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Prudent administration in Tennessee: the standard, the investor rule and the review

Prudence in Tennessee is two statutes working together: the trust code's standard of care and the state's prudent investor act. This guide states what each provides and what a trustee records to show it was followed.

Tèks konplè gid sa a an angle; rezime ki anwo a nan lang ou. Rezime lwa yo ak vèsyon angle a rete sous referans lan.

Duties · 6 min lekti

The standard of care

Tenn. Code Ann. § 35-15-804 provides that a trustee administers the trust as a prudent person would, by considering the purposes, terms, distributional requirements and other circumstances of the trust, and in doing so exercises reasonable care, skill and caution. The trustee may incur only costs that are reasonable in relation to the trust property, the purposes of the trust and the skills of the trustee (Tenn. Code Ann. § 35-15-805), and a trustee who has special skills or expertise, or was named in reliance on them, uses them (Tenn. Code Ann. § 35-15-806).

The Tennessee Uniform Prudent Investor Act

Tenn. Code Ann. § 35-14-103 provides that a trustee who invests and manages trust assets owes the beneficiaries the duty to comply with the prudent investor rule unless the terms of the trust provide otherwise; the terms may expand, restrict, eliminate or alter it. The rule judges investment decisions in the context of the portfolio as a whole and as part of an overall strategy, with the circumstances Tenn. Code Ann. § 35-14-104 lists — economic conditions, inflation, tax consequences, the role each investment plays, the expected return, the beneficiaries' other resources, the need for liquidity and the special relationship of an asset to the trust's purposes. The trustee diversifies unless the trustee reasonably determines that special circumstances make it better not to, with the retention right and the life-insurance rule Tenn. Code Ann. § 35-14-105 states.

The review, and delegation

Within a reasonable time after accepting a trusteeship or receiving trust assets, a trustee reviews the trust assets and makes and implements decisions concerning their retention and disposition, to bring the portfolio into compliance with the purposes, terms, distribution requirements and other circumstances of the trust (Tenn. Code Ann. § 35-14-106). A trustee may delegate investment and management functions a prudent trustee of comparable skills could properly delegate, exercising reasonable care in selecting the agent, establishing the scope and terms of the delegation and periodically reviewing the agent's actions (Tenn. Code Ann. §§ 35-14-111, 35-15-807). The statutes state no number of days; the record of the review is what shows it happened.

Lwa yo, mo pou mo

  • Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.

  • Duties at inception of trusteeship

    Tenn. Code Ann. § 35-14-106 ↗

    Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.

  • Delegation of investment and management functions

    Tenn. Code Ann. § 35-14-111 ↗

    Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.

  • Prudent administration

    Tenn. Code Ann. § 35-15-804 ↗

    Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.

Kesyon moun poze souvan

Does the prudent investor rule bind an individual Tennessee trustee?

Yes, unless the terms of the trust provide otherwise (Tenn. Code Ann. § 35-14-103); the terms may expand, restrict, eliminate or alter it.

Does a Tennessee trustee have to sell everything the settlor owned?

No. The trustee reviews the assets within a reasonable time and decides about retention and disposition in light of the trust's purposes (Tenn. Code Ann. § 35-14-106), diversifying unless special circumstances make it better not to, with the retention right the statute gives (Tenn. Code Ann. § 35-14-105).

Can a Tennessee trustee hire an investment manager?

Yes, with reasonable care in selecting the agent, setting the terms and reviewing the agent's actions (Tenn. Code Ann. §§ 35-14-111, 35-15-807); a trustee who complies is not liable for the agent's decisions.

Sant Aprantisaj la se enfòmasyon jeneral sou lwa Tennessee — se pa konsèy legal, e li pa ranplase konsèy yon avoka Tennessee ki gen lisans sou reyalite pa ou. TrusteeClear se yon lojisyèl, pa yon kabinè avoka.