Avoiding Probate with a Trust: Is It Always Possible in Tennessee?

Have you ever wondered if a trust can completely shield your assets from probate? We often hear that trusts are the “go-to” tool for bypassing legal proceedings, but there can be exceptions. Our firm, Foust & Foust, PLLC, has guided many families through estate planning decisions, and we’ve seen how trusts can simplify asset transfers for beneficiaries. 

Let’s look at the reasons people turn to trusts for probate avoidance in Tennessee—and whether it always works as intended.

Probate in Tennessee: An Overview

Probate is a court-managed process for gathering a deceased individual’s assets, paying off debts, and ultimately transferring property to heirs. It can take time, and it often involves fees and public filings. These factors prompt many to seek alternatives that offer privacy, lower costs, and quicker distribution to loved ones.

A typical probate case in Tennessee might span several months or longer, depending on the nature of the assets and any questions involving creditors. In some instances, the delay can create stressful waits for beneficiaries, fueling the desire to find ways around the system.

One partial solution is the small estate procedure. If the total estate value (excluding real estate) is under a certain threshold, families may pursue expedited probate steps. While helpful in specific situations, it doesn’t always provide a solution for everyone—hence the popularity of trusts.

The Role of Living Trusts in Avoiding Probate

In Tennessee, living trusts are frequently recommended for bypassing probate. The trust maker (the “grantor”) establishes this legal entity by drafting a trust document and naming a successor trustee to step in upon the grantor’s passing or incapacity. Assets such as real property, investment accounts, or bank funds are then retitled into the trust’s name during the grantor’s lifetime.

Because the trust holds the property, these assets do not become part of the estate subject to probate upon the grantor’s death. This arrangement can help beneficiaries receive inheritances sooner, with less court intervention. It also keeps details about those assets off the public record.

Still, living trusts are not automatic. They must be properly funded—that is, each asset must be transferred to the trust. If any holdings remain outside the trust, those might wind up in probate. Let’s look deeper at the situations where a trust might fall short of complete probate avoidance.

When a Trust Might Not Avoid Probate in Tennessee

Sometimes, a person establishes a trust and expects that everything will bypass probate, yet the estate can still involve the court. This may happen under a few circumstances. Whether due to incomplete asset transfers or legal disagreements, it’s worth knowing these scenarios ahead of time.

Incomplete Trust Funding

Trusts only govern the property placed into them. If an asset—say a savings account or a piece of land—remains titled outside the trust, that asset could require probate upon the owner’s passing. It’s easy to overlook items like retirement accounts or stock certificates if they were never re-titled or assigned a beneficiary that matches the trust’s plan.

To prevent that issue, it’s helpful to inventory all bank accounts, policies, and deeds to confirm they are properly in the trust or have beneficiary designations compatible with your estate plan. Thoroughly funding the trust in your lifetime often spares your heirs hassles after you’re gone.

Trust Disputes

Although trusts commonly reduce court involvement, disagreements can arise. Family members might question an amendment or claim the grantor did not have the capacity. If a trust gets contested, the probate court could step in to settle the conflict. In such cases, legal proceedings can mirror a will contest.

Drafting a well-documented trust, including witness statements or medical letters supporting the grantor’s capacity, can diminish the likelihood of disputes. But it’s good to know that a trust is not an absolute guarantee against legal fights if someone decides to challenge its validity.

Unforeseen Circumstances and Asset Discovery

Sometimes, an asset is found after death—maybe an overlooked mutual fund or a newly discovered property interest—and it wasn’t moved into the trust. The presence of that stray asset might mean a partial probate filing just to handle that one piece of property or investment account. Regular estate plan reviews can curb this risk by catching newly acquired items early and adding them to the trust as needed.

Other Strategies to Avoid or Minimize Probate in Tennessee

Living trusts do a lot of heavy lifting, but people often combine them with additional approaches. Title arrangements, beneficiary designations, and lifetime gifts can all limit the assets subject to probate. Let’s see how these methods work in practice.

Joint Ownership with Right of Survivorship

If you hold property jointly with someone else and the title specifies “with right of survivorship,” the surviving co-owner receives full ownership automatically upon the other’s death. Under Tenn. Code § 66-1-107, that transfer happens outside probate. However, it’s wise to distinguish joint tenancy (with survivorship) from tenancy in common, as the latter does not accomplish probate avoidance.

Married couples in Tennessee also have “tenancy by the entirety,” under Tenn. Code § 66-1-109. Once one spouse passes away, the real property passes entirely to the surviving spouse with minimal court interference.

Payable-on-Death (POD) and Transfer-on-Death (TOD) Designations

A POD or TOD arrangement can provide direct transfers of funds or securities when the owner passes. Under Tenn. Code § 45-2-704, a POD bank account lets a beneficiary directly claim the balance by presenting a death certificate and identification. This approach bypasses probate while still permitting the owner full control over the account during life.

For stocks, bonds, or brokerage accounts, Tenn. Code § 35-12-108 facilitates TOD registration. As with a POD account, the named beneficiary claims the security on the owner’s death, shunning the probate process entirely.

Transfer-on-Death Deeds for Real Estate

Although several states allow real estate to pass via transfer-on-death deeds, Tennessee law does not permit this. Instead, those looking to avoid probate with real estate usually rely on a trust or joint ownership with survivorship. Understanding local property laws is vital before assuming a transfer-on-death deed is possible.

Transfer-on-Death Registration for Vehicles

At present, Tennessee also declines to support transfer-on-death vehicle registrations. As such, owners who want a vehicle to avoid probate typically list it in their living trust or explore joint registration with survivorship. That ensures the automobile remains out of the probate estate.

Monetary Gifts

Another approach is giving away funds during your lifetime. Under current tax allowances, you may give certain sums each year to chosen individuals without major tax implications. In 2024, an individual can gift up to $18,000 per person without gift taxes. Such direct gifts remove those amounts from your estate, potentially minimizing probate and estate taxes down the line.

Below is a quick reference table summarizing various probate avoidance methods and their key points:

Ways to Bypass or Reduce Probate

Take Control of Your Estate Planning: Contact Foust & Foust, PLLC Today

You deserve clear answers about whether a trust can fit your family’s needs. At Foust & Foust PLLC, we understand the value of making things simpler for loved ones. If you have questions about trusts, or if you want to explore additional pathways to reduce or bypass probate, feel free to call us at 865-203-4041 or visit our website. You can also email contact@foustlaw.com for more details. We’re ready to speak with you about practical, caring ways to safeguard your legacy and help your family receive what you intend, right when they need it.