Tennessee Living Trust - Laws, cost, benefits, and trustee duties

A Tennessee living trust is an important asset protection and estate planning tool. Tennessee's trust laws are complex, so it is difficult for a common man to form a trust. But with the proper supervision, it can be done. You may easily create an estate plan and distribute assets to the beneficiaries after your death.

What Is a Living Trust?

A "living" trust (also known as an "inter vivos" trust) is a legal setup. As a grantor you create a trust while being alive. After your death the living trust beneficiaries receive the properties. You can use a Will and distribute your properties. However, to get your assets, the beneficiaries must go through the probate process as per federal law. Probate is a judicial process that follows a uniform probate code and transfers property to beneficiaries.

In Tennessee, there are primarily two types of Trusts: Revocable and Irrevocable trusts.

Choosing a revocable or irrevocable trust may depend on factors such as:

• Family situation
• Proper asset allocation to family members
• Family wealth composition
• Desire to control family assets

Revocable living trust

A revocable living trust in Tennessee is a comfortable option for estate planning. It allows you to change or cancel the trust at any moment. The main benefits of a Tennessee revocable trust are maintaining estate privacy and avoiding probate.

As a grantor, you should:

• Write a revocable trust agreement
• Select a trustee
• Transfer assets to a revocable living trust

You should remember that after the death of a grantor, a Tennessee revocable trust becomes irrevocable.

Irrevocable living Trust

Tennessee irrevocable trusts cannot be changed or canceled. They can only be changed if the trustee and beneficiary give permission. The main benefits of a Tennessee irrevocable trust are removing legal ownership of assets and protecting them from creditors.

Tennessee irrevocable trusts include:

Irrevocable gift trust

The client transfers family money to a spouse, children, and grandkids while protecting it.

Irrevocable life insurance trusts

Irrevocable life insurance trusts can remove life insurance policies from a grantor's taxable inheritance.

Qualified personal residence trusts

It can transfer a grantor's home into a trust, removing it from their taxable estate.

Grantor-retained annuity trusts

A grantor receives annual payments for a particular period. At the end of the term, the residual assets pass to beneficiaries in an estate tax-favored manner.

Charitable remainder trusts

It usually distributes a certain part of trust assets to the beneficiaries. The beneficiaries could be anyone, such as the grantor, spouse, or children. If no one claims it for a set of time, then it will go to a charity. A charitable remainder trust can give the grantor an income tax charitable gift deduction. The charity will receive trust assets after a long period.

Tennessee has two more trusts: Asset Protection and Investment Services Trusts.

Asset Protection Trust

This trust protects your assets from creditors. It also provides some control to the grantor. It's ideal for protecting and managing assets.

Investment Services Trust

It is also called a TIST trust. A grantor can protect investment assets through this self-settled asset protection trust. The TIST trust is suitable for high-net-worth individuals and provides decent tax benefits.

Tennessee has two more trusts: Asset Protection and Investment Services Trusts.

Asset Protection Trust

This trust protects your assets from creditors. It also provides some control to the grantor. It's ideal for protecting and managing assets.

Investment Services Trust

It is also called a TIST trust. A grantor can protect investment assets through this self-settled asset protection trust. The TIST trust is suitable for high-net-worth individuals and provides decent tax benefits.

Should I have a living trust in Tennessee?

A living trust has several benefits and is easy to use. It also provides privacy. On the other hand, Wills are always public when probated. They also reveal your assets, beneficiaries, or distribution dates. Living trusts are tougher to dispute compared to Wills.

Living trusts give you complete control over your assets during and after death. While you're alive, the trust owns the assets. Still, as a grantor, you have control. You may appoint a trustee to manage and distribute your assets. He will distribute your assets to your beneficiaries at a specified time after your death. However, a legal Will distributes assets after probate, limiting your options.

How much does a Tennessee trust cost?

The cost of setting up a living trust may differ depending on the complexity, service route you choose, location, lawyer fees, and asset retitling costs. If you choose to do it without an attorney, you'll save a lot from the high lawyer fees. An estate planning attorney may charge $1,000 or more (double for couples). If you choose online programs, it will cost only a few hundred dollars.

If you feel uncomfortable doing it alone, get help from a trust specialist lawyer. Discuss fees upfront. If they charge a flat fee, make sure it includes the cost of asset retitling. Ask the attorney about the projected timeline and overrun fees if they charge you hourly.

Tennessee Living Trusts: How do I create one?

To create a Tennessee Living Trust you should follow several stages:

Choose your Trust type

You may select a revocable living trust or an irrevocable trust. However, a revocable living trust is more flexible than the other.

Designate a Trustee

People can become self-appointed trustees. However, a grantor can also assign a financial institution to that position. You should choose a successor trustee. This way you may manage the Trust in case of death or incapacity.

Assign your beneficiaries

Choose your beneficiaries carefully. You may choose your family and friends or add some charitable organizations.

Add Specific Assets (Optional)

Some options let you add and track all Trust assets. Create specific criteria for who should receive them and when.

Prepare the Trust Document

It is a legal document carrying all the details of the Trust. It also includes the trustee's rights, instructions regarding asset distribution, and other provisions. An expert estate planning attorney may help you create the Trust agreement by following all the laws.

Notarize and execute the Trust

As per Tennessee law, you must sign your trust document before a notary public. Notarization helps you pass any Trust validity issues.

Fund the Trust

Transfer assets and investments into the Trust. You should also change the real estate titles, add account beneficiaries, or modify trust ownership rights as per your requirements.

Tennessee Living Trust benefits

• A living trust can help you to avoid probate. Probate is an expensive process. It also takes long to execute. So, creating a living trust saves that cost and time.
• A living trust keeps asset details secret, unlike a Will. Details of a Will become public once submitted to probate court.
• A living trust lets you arrange for provisions if you become mentally or physically unstable. A successor trustee can handle your assets without a court-appointed guardian or conservator.
• You can add your assets and easily manage them in a Trust. You may also revoke revocable trusts.
• You may get inheritance tax advantages for larger estates. Check your financial situation and estate tax rules.

Can a Tennessee Living Trust Lower Estate Tax?

Tennessee living trusts can not lower your estate tax. The federal estate tax applies only to estates over $12 million. 2022 and 2023 exemptions are $12.06 million and $12.92 million (doubled for married couples filing jointly). Tennessee eliminated its state estate tax in 2016.

A QTIP trust, or an AB or marital trust, avoids estate tax when assets are given to a surviving spouse.

Do you need a Will along with a living Trust in Tennessee?

You should have a Will in Tennessee. Once the grantor dies, non-trust assets can't be distributed. With a Will, you can transfer non-trust assets to the beneficiaries. Parents with minor children should draft a Will to assign a guardian.

What happens with a Tennessee Living Trust when the grantor dies?

When the grantor dies, the successor trustee manages and distributes the trust property. These are the steps:

Notification of Death of the Grantor

The original trustee or successor trustee should be notified immediately of the death.

Review of the Trust Document

The trustee should read the trust document carefully and understand trustee duties. He must also check all the provisions and beneficiaries' rights.

Collection of Important Documents

The trustee should collect the trust agreement, death certificates, financial accounts, and asset inventories.

Inform Original Beneficiaries

The trustee must send a notification to the trust beneficiaries and the deceased's legal heirs. The notification must describe all the details of the Trust and should be sent within 60 days of death. The recipients may request a copy of the Trust agreement.

Trust Asset Inventory and Evaluation

The trustee should draft a list of all trust assets and may need to determine their value through appraisal.

Debt and expense settlement

The trustee must pay the deceased's rightful debts and trust administrative costs. It must be done before transferring assets to the beneficiaries.

Tax Obligations

The trustee should file final personal income tax returns on behalf of the deceased. If the Trust has income or the estate exceeds federal estate tax thresholds, the trustee should also file Trust and estate taxes.

Asset Distribution to Beneficiaries

After paying debts, taxes, and expenditures, the trustee will distribute the remaining assets to beneficiaries as per the trust instructions.

Finishing Trust Administration

After the distribution of assets and other trust tasks are done, the trustee can end the trust administration. The trustee may provide the beneficiaries with the details of all financial transactions that occurred during administration.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.