Establishing a trust may be advantageous for Tennessee estate planning purposes in some situations. However, it is important to understand the limitations of revocable living trusts. In a February 13, 2018 case, the Tennessee Court of Appeals considered a challenge filed by the beneficiary of a living trust against a trustee for exceeding her authority under the terms of the trust agreement.
The defendant in the case and her husband had executed a removable living trust agreement. They conveyed approximately 200 acres of real property to the trust. Upon the death of the husband, the trust was the sole residual beneficiary of his will. The defendant, as the successor trustee, distributed all of the real estate in the trust to herself by way of a quitclaim deed. She then terminated the trust. Her son, who was a beneficiary of the trust, filed an action alleging that she had exceeded her authority under the trust. He requested an accounting of the trust’s assets and sought the return of any wrongfully distributed assets.
In Tennessee, trusts are interpreted by looking at the language, context, purpose, and scope of the trust agreement to determine the grantor’s intent. In addition, a trust must be interpreted in order not to frustrate the intent of the grantor.