust was created becomes impracticable, unlawful, impossible to achieve, obsolete or ineffective, the trust does not fail. The court instead must either: (a) modify the terms of the trust; or (b) distribute the property of the trust; in either case in a manner that fulfills as nearly as possible the settlor's charitable intent and purposes. Unlike in the Uniform Trust Code and the Restatement (Third) of Trusts, subsection (a) of this section does not contain the word “wasteful,” and substitutes the words “obsolete or ineffective” as grounds for modification or termination because the word “wasteful” is believed to be too vague and subject to too broad of interpretation. Also unlike the Uniform Trust Code, which only requires that the manner of any modification or termination be “consistent with the settlor’s charitable purposes,” subsection (a) requires that any such modification or termination be effected in a manner “that fulfills as nearly as possible the settlor’s intent and purposes.” The Tennessee Uniform Trust Code believes that such requirement of subsection (a) is far less likely to effect a modification or termination that strays from a settlor’s intent and purposes and therefore results in favoring some watered down, vague and general, charitable purpose. The settlor, with one exception, may mandate that the trust property pass to a noncharitable beneficiary upon failure of a particular charitable purpose (as such is defined in subsection (a) of this section). Responding to concerns about the clogging of title and other administrative problems caused by remote default provisions upon failure of a charitable purpose (as such is defined in subsection (a) of this section), subsection (b) invalidates a gift over to a noncharitable beneficiary upon such failure unless the trust property is to revert to a still living settlor or fewer than 21 years have elapsed since the trust's creation. Subsection (b) will not apply to a charitable lead trust, under which a charity receives payments for a term certain with a remainder to a noncharity. In the case of a charitable lead trust, the settlor's particular charitable purpose does not fail upon completion of the specified trust term and distribution of the remainder to the noncharity. Upon completion of the specified trust term, the settlor's particular charitable purpose has instead been fulfilled. For a discussion of the reasons for a provision such as subsection (b), see Ronald Chester, Cy Pres of Gift Over: The Search for Coherence in Judicial Reform of Failed Charitable Trusts, 23 Suffolk U. L. Rev. 41 (1989). The doctrine of cy pres is applied not only to trusts, but also to other types of charitable dispositions, including those to charitable corporations. This section does not control dispositions made in nontrust form. However, in formulating rules for such dispositions, the courts often refer to the principles governing charitable trusts, which would include the Tennessee Uniform Trust Code. For the definition of charitable purpose, see T.C.A. § 35-15-405 . Pursuant to T.C.A. §§ 35-15-405 and 35-15-410 , a petition requesting a court to enforce a charitable trust or to apply cy pres may be maintained by a settlor. Under the Tennessee Uniform Trust Code, such action can also be maintained by a cotrustee, the Tennessee attorney general, or by a person having a special interest in the charitable disposition. See Restatement (Second) of Trusts § 391 (1959). Moreover, under the Tennessee Uniform Trust Code, such action can also be maintained by a trust advisor or trust protector, if either holds the power to do so. 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.