The Issue In a case out of the Fort Worth Court of Appeals, the issue was what power did the trustee have to distribute or not distribute assets of the trust. The beneficiaries of the trust sued the trustee to require him to distribute the assets to them. The trustee, a bank, wanted to keep operating the trust and refused to distribute assets. The issue before the court was whether or not the trustee had the right to not distribute assets and keep the trust active which was lucrative to the bank. The Ruling The Court of Appeals ruled that the trustee did not have to distribute the asset. In addition, the court ruled that the trustee was entitled to its attorney’s fees. Reason for Ruling The court made an exhaustive review of the will and trust documents creating the trust and determined that the trustee had “sole discretion” to make distributions and the beneficiaries could not force the trustee to make distributions. What you should know You need to know that words have meaning. Using words from a document that you find somewhere can lead to problems that you did not want. When you want to make a will, you should contact a competent attorney to help you. We do not prepare wills. 02-20-00058-CV.
The court also discussed the use of precatory words in a will or trust.
In a recent case in Texas, a mother and father had a trust for the benefit of their two children. The mother died. The father later remarried and had two additional children. The father attempted to revoke the first trust and made provisions for the property to go to his four children, share and share-alike. When the father died, one of the first two children asked the court to declare that the revocation of the first trust was invalid. The court agreed stating: (more…)
On occasion, an attorney contesting a will will run across a Deed to a Trustee when there is no trust. For instance a deed that is given “To John Smith, Trustee.” There are no documents showing that a trust ever existed. The question comes up about ownership of the property. Does the person listed as trustee own the property outright? Is it owned by someone else? How do you untangle the title to the property?
Courts have devised several ways to handle these situations based on the facts of the case. If the deed shows that the property was given for consideration paid by the person named as trustee, then that person named trustee owns the property outright. Even though he is listed as trustee, he has full ownership of the property if no trust document is found.
On the other hand, if the deed does not indicate that consideration was involved, a resulting trust is said to exist. In a resulting trust, the original grantor, the person who gave the deed to the person named “as trustee” retains ownership of the property. If that person is dead, his heirs own the property. Compare 802sw2d880 with 564sw2d404.
Title search after conveyance
When not considering ownership but just considering whether a deed from a “Trustee” is valid then the mere designation of a party as “Trustee,” “as Trustee,” or “Agent” following the name of a grantee, without additional language actually identifying a trust, does not in itself create a trust and it does not give notice or put an examiner upon inquiry that a trust does exist or that any person other than the present grantee has a beneficial interest. 12SW2d175, 137ALR460, 462-65; 682SW2d246. This “blind trustee” concept was first enacted into statutory form as a conveyancing statute. This statute was used for many years to avoid filing trust instruments of record and to escape the formality of creating a trust where title was held by a “nominee.” For example, when a conveyance is made to “Jack Smith, Trustee” and the creating instrument does not identify a trust or the name of any beneficiary, the trustee may “convey, transfer, or encumber the title of the property without subsequent question by a person who claims to be a beneficiary under a trust or who claims by, through, or under any undisclosed beneficiary or by, through, or under the person designated as trustee in that person’s individual capacity.” TPC § 101.001. Moreover, in this situation, “the trust property is not liable to satisfy the personal obligations of the trustee.” TPC § 101.002. See also TCP § 114.082 and 164SW2d488. If there is no subsequent conveyance out of the “blind trust” and no other evidence that a trust exists, record title to the property interest in question is deemed to be in the named trustee or the trustee’s successors. 802 S.W.2d 880.
Recent cases where the trust instrument can’t be found
A 2016 case shows additional complications that arise when a trust instrument doesn’t exist. No. 03-13-00768-CV.
A fiduciary owes the highest duty imposed in law to the person (beneficiary) over whose property he has control. A fiduciary might be appointed to administer a trust or handle an estate. The appointment will set out the rights and powers of the fiduciary. Based on these powers, the fiduciary will have the power to make decisions about the best use of the property. These discretionary powers may include the power to sell property, to invest, to rent or to exchange property.
Can a fiduciary delegate these discretionary powers? The general rule is that he can’t. 174/2 963. Usually when the trustee tries to delegate his powers, something bad is happening. For instance, an elderly trustee might be under the undue influence of someone who wants to use the trust property to benefit himself. Another example is where a person who doesn’t know the first thing about being a fiduciary relies on someone who takes advantage of the situation.
There are some cases where the courts have said that a trustee could delegate his discretionary duty. In a case where the trustee and beneficiary were the same person and this person and the trust, through the trustee, also were the guarantors on a note, the Supreme Court held that the beneficiary could not claim that the trustee had no right to delegate his duty to guarantee the note. 586/2 472. While this seems contrary to the general rule, when all the people involved are the same, you’re not going to avoid liability by claiming that you had no right to do what you did.
Copyright 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 inheritance laws, inheritance rights, have a family inheritance dispute, a property dispute or want information about contesting a will and need an inheritance lawyer, we can help. Please go to our main site www.texasinheritance.com and use the contact form to contact us today. We are Texas inheritance lawyers and would love to learn about your case and there is no fee for the initial consultation.
In 2005 the Texarkana Court of Appeals was asked that question. An elderly couple who became concerned about their future health and living care needs made two of their children signatories on their bank account. Over time, the mother died and a daughter was able to get sole control of the funds. She refused to give her father access to the account. The father filed suit. The daughter responded to the suit by saying that after the mother had died her brother started making large withdrawals from the fund. To protect the money, the daughter took the money out of the account and opened a new account where she was the only signatory. Her position was that the parents had orally created a trust when they put her on the account originally and she was just following the dictates of the trust. She also claimed that once her mother had died, the trust became irrevocable and her father could not revoke it. The trial court agreed with the daughter and held that the parents had created an oral trust when they put the daughter on the account and she had every right to protect their interest by taking the money out of that account and putting it in another one where she was the sole signatory on the account. The father appealed.
The appeals court reversed. They explained that a trust must be in writing. There are some exceptions to that rule but none of those exceptions were present in this case. Since there was no trust, the funds belonged to the father and not to the alleged trust. The court also held that if any trust was created, it was a revocable trust and the father could and did revoked the alleged trust by filing suit. The trial court was reversed and the appeals court sent the case back to the trial court to determine how much attorney’s fees should be awarded against the daughter. 167 sw3 924.
Copyright 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 inheritance laws, inheritance rights, have a family inheritance dispute, a property dispute or want information about contesting a will and need an inheritance lawyer, we can help. Please go to our main site www.texasinheritance.com and use the contact form to contact us today. We are Texas inheritance lawyers and would love to learn about your case and there is no fee for the initial consultation.
