David F. Johnson presented “Trust Issues In Divorce Proceedings” on November 17, 2021. This presentation covered trust issues that arise in divorce disputes, such as spouses creating an irrevocable trust, fraud claims to void a trust, conflict of interest issues raised by the same attorney drafting both spouse’s estate/trust documents, characterization of trust assets and distributions as separate or community, settlor standing to complain about trust administration issues, trust construction issues, adoption-in and adoption-out issues, spouse/settlor liability for controlling a trust, capacity issues raised by spouses being involved as trustees and director/officer of a closely held business, spouses’ co-trustee management issues, the new Texas Trust Code provisions dealing with the effect of dissolution of marriage on certain transfers in trusts.
David F. Johnson presented “Trustee’s Obligation to Inform Beneficiaries: Avoiding Breach of Fiduciary Duty Claims” to a national audience on November 16, 2021, via Strafford publishing with his co-presenter Scott E. Rahn, founder of RMO LLP. A critical obligation for trustees of irrevocable trusts is the duty to inform beneficiaries of the trust’s existence and activities. Trustees often face claims of breach of fiduciary duty for failure to comply with these responsibilities. Inconsistencies between the trust document and the applicable state law frequently complicate compliance. This presentation addressed a trust’s ability to expand or narrow the duty to disclose, statutory provisions dealing with the duty to disclose, demands for accountings, common law duty to disclose, disclosure duties in litigation, quiet trusts, ramifications for non-disclosure, and methods to avoid breach claims.
In In the Estate of Johnson, an applicant to be an independent administrator appealed a court’s decision to not appoint him due to his being unsuitable. No. 02-20-00133-CV, 2021 Tex. App. LEXIS 7138 (Tex. App.—Fort Worth August 26, 2021, no pet. history). The court of appeals first discussed the standard of review of orders finding a person unsuitable:
A probate court’s order finding a person is unsuitable to serve as executor is reviewed under an abuse-of-discretion standard. When applying an abuse-of-discretion standard, the normal sufficiency-of-the-evidence review is part of the abuse-of-discretion review and not an independent ground for reversal. The probate court abuses its discretion if its actions are unreasonable or arbitrary or without reference to any guiding rules or principles. “Under an abuse of discretion standard of review, we must make an independent inquiry of the entire record to determine if the trial court abused its discretion and are not limited to reviewing the sufficiency of the evidence to support the findings of fact made.”
In In re Estate of Clark, a trial court entered an order allowing a family allowance for the decedent’s wife. No. 02-20-00211-CV, 2021 Tex. App. LEXIS 5685 (Tex. App.—Fort Worth July 15, 2021, no pet. history). After the wife was removed as the administrator of the estate, the court entered another order ending the family allowance. Continue Reading Court’s Order Ending Family Allowance To Decedent’s Wife Was Reversed Due To A Lack Of Notice To The Wife
David will cover recent statutory changes and case law updates. He will discuss extending the rule against perpetuities, de jure versus de facto status as trustee, modifications to trusts, trust construction, temporary injunctions against trustees, trustee authority to sell real estate, trust management of closely held businesses, co-trustee management, exculpatory clauses, acceptance-of-the-benefits doctrine, will reformation and more.
Date: Tuesday, December 14, 2021
Time: 10:00 – 11:00 a.m. Central Time
Speaker: David F. Johnson
Continuing Education Credit Information:
This course was approved by the State Bar of Texas Committee on MCLE in the amount of 1 credit hour. This course has also been approved for 1.25 CTFA credit by the American Bankers Association, attendees can self report.
Who should attend:
In-house counsel and other litigation contacts, trust officers, risk management contacts, and wealth advisors
Webinar instructions will be e-mailed prior to the webinar
David F. Johnson has recently been named a Fellow with the American College of Trust and Estate Counsel (“ACTEC”). ACTEC is an organization of almost 2,400 trust and estate lawyers and law professors who have been elected by their peers in recognition of having made outstanding contributions to the practice of trust and estate law. ACTEC brings together top lawyers in the profession to maintain a high quality of trust and estate legal services through mutual education, to create and foster networking among those lawyers based on the highest order of trust and confidence, and to contribute to the improvement of the areas of law in which trust and estate lawyers practice. The nomination process requires the applicant to have contributed to the education of trust and estate attorneys over a long period of time though articles and speeches.
David F. Johnson co-presented “Breach of Fiduciary Duty Claims Against Trustees/Managers of Closely Held Businesses” with Kenneth J. Fair from Wright, Close & Barger LLP to the AFHE (Attorneys For Family-Held Enterprises) Fall Conference in Phoenix, Arizona, on November 29, 2021. This presentation discussed how and why trusts own closely held business interests, trustee’s duties regarding those interests, a officer and director’s duties and the business judgment rule, the conflict that can arise between those two capacities, attorney-client privilege issues, paying for attorneys when claims arise, and best-practice advice for attorneys who represent trustees in this situation.
David F. Johnson presented his paper “Is There a Trustee Get Out of Jail Free Card? The Use of Exculpatory Clauses in Trust Documents in Texas” to the Dallas Bar Association Probate, Trusts, and Estates Section on October 26, 2021. This presentation discussed the different types of exculpatory clauses in trust documents, why they exist, the historical treatment of exculpatory clauses in Texas, Texas’s current statutory provisions that impact their enforcement, current precedent impacting the enforcement of such clauses, and procedural issues involved in litigating those clauses.
In Moore v. Estate of Moore, a decedent’s wife claimed that she had an interest in an oil and gas lease formerly owned by her deceased husband. No. 07-20-00019-CV, 2021 Tex. App. LEXIS 6142 (Tex. App.—Amarillo July 30, 2021, no pet. history). The decedent’s children were the trustees of a trust that was the residuary beneficiary of the decedent’s will. If the decedent still owned the mineral interests at the time of his death, the trust would inherit that interest. After the decedent died, the wife and the trustees settled their dispute and entered into a settlement agreement that provided: “The Parties agree that each shall keep and own such real and personal property as they currently possess without any challenge of any other party.” Id. Later, the trustees sued the wife, alleging she breached her contractual duty to transfer the mineral interest to the trust, was liable under a theory of money had and received, and breached her fiduciary duties. After a jury trial, the trial court entered a judgment for the trustees, and held that the mineral interest belonged to the trust. The wife appealed. Continue Reading Court Holds That Trust Owned Mineral Interests And Not The Settlor’s Wife
In Peek v. Mayfield, a beneficiary sued a trustee for breach of fiduciary duty. No. 02-20-00107-CV, 2021 Tex. App. LEXIS 6080 (Tex. App.—Fort Worth July 29, 2021, no pet.). After a bench trial, the district court found that the trustee breached his fiduciary duties, removed him, and entered an order appointing a receiver and awarding other relief. The district’s court’s order did not require the receiver applicant to file a bond payable to the heir, nor did it indicate an appropriate amount for such a bond. The trustee appealed, and the court of appeals reversed:
Rule 695a provides that no receiver shall be appointed with authority to take charge of property until the party requesting the appointment has filed “a good and sufficient bond . . . payable to the defendant in the amount fixed by the court.” “The purpose of the bond is to ensure that the defendant can be reimbursed for any damages caused by the appointment of the receiver in the event that the receiver was wrongfully appointed.” The applicant’s bond is a prerequisite to the appointment of a receiver, and the trial court’s failure to require the bond necessitates reversal. “The filing of a bond by the receiver pursuant to Texas Civil Practice and Remedies Code section 64.023 will not satisfy this requirement.” In this case, the district court’s order does not require Linda to file a bond payable to Bruce, nor does it indicate an appropriate amount for such a bond. Bruce brought this deficiency to the district court’s attention in his motion to vacate appointment of the receiver, but the district court took no action to correct the error, and the record does not show that Linda posted such a bond. Therefore, the requirements of Rule 695a have not been met, and the receivership must be dissolved.