Tennessee Living Trust

Introduction

Key Things to Know

1. 1

   Deeding your Tennessee home into your living trust forfeits the state's homestead creditor exemption. Tenn. Code Ann. Section 26-2-301(d) extinguishes homestead protection on 'a deed, installment deed, mortgage, deed of trust, or any other deed or instrument by any other name whatsoever' conveying the homestead property, and no exception was found for a transfer into the grantor's own revocable trust, unlike Arizona's statute, which expressly preserves the exemption for a trust the owner can revoke. The exemption's dollar figure was raised by 2021 legislation (Pub. Ch. 301); confirm the current codified amount with an attorney before relying on it.

2. 2

   A Tennessee living trust avoids probate only for assets you actually transfer into it. Since a 2017 amendment, Tenn. Code Ann. Section 35-15-402(d) requires that any asset capable of registration, such as real estate, stocks, bonds, or a bank or brokerage account, be retitled or recorded in the trustee's name; a bare recital of assignment in the trust document alone does not move it, and anything left in your own name still goes through probate.

3. 3

   Tennessee imposes no notary, witness, or will-formality requirement to create the trust itself. Section 35-15-402(a) lists only five creation requirements: settlor capacity, intent, a definite beneficiary, a trustee with duties to perform, and that the same person is not sole trustee and sole beneficiary. But the certification of trust a bank will actually ask you for under Section 35-15-1013 must be signed by the trustee and attested by a notary public, even though the trust behind it needs no notary at all.

4. 4

   Tennessee is one of roughly 20 states that allow a self-settled asset-protection trust, but it is a separate, irrevocable instrument, not your revocable living trust. Under the Tennessee Investment Services Act (Tenn. Code Ann. Sections 35-16-101 to 35-16-112), a trust naming a qualified Tennessee trustee shields assets from the settlor's creditors after a two-year statutory lookback, with exceptions for child support, alimony, and marital property division. An ordinary revocable living trust gives the settlor no such protection during life.

5. 5

   Tennessee trusts can run for up to 360 years. Section 66-1-202(f) requires that, for a trust created after June 30, 2007, all beneficial interests vest or terminate, and any power of appointment be exercised, within 360 years, one of the longest statutory perpetuities periods among states that have not abolished the rule outright.

6. 6

   Tennessee is a common-law property state, but married couples can opt into the Tennessee Community Property Trust Act of 2010 (Sections 35-17-101 to 35-17-105) by creating a jointly signed trust that expressly declares itself a 'Tennessee community property trust,' primarily to capture the federal double basis step-up at the first spouse's death. A plain Tennessee living trust that does not make this election has no community-property consequence at all.

7. 7

   Tennessee has no estate or inheritance tax for anyone who dies in 2016 or later (Section 67-8-318) and no gift tax since 2012, so a living trust buys no state death-tax advantage of its own. Separately, funding real property into the trust and later distributing it back out are both exempt from Tennessee's recordation tax (Section 67-4-409(a)(3)), though an ordinary sale by the trustee to an unrelated buyer remains taxable.

Tennessee Requirements for Living Trust

• Tennessee Funding Rule for Assets Capable of Registration

  Tenn. Code Ann. Section 35-15-402(d) requires real estate, stocks, bonds, and bank or brokerage accounts to be retitled or recorded in the trustee's name to be funded into the trust; a bare recital of assignment in the trust document does not transfer a registrable asset. Only assets not capable of registration transfer by recital alone.

• Tennessee No Notary or Witness Required to Create the Trust

  Section 35-15-402(a) requires only settlor capacity, intent to create the trust, a definite beneficiary, and a trustee with duties to perform. No notarization, witnessing, or will formality applies to the trust instrument itself.

• Tennessee Homestead Exemption Forfeited by Any Deed Into the Trust

  Section 26-2-301(d) extinguishes the homestead creditor exemption on any deed conveying the homestead property, with no exception found for a transfer into the grantor's own revocable trust. Confirm the current statutory dollar figure, raised by 2021 Pub. Ch. 301, before funding a residence.

• Tennessee Certificate of Trust Must Be Notary-Attested

  Section 35-15-1013 requires a certification of trust furnished to a bank or third party to be signed by the trustee and attested by a notary public, even though the underlying trust instrument requires no notarization.

• Tennessee 360-Year Perpetuities Period

  Section 66-1-202(f) requires that, for a trust created after June 30, 2007, all beneficial interests vest or terminate, and any power of appointment be exercised, within 360 years, one of the longest statutory perpetuities periods among states that have not abolished the rule outright.

• Tennessee Self-Settled Asset Protection Trust Is a Separate Instrument

  The Tennessee Investment Services Act (Sections 35-16-101 to 35-16-112) allows an irrevocable trust with a qualified Tennessee trustee to shield assets from creditors after a two-year lookback. An ordinary revocable living trust does not carry this protection.

• Tennessee Recordation Tax Exemption for Funding and Distributing Real Property

  Section 67-4-409(a)(3) exempts a transfer of real property into a revocable living trust by its own settlor, and a later distribution of that property out of the trust to the settlor's beneficiaries, from Tennessee's recordation tax; an ordinary sale to an unrelated third party remains taxable.