How to Set Up a Trust in Tennessee: Steps, Funding, and Costs

To set up a trust in Tennessee, you choose the type of trust that fits your situation, draft a written trust agreement that meets the Tennessee Uniform Trust Code, sign it, and then retitle your assets into the trust’s name. That last step is the one people skip, and it’s the one that decides whether the trust actually works.

Tennessee is a friendly place to do this. There’s no state income tax on trust income, the state exempts transfers into your own revocable trust from realty transfer tax, and the trust code gives you flexible tools including a specialized asset-protection option. Here’s how the process runs, start to finish.

Decide Between a Revocable and Irrevocable Trust

Every other decision flows from this one.

A revocable living trust is the common starting point. You create it during your lifetime, name yourself as trustee, and keep full control. You can change the terms, add or remove property, swap beneficiaries, or dissolve it whenever you want. Tennessee law presumes a trust is revocable unless the document expressly says otherwise, so silence works in your favor.¹ The tradeoff: because you still control the assets, your creditors can still reach them. A revocable trust’s real job is avoiding probate and keeping your estate plan private.

An irrevocable trust is harder to undo. Once you transfer assets in, you generally give up the right to take them back or change the terms without the beneficiaries’ consent. In exchange, the property is typically beyond the reach of your personal creditors because you no longer own it.

Tennessee’s Investment Services Act takes this further by allowing a self-settled asset protection trust. You can be a beneficiary and retain some control (directing investments, vetoing distributions) while still shielding the assets from creditors after a two-year waiting period. Past-due child support and alimony are not shielded. If creditor protection is a priority, this is worth raising with an attorney.

One tax point worth knowing before you go further: Tennessee repealed its Hall Income Tax in 2021 and has no state income tax at all. Trust income accumulated in Tennessee isn’t taxed at the state level, which is why some out-of-state residents choose to establish their trusts under Tennessee law.

Pick a Trustee and Name Your Beneficiaries

The trustee manages the trust’s assets and carries out your instructions. With a revocable living trust, you’ll almost always name yourself as the initial trustee so you stay in control of your own property. The appointment that really matters is the successor trustee, who steps in when you die or can no longer manage things yourself.

A successor trustee can be a family member, a trusted friend, a bank, or a licensed trust company in Tennessee. Pick someone trustworthy and organized enough to handle financial recordkeeping. If nobody in your life fits, a corporate trustee charges an annual fee but brings professional management and won’t predecease the trust.

Identify your beneficiaries clearly. “My children” invites problems if family circumstances change. Use full legal names and spell out what each person gets: a percentage of the trust, specific property, or income distributions over time. For minor children, the trust can hold assets until they reach an age you choose.

Retirement Accounts Are a Special Case

You cannot retitle a 401(k) or IRA into a trust’s name while you’re alive. The custodian won’t do it. You can name a trust as the beneficiary, which is sometimes useful when a beneficiary is a minor, has a disability, or can’t manage a large inheritance. But it carries a real tax cost: income retained inside a trust hits the top federal bracket of 37% at just $15,650 of taxable income for the 2025 tax year, compared to over $626,000 for a single individual.² Unless there’s a specific reason, naming individuals directly usually works better.

Draft the Trust Agreement

Tennessee requires that a trust be created by a settlor who has legal capacity and who clearly intends to create it, with identifiable beneficiaries and duties for the trustee to perform.³ The state technically allows oral trusts for personal property, but nobody should rely on that for estate planning. Put it in writing.

At a minimum, the agreement should cover:

Your initial trustee, at least one successor trustee, and the process for replacing a trustee who resigns or can’t serve.
Trustee powers, including buying, selling, and investing assets, making distributions, and hiring professionals. Tennessee grants trustees a set of default powers, and your document can expand or limit them.⁴
Distribution instructions describing exactly how and when beneficiaries receive assets. You can set age thresholds, create ongoing income streams, or tie distributions to milestones like finishing college.
Incapacity provisions giving your successor trustee clear authority to step in and manage the trust without a court guardianship proceeding.

Vague language is your enemy here. “Distribute as the trustee sees fit” invites family fights. Specific instructions about who gets what, and under what circumstances, will save your beneficiaries a lot of grief.

Sign the Document

Tennessee does not require a trust agreement to be notarized or witnessed to be valid. The settlor’s signature is enough.⁵ Even so, getting it notarized is standard practice. A notarized signature is much harder to challenge later, and you’ll need notarization anyway when you start transferring real estate into the trust.

Keep the original in a fireproof safe or safe deposit box. Give copies to your successor trustee and your attorney. Your beneficiaries don’t need the full document yet, but your trustee will need it immediately if something happens to you.

Fund the Trust

A trust that exists only on paper accomplishes nothing. The single most common mistake in trust-based estate planning is failing to actually transfer assets into the trust after signing it. Until property is retitled in the trust’s name, the trust doesn’t own it, and those assets will likely end up in probate anyway.

Real Estate

Transferring real property requires a new deed (typically a quitclaim or warranty deed) conveying the property from you individually to you as trustee of your trust. The deed must include a legal description of the property, the parcel number, and the name of the trust. It must be notarized and recorded with your county register of deeds.

Tennessee exempts transfers from an individual to their own revocable living trust from the realty transfer tax.⁶ You’ll still pay a recording fee to the county register, which typically runs between $50 and $150 depending on the county and the number of pages in the deed. The same exemption applies when the trustee later transfers property out to beneficiaries.

Bank and Brokerage Accounts

Contact each institution and ask to retitle the account in the trust’s name. Most banks have their own forms. The account name will change to something like “Jane Smith, Trustee of the Jane Smith Revocable Trust dated January 1, 2026.” The process is usually straightforward but can take a few weeks per institution, so start early.

What Stays Outside the Trust

Retirement accounts like IRAs and 401(k)s can’t be retitled. Life insurance policies are typically handled through beneficiary designations rather than trust ownership, though you can name the trust as a beneficiary if the situation calls for it. Vehicles are sometimes left out to avoid complications with insurance and registration, though Tennessee does allow you to title a vehicle in a trust’s name.

Add a Pour-Over Will

Some assets will inevitably be left outside the trust when you die. Maybe you opened a new account and forgot to retitle it, or you inherited property at the last minute. A pour-over will is the safety net that catches those stray assets and directs them into your trust through probate.

A pour-over will works like any other will, except its only substantive instruction is that everything not already in the trust goes to the trust. Those assets still pass through probate, so the pour-over doesn’t eliminate the process entirely. It just ensures that everything ultimately lands in the right place and gets distributed according to your trust’s terms.

It’s also where you name a guardian for minor children, which a trust cannot do. If you have kids under 18, you need both documents.

Changing or Revoking the Trust Later

Tennessee gives you broad power to amend or revoke a revocable trust at any time. If your trust document describes a specific method for making changes, follow it substantially. If it doesn’t, you can amend or revoke through a later will that specifically references the trust, or through any other action that shows clear and convincing evidence of your intent.¹

In practice, amendments are usually made through a written trust amendment that references the original and spells out the changes. For a major overhaul, it’s often cleaner to revoke the old trust and create a new one. Either way, keep records of every version so your successor trustee isn’t guessing which one controls.

Taxes and Ongoing Trustee Duties

While you’re alive and serving as trustee of your own revocable trust, the IRS treats the trust as invisible. All trust income goes on your personal return using your Social Security number. No separate tax ID, no separate return.

That changes when you die. Your successor trustee must apply for an Employer Identification Number for the trust, because it’s now a separate taxable entity. If the trust earns $600 or more in gross income during the tax year, the trustee must file Form 1041, the federal income tax return for estates and trusts.² Because trust brackets compress hard (37% at $15,650 for 2025), most trusts are designed to distribute income to beneficiaries rather than accumulate it, shifting the tax to the beneficiary’s lower personal rate. Tennessee still owes no state income tax on any of this.

The trustee also has fiduciary duties under Tennessee law, including a duty to keep current beneficiaries reasonably informed and to share any facts they’d need to protect their own interests.⁷ Practically, that means keeping detailed financial records, providing regular accountings (an annual statement of assets, income, expenses, and distributions is the standard), filing Form 1041 and K-1 schedules each year the trust has enough income, and investing prudently under Tennessee’s prudent investor standard. A trustee who ignores these duties can be held personally liable. If you’re naming a family member, make sure they understand what they’re taking on.

What It Costs

The attorney fee is the biggest line item. A standard revocable living trust package (the trust agreement, a pour-over will, a power of attorney, and a healthcare directive) typically runs between $1,500 and $5,000 depending on the complexity of your estate and the attorney’s fee structure. Trusts involving business interests, blended families, or special needs beneficiaries tend to land at the higher end. Some attorneys charge flat fees, which makes the total predictable.

Beyond that, the costs are modest. Notarization typically costs a few dollars per signature. Recording a deed to transfer real estate into the trust usually runs $50 to $150 per property at the county register of deeds. Tennessee’s transfer tax exemption for revocable trust transfers saves you what would otherwise be $0.37 per $100 of property value, which adds up quickly on a home.⁶

Once the documents are signed and the assets are retitled, the trust is doing its job. Come back to it whenever life shifts (marriage, divorce, a new child, a new property) and update the document so it still says what you’d want it to say.

1
FindLaw. Tennessee Code 35-15-602 – Revocation or Amendment of Revocable Trust
2
IRS.gov. 2025 Instructions for Form 1041 and Schedules A, B, G, J, and K-1
3
Justia. Tennessee Code 35-15-402 – Requirements for Creation
4
Justia. Tennessee Code 35-15-815 – General Powers of Trustee
5
Justia. Tennessee Code 35-15-401 – Methods of Creating Trust
6
Tennessee Department of Revenue. Realty Transfer and Recordation Tax Manual
7
FindLaw. Tennessee Code 35-15-813 – Duty to Inform and Report