(a) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:

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Terms Used In Tennessee Code 35-15-505

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Beneficiary: means a person that has a present or future beneficial interest in a trust, vested or contingent. See Tennessee Code 35-15-103
  • Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
  • Decedent: A deceased person.
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Fiduciary: means :
    (A) 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. See Tennessee Code 35-15-103
  • Fiduciary: A trustee, executor, or administrator.
  • Inter vivos: Transfer of property from one living person to another living person.
  • Irrevocable trust: A trust arrangement that cannot be revoked, rescinded, or repealed by the grantor.
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • Person: means an individual. See Tennessee Code 35-15-103
  • Personal representative: when applied to those who represent a decedent, includes executors and administrators, unless the context implies heirs and distributees. See Tennessee Code 1-3-105
  • Power of appointment: means :
    (A) 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. See Tennessee Code 35-15-103
  • Power of withdrawal: means a presently exercisable general power of appointment other than a power:
    (A) Exercisable by a trustee and limited by an ascertainable standard. See Tennessee Code 35-15-103
  • Probate: Proving a will
  • Property: means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest therein. See Tennessee Code 35-15-103
  • 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). See Tennessee Code 35-15-103
  • Record: means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in a perceivable form. See Tennessee Code 1-3-105
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • Revocable trust: A trust agreement that can be canceled, rescinded, revoked, or repealed by the grantor (person who establishes the trust).
  • Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
  • Settlor: means a person, including a testator, who creates, or contributes property to, a trust. See Tennessee Code 35-15-103
  • Spendthrift provision: means a term of a trust which restrains both voluntary and involuntary transfer of a beneficiary's interest. See Tennessee Code 35-15-103
  • 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. See Tennessee Code 35-15-103
  • 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. See Tennessee Code 35-15-103
  • This state: means the state of Tennessee. See Tennessee Code 35-15-103
  • Trust advisor: means any person described in §. See Tennessee Code 35-15-103
  • Trust instrument: means an instrument executed by the settlor that contains terms of the trust, including any amendments thereto. See Tennessee Code 35-15-103
  • Trust protector: means any person described in §. See Tennessee Code 35-15-103
  • Trustee: A person or institution holding and administering property in trust.
  • Trustee: includes an original, additional, and successor trustee, and a cotrustee. See Tennessee Code 35-15-103
(1) During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors;
(2) Except as provided in chapter 16 of this title regarding investment services trusts and subdivisions (a)(3)-(5) regarding an irrevocable special needs trust, a creditor or assignee of the settlor of an irrevocable trust may reach the maximum amount that can be distributed to or for the settlor’s benefit. If a trust has more than one (1) settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor’s interest in the portion of the trust attributable to that settlor’s contribution;
(3) For the purposes of this section, “irrevocable special needs trust” means an irrevocable trust established for the benefit of one or more disabled persons, which includes, but is not limited to, any individual who is disabled pursuant to 42 U.S.C. § 1382c(a), as well as any individual who is disabled pursuant to any similar federal, state or other jurisdictional law or regulation, or has a condition that is substantially equivalent to one that qualifies them to be so disabled in accordance with any of the above even if not officially found to be so disabled by a governmental body if one of the purposes of the trust, expressed in the trust instrument or implied from the trust instrument, is to allow the disabled person to qualify or continue to qualify for public, charitable or private benefits that might otherwise be available to the disabled person. The existence of one or more nondisabled remainder beneficiaries of the trust shall not disqualify it as an irrevocable special needs trust for the purposes of this section;
(4) No creditor or assignee of the settlor of an irrevocable special needs trust, as defined in subdivision (a)(3), may reach or compel distributions from such special needs trust, to or for the benefit of the settlor of such special needs trust, or otherwise, regardless of whether or not such irrevocable special needs trust complies with, and irrespective of the requirements of, chapter 16 of this title;
(5) Notwithstanding any law to the contrary, neither a creditor nor any other person shall have any claim or cause of action against the trustee or other fiduciary, or an advisor of an irrevocable special needs trust. For purposes of this subdivision (a)(5), an advisor of an irrevocable special needs trust includes any person involved in the counseling, drafting, preparation, execution or funding of an irrevocable special needs trust; and
(6) After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable immediately preceding the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate and the expenses of the settlor’s funeral and disposal of remains. With respect to claims, expenses, and taxes in connection with the settlement of the settlor’s estate, any claim of a creditor that would be barred against the fiduciary of a settlor’s estate, the estate of the settlor, or any creditor or beneficiary of the settlor’s estate shall be barred against the trust property of a trust that was revocable at the settlor’s death, the trustee of the revocable trust, and the creditors and beneficiaries of the trust. The provisions of § 30-2-317(a) detailing the priority of payment of claims, expenses, and taxes from the probate estate of a decedent shall apply to a revocable trust to the extent the assets of the settlor’s probate estate are inadequate and the personal representative or creditor or taxing authority of the settlor’s estate has perfected its right to collect from the settlor’s revocable trust.
(b)[Deleted by 2024 amendment]
(c) For purposes of subdivision (a)(2), the power of a trustee of an irrevocable trust, whether arising under the trust agreement or any other provision of the law, to make a distribution to or for the benefit of a settlor for the purpose of reimbursing the settlor in an amount equal to any income taxes payable on any portion of the trust principal and income that are includable in the settlor’s personal income under applicable law, as well as distributions made by the trustee pursuant to such authority, shall not be considered an amount that may be distributed to or for the settlor’s benefit.
(d) With respect to an irrevocable trust for which the settlor made a qualified election pursuant to 26 U.S.C. § 2523(f), the power of a trustee, and any benefit resulting to the settlor from any exercise of such power, whether arising under the trust agreement or any other provision of the law, to make a distribution to or for the benefit of a settlor or to otherwise permit the settlor to use or benefit from trust property following the death of the settlor’s spouse, shall not be considered an amount that may be distributed to or for the settlor’s benefit for purposes of subdivision (a)(2). This subsection (d) shall not limit a creditor’s remedies under the Uniform Fraudulent Transfer Act, compiled in title 66, chapter 3, part 3, regarding the settlor’s transfers to such trust.
(e) For purposes of subdivision (a)(2) and subsection (g), a person who is the holder of a power of withdrawal is not considered a settler of the trust by failing to exercise that power of withdrawal, letting that power of withdrawal lapse, or releasing or waiving that power of withdrawal.
(f) For purposes of subdivision (a)(2) and subsection (g), a person who becomes a beneficiary of a trust due to the exercise of a power of appointment by someone other than such person shall not be considered a settlor of the trust.
(g)

(1) Notwithstanding § 66-3-310, no person shall bring an action with respect to a transfer of property to a spendthrift trust:

(A) If the person is a creditor when the transfer is made, unless the action is commenced within the later of two (2) years after the transfer is made or six (6) months after the person discovers or reasonably should have discovered the transfer; or
(B) If the person becomes a creditor after the transfer is made, unless the action is commenced within two (2) years after the transfer is made.
(2) If subdivision (g)(1) applies:

(A) A person shall be deemed to have discovered the existence of a transfer at the time any public record is made of the transfer, including but not limited to, a conveyance of real property that is recorded in the office of the county register of deeds of the county in which the property is located or the filing of a financing statement under title 47, chapter 9, or the equivalent recording or filing of either with the appropriate person or official under the laws of a jurisdiction other than this state; and
(B)

(i) No creditor shall bring an action with respect to a transfer of property to a spendthrift trust unless that creditor proves by clear and convincing evidence that the settlor’s transfer to the trust was made with the intent to defraud that specific creditor;
(ii) Notwithstanding any law to the contrary, neither a creditor nor any other person shall have any claim or cause of action against the trustee or other fiduciary or an advisor of a spendthrift trust if that claim or cause of action is based in any way on any person availing themselves of the benefits of this subsection (g);
(iii) For purposes of subdivision (g)(2)(B)(i), an advisor of a spendthrift trust includes, but is not limited to, any person involved in the counseling, drafting, preparation, execution or funding of a spendthrift trust;
(iv) For purposes of subdivision (g)(2)(B)(ii), counseling, drafting, preparation, execution or funding of a spendthrift trust includes the counseling, drafting, preparation, execution and funding of a limited partnership, a limited liability company or any other type of entity if interests in the limited partnership, limited liability company or other entity are subsequently transferred to a spendthrift trust.
(3) Notwithstanding subdivision (g)(2)(B), in the same manner as provided other than by this section to trusts in general, a beneficiary, settlor, cotrustee, trust advisor or trust protector retains the right to bring a claim against a trustee or against another cotrustee, trust advisor, trust protector or any of their predecessors; however, no such claim shall arise solely because a person availed themselves, or attempted to avail themselves, of the benefits of this subsection (g).
(4) If more than one transfer of property is made to a spendthrift trust, the subsequent transfer of property to the spendthrift trust shall be disregarded for the purpose of determining whether a person may bring an action pursuant to this subsection (g) with respect to a prior transfer of property to the spendthrift trust; and any distribution to a beneficiary from the spendthrift trust shall be deemed to have been made from the most recent transfer made to the spendthrift trust.
(5) With the exception of any claim brought pursuant to subdivision (g)(3), notwithstanding any other law, no action of any kind, including, without limitation, an action to enforce a judgment entered by a court or other body having adjudicative authority, shall be brought at law or in equity against the trustee, other fiduciary or advisor of a spendthrift trust if, as of the date such action is brought, an action by a creditor with respect to a transfer of property to the spendthrift trust would be barred pursuant to this subsection (g).
(6) This subsection (g) shall not abridge the rights of a creditor, to the extent otherwise provided by this section, to reach the maximum amount that can be distributed to or for the settlor’s benefit under a spendthrift trust.
(h) For purposes of this section, a person is not considered the settlor or deemed settlor of an irrevocable inter vivos trust if the person is a beneficiary with respect to property that was contributed to the trust by the person’s spouse, regardless of whether or when the person was a settlor of an irrevocable inter vivos trust for the benefit of the person’s spouse. For purposes of this subsection (h), “person’s spouse” means the individual to whom the person was married at the time the irrevocable inter vivos trust was created, regardless of a subsequent dissolution of the marriage.
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