A Texas spendthrift trust is authorized by the Texas Property Code. It is set up by the “grantor.” The trust will name one or more “beneficiaries” of the trust property. The beneficiaries will receive the trust property at a given time, i.e. reaching the age of 35. Sometimes, a trust will exist for a beneficiary’s life with the property going to his children when he dies. A trust is administered by a trustee who may also be one of the beneficiaries. However, if at any time the trustee and the beneficiary are they same person, the trust ends.
Such trust usually make a payment for the “health, support, maintenance and education” of the beneficiary to take care of the beneficiary’s needs during the existence of the trust.
Protection from creditors
A Texas spendthrift trust is a trust set up to protect the beneficiary from his creditors. For instance, there is a child that does not manage his property correctly, so he is always being sought by his creditors to pay his bills. His parents want to leave him property but are afraid that his creditors will get the property because of the mismanagement of the child.
A Texas spendthrift trust is the answer. In its most basic form, a Texas spendthrift trust provides for the child but is not available to the child’s creditors. A creditor can sue the child but cannot get to the assets of the trust.
A person cannot set up a Texas spendthrift for themselves. However, some states do allow a person to create a spendthrift trust for themselves.
Texas courts recognize that a person with a power of attorney owes the principal (the person who gave the power of attorney) a fiduciary duty. The holder of the power of attorney owes her principal a high duty of good faith, fair dealing, honest performance, and strict accountability. When the fiduciary receives an alleged gift from the principal, the fiduciary has an extremely high burden to show that the gift was in the best interest of the principal. The courts have observed that the fiduciary relationship cast upon the profiting fiduciary the burden of showing the fairness of the transactions. By accepting both the role of fiduciary and gifts from the principal, the agent consents to have her conduct measured by a higher standard of loyalty.In one case, the fiduciary never acted under her power of attorney. Therefore, she claimed, she did not have to meet the high burden of a fiduciary to prove that the gifts she received from the principal were in the best interest of the principal. The court rejected these arguments. The court found that the holder of the power of attorney owed the principal a fiduciary duty based solely on the power of attorney whether or not it was ever exercised. This finding placed the burden on the holder to prove the transfer of the principal’s property to her was fair and in the best interest of the principal.
The violation of the duty that a holder of a power of attorney owes to the principal can result in a felony conviction. In one case, the facts were as follows: “Grace added Tyler as a signatory on her bank accounts, and executed a durable power of attorney naming Tyler as her “agent (attorney-in-fact).” The power of attorney gave Tyler power over all of Grace’s assets.” Tyler later misapplied the funds under her control by using some for her personal debts.
The criminal law in question, §32.45 of the Texas Penal Code says: “A person commits an offense if he intentionally, knowingly, or recklessly misapplies property he holds as a fiduciary or property of a financial institution in a manner that involves substantial risk of loss to the owner of the property or to a person for whose benefit the property is held.” Tyler claimed that she had no formal trustee relationship with Grace, and therefore a fiduciary relationship “may not have” existed. In ruling that the existence of the power of attorney alone created the fiduciary relationship, the court upheld her conviction.
Update: In a 2018 case, an appeals court upheld a decision that the person with a power of attorney breached his fiduciary duty when he withdrew funds from a bank account and put the funds in his own account. The court ruled that he converted the funds and had to return them. Conversion is the wrongful exercise of dominion and control over another’s property in denial of or inconsistent with one’s rights. “From the evidence, the trial court could have reasonably concluded that when (POA) withdrew the money from the joint account, (POA) was not acting in (principal’s) interests but was using the power of attorney to wrongfully exercise dominion and control over the money to the exclusion of, or inconsistent with, (the owner’s) rights.” No. 02-17-00138-CV. In 2019, the courts held that a person with a power of attorney who had the bank issue him a certified check that he put in his own account, breached his fiduciary duty. This was true even though the person from whom he had the power of attorney signed the check. 02-17-00138-CV.
Basically, a fiduciary is someone on whom the law imposes the highest duty to act on behalf of another like an executor, administrator or trustee.
Fiduciary relationships can be formal such as partners, agents, executors, administrators, trustees, a holder of a power of attorney, etc.
Fiduciary relationships can also be imposed by law because of the relationship of the parties such as domanance by one and weakness by another, where one has gained the trust of another to handle their affairs, etc. In a 2018 case, the Court of Appeals held that a funeral home had a special relationship (fiduciary relationship) with the family concerning the handling of a body. In the case, the funeral home picked up, transported and displayed to the family the wrong body. 08-17-00151-CV.
By Robert Ray a Texas inheritance attorney. The foregoing information is general in nature and does not apply to every fact situation. If you are concerned about Texas inheritance laws, inheritance rights, probate limits, have a family inheritance dispute, a property dispute or want to know the reasons for contesting a will or protecting a will from a contest and need an inheritance lawyer, we can help. Please click on the “Contact Us” tab above and use the contact form to contact us today. We are Texas inheritance lawyers and would love to learn about your case. There is no fee for the initial consultation.
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The short answer is no. A power of attorney can grant a general power or a special power. It can be a durable power of attorney or not. You can also have a power of attorney solely for medical decisions.
What do all of these terms mean? A power of attorney is granted by one person, the principal, to another person, the agent usually called the “attorney in fact.” The attorney in fact has the powers to act on behalf of the principal and to do those things that the principal has granted him the power to do just as if the principal were doing them himself.
A general power of attorney grants the broadest powers. An attorney in fact with a general power of attorney, can do almost anything from selling the principal’s real estate to opening and closing bank accounts on behalf of the principal.
A special power of attorney is less broad and is restricted to the powers that are specifically mentioned in the special power of attorney. An example would be granting someone the power to transfer title to an automobile or to cash a check from an insurance settlement. The attorney in fact is not allowed to act on behalf of the principal except within the limits set out in the special power of attorney.
A power of attorney for medical purposes gives the attorney in fact the right to make medical decisions on behalf of the principal at a time when the principal is not capable of making them himself.
Any power of attorney can be made “durable.” A power of attorney ends if the principal becomes incompetent. A durable power of attorney will remain in effect even if the principal becomes incompetent. From this discussion, you can see that the principal must be competent at the time he grants a power of attorney; otherwise, the power of attorney is no good.
A power of attorney ends on the death of the principal, whether the power of attorney is durable or not.
The attorney in fact must exercise his powers with the utmost care because he is a fiduciaryand is potentially liable if he does not take good care of the principal’s property under his control.
Basically, a fiduciary is someone on whom the law imposes the highest duty to act on behalf of another like an executor, administrator or trustee.
