What Are a Trustee’s Duties and Responsibilities in Tennessee?

Picking a trustee feels like a big decision, and it is. 

At Foust & Foust, PLLC our boutique firm focuses on estate planning, probate, and trust administration for families across Tennessee, and we guide trustees through every step. 

A trust is a legal arrangement where a grantor places assets in the hands of a trustee to manage for named beneficiaries, often for years to come.

The right trustee choice protects your family’s legacy and reduces stress for loved ones.

In this guide, we explain the legal duties, everyday tasks, and basic tools a trustee needs under Tennessee law. You will see what good administration looks like, and where to get help if things get tricky.

Overview of the Trustee Role in Tennessee

Serving as trustee means following the trust document and Tennessee law with care. It also means communicating directly, documenting every move, and making decisions that put beneficiaries first.

Defining the Fiduciary Duty

A trustee is the person or entity chosen by the grantor to carry out the trust’s terms. The job involves managing property, paying expenses, investing funds, and distributing assets in accordance with the trust’s rules.

A trustee acts as a fiduciary, which means a high duty of care and loyalty to the beneficiaries. The trustee’s choices must put beneficiary interests ahead of personal gain at all times.

That standard ties every decision back to the trust document and Tennessee statutes. Good trustees keep that lens on, even when pressure rises.

Who Can Serve as a Trustee?

Tennessee allows any competent adult to serve, including a spouse, child, relative, or trusted friend. Many families value the personal touch and history a loved one brings.

Some trusts call for professional help, such as an attorney, CPA, financial institution, or a private trust company. Non-residents can serve in Tennessee, and if required, they should register with the Tennessee Secretary of State before acting.

Think through availability, financial skills, and temperament before accepting the role. The right fit makes the work smoother for everyone.

Core Fiduciary Duties Under the Tennessee Uniform Trust Code

Tennessee adopted the Tennessee Uniform Trust Code, found at Tenn. Code Ann. §§ 35-15-101 to -1301. These rules guide loyalty, investment, recordkeeping, and communications.

Duty of Loyalty and Impartiality

The duty of loyalty prohibits self-dealing and conflicts of interest. A trustee cannot use trust assets for personal benefit, steer deals to friends, or accept secret fees unless the trust plainly allows it and the law permits it.

The duty of impartiality requires a fair balance between income and remainder beneficiaries, unless the trust says otherwise. This balance affects investment choices, distribution timing, and tax impacts for each group.

Here are common red flags trustees should avoid:

• Buying trust property for personal use, even at market price
• Lending trust money to yourself or a related business
• Delaying distributions to pressure a beneficiary

When in doubt, get written consent from affected beneficiaries or court approval. That step lowers tension and personal risk.

Prudent Administration and Investment

The Tennessee Uniform Prudent Investor Act and the Tennessee Uniform Principal and Income Act govern investment duties in Tennessee. These statutes push trustees to use a thoughtful, diversified process, not guesswork.

The trustee should balance growth with protection of principal, based on the trust’s goals, time horizon, and beneficiary needs. That means setting an investment policy, monitoring costs, and revisiting choices as markets shift.

Allocating receipts between income and principal must follow the Principal and Income Act and the trust’s terms. Proper allocation keeps distributions fair across generations.

Specific Day-to-Day Responsibilities

The daily work starts with collecting assets and confirming what the trust owns. Good systems keep the administration clean from day one.

Managing Assets and Recordkeeping

First, gather and value all trust property, such as real estate, bank and brokerage accounts, business interests, and personal items. Title assets in the name of the trust and set up secure storage or insurance where needed.

Accurate records sit at the center of good administration. Track every deposit, expense, and distribution, and save contracts, appraisals, and statements in an organized file.

Simple checklists and a shared folder can keep these many threads from tangling. A good process saves time and lowers stress later.

Handling Taxes, Debts, and Distributions

The trustee identifies and pays valid debts before making distributions. State and federal trust tax returns are often required, along with any property or sales tax associated with trust assets.

Discretionary distributions often use HEMS, which stands for Health, Education, Maintenance, and Support. The trustee reviews requests with documented need, the trust’s language, and current cash flow in mind.

Here is a short rhythm many trustees follow for money matters:

1. Confirm assets and cash position, then reserve for taxes and known expenses.
2. Pay valid debts and file required tax returns on time.
3. Process distributions under the trust standard, and record the reason for each payment.

With that order, you protect the trust first, then support beneficiaries as the document allows.

Communicating with Beneficiaries

Tennessee expects trustees to keep beneficiaries reasonably informed. That includes contact information, a summary of assets, and how decisions affect income or principal.

Regular accountings, answers to questions, and updates on big actions reduce surprises. Transparency builds trust, and it improves outcomes when tough calls land on your desk.

The Tennessee Trust Advantage

Tennessee offers a friendly legal environment for long-term family planning. Trustees working here enjoy tools that protect assets and allow flexible updates over time.

Favorable Tax Laws

Tennessee does not impose a state income tax on wages and does not have an inheritance tax or estate tax. Fewer state-level taxes can keep more dollars in the trust.

Those savings can help fund education, healthcare, or long-range investment goals for the next generation. A smart plan pairs those laws with sound administration.

Progressive Trust Structures

Directed Trusts allow families to split duties: an investment advisor handles investments, while the trustee handles administration. 

Domestic Asset Protection Trusts and Community Property Trusts, both available in Tennessee, deliver powerful planning options for asset protection and tax basis planning.

Tennessee’s decanting statutes allow a trustee to transfer assets from an old irrevocable trust into a new trust with better terms, if the law and the trust terms allow. This tool helps fix drafting gaps or modernize administrative provisions.

Here are structures we often discuss with clients and trustees:

• Directed Trusts for separating investment oversight from daily administration
• Domestic Asset Protection Trusts (DAPTs) for shielding assets from certain future creditor claims
• Community Property Trusts (CPTs) for married couples aiming for favorable step-up planning on both halves
• Decanting to refresh outdated trusts without a full court overhaul

Choosing the right approach starts with the trust’s goals and the family’s risk tolerance. One size rarely fits all here.

Managing Special Trust Scenarios

Life events can quickly shift the trustee’s duties. Planning for those turns helps a trustee respond with confidence.

Grantor Incapacity vs. Grantor Death

If a grantor becomes incapacitated, the trustee often manages care costs, applies for disability or long-term care benefits, and keeps detailed records of support payments. The focus is on stability and meeting daily needs without draining the trust too quickly.

After the grantor’s death, the trustee gathers death benefits, secures property, notifies banks and custodians with a certificate of trust, and follows any division instructions. Final taxes and debts come first, then distributions or funding of continuing subtrusts.

Direct timelines and checklists help here, since multiple institutions need information at once. Good notes cut down on repeat calls and mixed messages.

Administering Special Needs Trusts

Special Needs Trusts call for extra care. The trustee must confirm that payments do not reduce or end SSI, Medicaid, or other benefits.

Distributions often pay vendors directly for goods and services that improve the quality of life. Cash gifts to the beneficiary can pose problems, so planning matters.

Helpful guardrails for Special Needs Trusts include:

• Pay third parties directly for housing, therapy, transportation, and education.
• Avoid cash in the beneficiary’s hands when benefits are needs-tested.
• Keep benefit letters, invoices, and a log of every support decision.

With a steady process, you can support the beneficiary’s life without tripping eligibility rules.

Potential Pitfalls and Avoiding Disputes

Most disputes trace back to poor communication or thin records. A careful trustee lowers that risk with steady updates and a clean paper trail.

Common Sources of Conflict

Conflicts often start when accounts are late, distributions drag on, or investments feel too risky or too timid. Family dynamics can raise the temperature quickly.

A trustee who breaches fiduciary duties can face personal liability. That includes self-dealing, failing to provide required notices, or ignoring the trust’s terms.

Watch for these hot spots:

• No annual accountings or missing back-up documents
• A confusing investment policy or unexplained trading costs
• Favoring one beneficiary without support in the trust language

Fixes usually involve better records, written policies, and faster responses to reasonable requests. Small course corrections prevent bigger storms later.

Seeking Professional Guidance

Trustees do not have to work alone. Tennessee law allows a trustee to hire legal, tax, and investment professionals to help with specialized tasks.

Advice on tax filings, investment policy, and trust modifications can save significant dollars and time. It also protects the trustee by showing a thoughtful process behind each decision.

If you are unsure about a step, get help early, not after a dispute starts. Early guidance often pays for itself.

Contact Foust & Foust, PLLC for Trust Administration Support

Every trust has its own goals, timelines, and family story, and we respect that. If you have been named as a trustee or want to set up a trust that actually works in daily life, we welcome your questions. 

Call 865-203-4041, email contact@foustlaw.com, or visit our contact page to start a helpful conversation.

We are ready to roll up our sleeves and help you manage the trust with clarity and calm. A short call brings peace of mind. Reach out and let us support your next step.