Trust Decanting Requirements in Tennessee

At a glance

Requirements one by one

The power and Tennessee connection

Section 35-15-818 lets a trustee use instrument authority to invade principal for one or more proper objects by appointing all or part of that principal to a second trust. It reaches testamentary instruments and irrevocable inter vivos trust agreements, applies to any trust administered in Tennessee, and yields to terms that expressly provide otherwise.

The statute preserves further-trust authority arising from another statute, common law, or the governing instrument. This page describes only the statutory § 35-15-818 route.

Beneficiaries and power changes

The second trust may have only one or more beneficiaries of the first trust. If the settlor is living, the exercise cannot make a future beneficiary eligible for income or principal earlier than under the first trust; after the settlor's death, acceleration is permitted. A second trust may give an eligible first-trust beneficiary a power of appointment that reaches people outside either trust, but that power cannot be exercised to extend the first trust's applicable perpetuities period.

Beneficiary-trustee limits

A trustee who is also a beneficiary cannot use § 35-15-818 to acquire a self-distribution power the trustee did not have, exchange an ascertainable standard for broader discretion, remove required adverse-person or cotrustee consent while also shedding the standard, or gain authority to discharge the trustee's own support obligation.

Tax and duration guardrails

The statute protects income interests in listed marital-deduction, charitable- remainder, and grantor-retained annuity or unitrust trusts. It also bars an exercise that would prevent or reduce an originally claimed annual exclusion, marital or charitable deduction, direct-skip treatment, or other specific federal tax benefit. S-corporation stock cannot be appointed to a second trust that is not a permitted shareholder.

Neither the appointment itself nor a new beneficiary power of appointment may extend the perpetuities period applicable to the first trust.

The exercise record

The trustee exercises the power through a written instrument signed by the trustee and filed with the trust records. Section 35-15-818 does not add an acknowledgment or notarization requirement.

Since July 1, 2026, subdivision (12) expressly permits the trustee to exercise by modifying or restating the trust instrument. The amended definition treats that modified or restated original trust as the second trust and says the exercise does not require retitling property or changing a payable-on-death or beneficiary designation to the original trust.

What trips people up

Older sources may point to § 35-15-816(c). Public Chapter 166 moved the statutory power into standalone § 35-15-818 in 2023, and Public Chapter 616 amended the new section effective July 1, 2026. Current research therefore must apply the post-July 2026 text, including the express modification-or-restatement route.

The statute's silence on notice and court approval is specific to the decanting procedure. It does not decide whether another trust provision, fiduciary duty, pending proceeding, or generally applicable law matters to a particular exercise.

Common questions

Can the trustee create an entirely new beneficiary?

Not as a second-trust beneficiary under this statute. A permitted power of appointment may name people outside the original or second trust as possible appointees, but that is different from making them second-trust beneficiaries.

Must every first-trust beneficiary remain in the second trust?

No. The statute says the second trust must have “one (1) or more” first-trust beneficiaries, not all of them, while still requiring the exercise to favor the proper objects of the trustee's power.

Does modification require retitling every asset?

No. The 2026 amendment says a modification or restatement does not require retitling property held by the original trust or changing its payable-on-death or beneficiary designations.

Statutes and sources

• Tenn. Code Ann. § 35-15-818 — current statutory appointment-in-trust route, as enacted and relocated in 2023. Official Public Chapter 166 text (accessed September 12, 2026).
• Tenn. Code Ann. § 35-15-818(12)-(13) — 2026 modification/restatement and no-retitling amendments, effective July 1, 2026. Official Public Chapter 616 text (accessed September 12, 2026).