Delegation, agents and directed trusts in Tennessee

Delegation to an agent

A trustee may delegate duties and powers that a prudent trustee of comparable skills could properly delegate under the circumstances, exercising reasonable care, skill and caution in selecting the agent, establishing the scope and terms of the delegation consistent with the purposes and terms of the trust, and periodically reviewing the agent's actions to monitor performance and compliance (Tenn. Code Ann. § 35-15-807(a)). In performing a delegated function the agent owes the trust a duty to exercise reasonable care to comply with the terms of the delegation ((b)); a trustee who complies is not liable for an action of the agent ((c)); and by accepting a delegation from a trustee subject to Tennessee law the agent submits to the jurisdiction of Tennessee's courts ((d)). Investment and management functions are delegated on the same terms under the Uniform Prudent Investor Act (Tenn. Code Ann. § 35-14-111).

The directed trust: the excluded fiduciary

Under Tennessee's own directed-trust provisions, the terms of a trust, a nonjudicial settlement agreement or a court order may give a trust advisor or trust protector any of the powers Tenn. Code Ann. § 35-15-1201 lists, exercised in the advisor's or protector's sole and absolute discretion and binding on all persons. A trustee required to follow a direction is an excluded fiduciary (Tenn. Code Ann. § 35-15-710) and acts in accordance with the exercise of the power (Tenn. Code Ann. § 35-15-808(b)); an excluded fiduciary has no duty to review, evaluate, investigate or monitor the advisor's or protector's conduct, to advise or consult, or to warn a beneficiary or third party, and confirming and recording a directed action is an administrative act, not an undertaking to monitor (Tenn. Code Ann. § 35-15-1204); nor is the excluded fiduciary liable for a loss from compliance with the direction or from the director's act, inaction or declined proposal (Tenn. Code Ann. § 35-15-1205).

A trust advisor or trust protector who is not a beneficiary is a fiduciary as to each power, acting in good faith under the terms, purposes and interests of the beneficiaries, unless the instrument makes the appointment a nonfiduciary one (Tenn. Code Ann. § 35-15-1202). The powers the statute lists include amending the instrument for tax changes or changes in the law of perpetuities and restraints on alienation, appointing a successor advisor or protector, reviewing and approving a trustee's reports or accountings, changing the governing law or the principal place of administration, removing and replacing a trustee for the reasons the instrument states, consenting to distribution or investment decisions, directing the acquisition, disposition or retention of investments, and adjusting beneficial interests or powers of appointment (Tenn. Code Ann. § 35-15-1201(a)). By accepting the appointment, an advisor or protector submits to the jurisdiction of Tennessee's courts (Tenn. Code Ann. § 35-15-1203), and the statute provides for the office's acceptance, resignation, removal and successors (Tenn. Code Ann. § 35-15-711; § 35-15-714; § 35-15-715; § 35-15-716). Where the office is vacant, the power vests in the trustee, who is not liable for not exercising it for 60 days after learning of the vacancy (Tenn. Code Ann. § 35-15-713).

The statutes, verbatim

• Delegation of investment and management functions

  Tenn. Code Ann. § 35-14-111 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

• Powers of trust advisors and trust protectors

  Tenn. Code Ann. § 35-15-1201 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

• Trust advisors and trust protectors as fiduciaries

  Tenn. Code Ann. § 35-15-1202 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

• No duty to review the actions of a trustee, trust advisor or trust protector

  Tenn. Code Ann. § 35-15-1204 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

• Directed trusts

  Tenn. Code Ann. § 35-15-710 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

• Delegation by trustee

  Tenn. Code Ann. § 35-15-807 ↗

  Clear, simple explanation; the verbatim statute text is not yet attested in our library. See the official statute via the link above.

Common questions

Frequently asked questions

Can a Tennessee trustee delegate investment decisions?

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

What is an excluded fiduciary in Tennessee?

A trustee required by the terms, a nonjudicial settlement agreement or a court order to follow a trust advisor's or trust protector's direction (Tenn. Code Ann. § 35-15-710), with no duty to monitor the director and no liability for a loss from compliance (Tenn. Code Ann. §§ 35-15-1204, 35-15-1205).

Is a Tennessee trust advisor a fiduciary?

A trust advisor or trust protector who is not a beneficiary is a fiduciary as to each power, unless the instrument makes the appointment a nonfiduciary one (Tenn. Code Ann. § 35-15-1202).

General information about Tennessee law, not legal advice.