Beneficiaries often request that a trustee secure a loan from a third party. In an economic downturn, such requests are even more prevalent. As a general rule, a trustee should not want to do so as it should assume that the beneficiary will default and the trustee will then be placed in a situation of having pay the debt of beneficiary with trust assets and then potentially taking action against a beneficiary, a person to whom the trustee owes a fiduciary duty. Yet, the trustee may have pressure to make such a transaction.

A trustee should consider its fiduciary duties before agreeing or denying such a request. A trustee has a duty of loyalty to the beneficiaries. Texas Property Code Section 117.007 provides: “A trustee shall invest and manage the trust assets solely in the interest of the beneficiaries.” Tex. Prop. Code § 117.007; InterFirst Bank Dallas, N.A. v. Risser, 739 S.W.2d 882, 898 (Tex. App.—Texarkana 1987, no writ). A trustee owes a duty of loyalty to each beneficiary, therefore, the trustee should weigh whether securing a loan for one beneficiary may violate a duty of loyalty owed to another beneficiary.

In this regard, a trustee has a duty to treat all beneficiaries with impartiality. Texas Jurisprudence states:

A trustee must act for all the beneficiaries; he or she may not properly act for only some of them. The trustee owes the same fiduciary duty to all to protect their respective interests, without partiality or favor to some at the expense of others; thus, a trustee is bound, in the absence of instructions to the contrary, to administer the trust with an eye to a remainder interest, as well as to the interest of a life tenant, and he or she cannot slight one interest for the benefit of the other. Additionally, a trustee owes the same fiduciary duty to a contingent beneficiary as to one with a vested interest, insofar as necessary for the protection of the rights of the contingent beneficiary in the trust property. This duty of impartiality has been codified in the Uniform Prudent Investor Act, which states that if a trust has two or more beneficiaries, the trustee must act impartially in investing and managing the trust assets, taking into account any differing interests of the beneficiaries.

Tex. Jur. 3rd, Trusts, § 64. So, a trustee has to weigh whether securing a loan for one beneficiary complies with a duty of impartiality: is the trustee impermissibly favoring one beneficiary over another?

A trustee also has a duty to properly manage trust assets: “A trustee’s fundamental duties include the use of the skill and prudence which an ordinary, capable, and careful person will use in the conduct of his own affairs as well as loyalty to the trust’s beneficiaries.” Herschbach v. City of Corpus Christi, 883 S.W.2d 720, 735 (Tex. App.—Corpus Christi 1994, writ denied). Texas Property Code Chapter 117 (The Uniform Prudent Investor Act) provides that a trustee may manage trust property and invest and reinvest in property of any character on the conditions and for the lengths of time as the trustee considers proper. Tex. Prop. Code Ann. § 113.006. Chapter 117 limits this rather broad grant of authority and provides that a trustee who invests and manages trust assets owes a duty to the beneficiaries to comply with the prudent investor rule. Tex. Prop. Code Ann. § 117.003(a). Under the statute, the prudent investor rule provides, in part: “(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.” Id. The trustee must address whether it is a prudent investment and management of trust assets to secure a loan for a beneficiary.

A trustee, however, should keep in mind that because securing a loan for a beneficiary is inherently different than for a third party, a trustee should consider whether the security is more akin to a distribution. The Restatement provides:

Sometimes a beneficiary requests funds for a purpose that falls within the reasonable discretion of the trustee but which the applicable standard would not require the trustee to furnish. If the trustee is reluctant for some reason to make the requested distribution, and particularly if the trustee’s concern is one of impartiality, the trustee has discretion to make a loan or advance to the beneficiary. The loan need not qualify as a prudent investment under § 90. RESTATEMENT THIRD, TRUSTS (Prudent Investor Rule) § 227. It is a form of discretionary benefit, and may be made at a market rate of interest or at low or no interest; and funds may be advanced with recourse only against the beneficiary’s interest, without personal liability.

RESTATEMENT (THIRD) TRUSTS, § 50, cmt. d(6). Accordingly, a trustee should consider whether the trust allows the trustee to treat a security transaction as a type of benefit and/or distribution to the beneficiary (and there may be certain tax considerations resolved as well).

A trustee has a duty to disclose to a beneficiary. A trustee also has a duty of full disclosure of all material facts known to it that might affect the beneficiaries’ rights. Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex. 1984). Further, a trustee has a duty of candor. Welder v. Green, 985 S.W.2d 170, 175 (Tex. App—Corpus Christi 1998, pet. denied). Regardless of the circumstances, the law provides that beneficiaries are entitled to rely on a trustee to fully disclose all relevant information. See generally Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786, 788 (1938). So, a trustee has a duty to disclose the securing of a loan for one beneficiary to other beneficiaries.

This may conflict with a duty of confidentiality. The duty of loyalty includes a duty to maintain the confidentiality of a beneficiary’s information. The Restatement provides: “The trustee is under a duty to the beneficiary not to disclose to a third person information which he has acquired as trustee where he should know that the effect of such disclosure would be detrimental to the interest of the beneficiary.” RESTATEMENT (SECOND) OF TRUSTS § 170. The Restatement addresses the conflicting position that a trustee is in when a duty to maintain the confidentiality of a beneficiary’s information abuts a duty to disclose to other beneficiaries:

This duty of confidentiality ordinarily does not apply to the disclosure of trust information to beneficiaries or their authorized representatives (see duties to inform and report, §§ 82 and 83) or, in the interest of one or more trust beneficiaries, to the trustees of other trusts or the fiduciaries of fiduciary estates in which a beneficiary has an interest. Even in providing information to or on behalf of beneficiaries, however, the trustee has a duty to act with sensitivity and, insofar as practical, with due regard for considerations of relevancy and sound administration, and for the personal concerns and privacy of the trust beneficiaries.

RESTATEMENT (THIRD) OF TRUSTS § 78. Where a beneficiary’s information impacts a co-beneficiary’s interest in the trust, a trustee may be in a position where a duty of loyalty requires disclosure.

After considering its fiduciary duties, a trustee should consider whether it has the authority or power to secure a loan for a beneficiary. A trustee generally has authority to encumber trust assets:

Unless prohibited by statute or the terms of the trust, a trustee has power to borrow money for trust purposes and to pledge, mortgage, grant a deed of trust, or otherwise encumber trust property. The trustee has a duty to exercise caution as well as the duty to exercise care and skill in deciding whether and under what terms to borrow money for trust purposes or to grant a security interest in trust property… Because of a trustee’s duty to respect the terms of the trust (§ 76), it is normally improper for a trustee to exercise the power to encumber trust property by granting security interests in assets that are to be specifically distributed to one or more beneficiaries on termination.

Restatement (Third) of Trusts, § 86.

A trustee should review the trust agreement. “The trustee shall administer the trust in good faith according to its terms and the Texas Trust Code.” Tolar v. Tolar, No. 12-14-00228-CV, 2015 Tex. App. LEXIS 5119 (Tex. App.—Tyler May 20, 2015, no pet.). “The powers conferred upon the trustee in the trust instrument must be strictly followed.” Id. There are potential trust provisions that expressly allow a trustee to provide security for loans to beneficiaries. One example is as follows:

The trustee, in the trustee’s discretion, is authorized to endorse, guarantee, become the surety of or otherwise become obligated for or with respect to the debts or other obligations of any person (including a beneficiary), firm, corporation, partnership, trust or other legal entity, whether with or without consideration, when the trustee believes such actions advance the purposes of any trust created or continued hereunder.

Where a trust document allows such a transaction, a trustee may generally enter into such an agreement when it is done in good faith. For example, in one case, the trust granted the trustee the power: “to lend money to any beneficiary hereunder, either with or without security and on such other terms as my executors may deem appropriate.” In re Hanes, 214 B.R. 786, 822 (Bankr. E.D. Va. 1997). The court construed this language as: “The language of the above provisions expressly permits lending to the beneficiaries and the pledging of any assets to secure borrowing.” Id. It held that the challenged loans were permissible:

Viewing the instruments and the circumstances as a whole, we find that it was Hanes, Sr.’s intention to give his sons broad authority to manage the Marital Trust in their absolute discretion. The family investment plan was a proper function of Hanes duties as Trustee. To the extent that the DCI Companies were investments made by HILP in furtherance of the family investment plan, the pledges securing lending directly to these entities was authorized.


In the absence of trust language, there is general statutory authority that may allow this type of transaction. A trustee has the general power to do anything that is necessary or appropriate to carry out the purpose of the trust. Tex. Prop. Code Ann. § 113.002. There is also a specific statute that addresses encumbering trust assets:

A trustee may borrow money from any source, including a trustee, purchase property on credit, and mortgage, pledge, or in any other manner encumber all or any part of the assets of the trust as is advisable in the judgment of the trustee for the advantageous administration of the trust.

Tex. Prop. Code § 113.015 (emphasis added). This statute allows a trustee to encumber trust assets (allow them to be collateral for a loan) if the trustee finds that the lien would be advantageous for the administration of the trust. Note that this does not require the trustee to find that it is a good investment or that encumbering the assets are for consideration. Rather, a trustee may find, for example, that benefiting a beneficiary by agreeing to such a lien may be advantageous to the administration of the trust where the trust is for the primary benefit of the beneficiary and agreeing to the lien is better than making an outright distribution or a loan to the beneficiary. Other states have similar statutes that allow a trustee to secure loan for the benefit of a beneficiary. See, e.g., Oregon Rev. Stat.  130.725 (2017) (A trustee may “[p]ledge trust property to guarantee loans made by others to the beneficiary.”).

A third party lender will likely want to make sure that the trustee has the authority to encumber trust assets and may seek a copy of the trust document. When a trustee wants to enter into a transaction to secure a loan for a beneficiary, it may want to provide a certification of trust instead of providing an entire trust document. Tex. Prop. Code § 114.086.

If the beneficiary causes harm to the trust due to his or her activities, a trustee may have a claim against the beneficiary. Texas Property Code Section 114.031 provides:

A beneficiary is liable for loss to the trust if the beneficiary has: (1) misappropriated or otherwise wrongfully dealt with the trust property; (2) expressly consented to, participated in, or agreed with the trustee to be liable for a breach of trust committed by the trustee; (3) failed to repay an advance or loan of trust funds; (4) failed to repay a distribution or disbursement from the trust in excess of that to which the beneficiary is entitled; or (5) breached a contract to pay money or deliver property to the trustee to be held by the trustee as part of the trust.

Tex. Prop. Code § 114.031(a). So, if a beneficiary has caused loss to the trust due to wrongfully dealing with trust property, a trustee has a claim against the beneficiary, who is liable for the loss. Id.

One important issue is that the beneficiary may not have any assets, so suing the beneficiary may be a worthless exercise. The Texas Property Code also has a provision that allows a trustee to offset any distributions to the beneficiary due to a loss:

Unless the terms of the trust provide otherwise, the trustee is authorized to offset a liability of the beneficiary to the trust estate against the beneficiary’s interest in the trust estate, regardless of a spendthrift provision in the trust.

Tex. Prop. Code § 114.031(b). Therefore, if a trustee establishes a claim against the beneficiary, the trustee can then simply payoff that debt by offsetting distributions otherwise due to the beneficiary from the trust. However, a trustee generally does not want to rely on this statutory right to offset debts to the trust by the beneficiary, and it should be used only when necessary.

Further, a trustee that enters into such a transaction should consider methods to limit risk. The trustee can always filed suit to seek an instruction from a court on the propriety of a transaction. Additionally, there are non-judicial methods to limit risk. Once such method is to enter into a release agreement with all relevant beneficiaries. A beneficiary who has full capacity and acting on full information may relieve a trustee from any duty, responsibility, restriction, or liability that would otherwise be imposed by the Texas Trust Code, and this release must be in writing and delivered to the trustee. Tex. Prop. Code Ann. § 114.005. Further, writings between the trustee and beneficiary, including releases, consents, or other agreements relating to the trustee’s duties, powers, responsibilities, restrictions, or liabilities, can be final and binding on the beneficiary if it is in writing, signed by the beneficiary, and the beneficiary has legal capacity and full knowledge of the relevant facts. Tex. Prop. Code Ann. § 114.032. Minors are bound if a parent signs, there are no conflicts between the minor and the parent, and there is no guardian for the minor. Id. So, a trustee can limit its risk of future claims by having beneficiaries consent to the security agreement and release the trustee for any results therefrom.

In conclusion, a trustee usually has the power or authority to secure a loan for a beneficiary. However, the trustee should use caution in doing so as it has a duty to protect trust assets and invest them wisely. If a trustee contemplates securing a loan, it should seek legal advice on documenting the loan transaction with the lender and documenting the transaction with the beneficiary (and other beneficiaries) to limit risk of claims in the future.

In In the Estate of Nicholas, the temporary administrator of an estate and the decedent’s mother filed a Texas Rule of Civil Procedure 202 petition concerning a shootout at a residence by the City of Houston Police Department. No. 14-19-00716-CV, 2020 Tex. App. LEXIS 2532 (Tex. App.—Houston [14th Dist.] March 26, 2020, no pet. history). The petitioners sought to investigate potential claims against the city. The city filed a plea to the jurisdiction, asserting that the petition failed as a matter of law because the statutory probate court lacked statutory subject-matter jurisdiction and other grounds. The court denied the plea, and an interlocutory appeal followed.

The court of appeals discussed a statutory probate court’s jurisdiction:

Section 32.005 of the Texas Estates Code provides that a “statutory probate court has exclusive jurisdiction of all probate proceedings, regardless of whether contested or uncontested.” Tex. Est. Code § 32.005(a) (emphasis added). In a county in which there is a statutory probate court, “a claim brought by a personal representative on behalf of an estate” is also a claim “related to [a] probate proceeding.” See Tex. Est. Code § 31.002(a)(3), (c)(1)-(2) (defining “matters related to a probate proceeding”)… In addition, Section 32.005(a) recognizes that the Estates Code provides for concurrent jurisdiction over some causes of action related to a probate proceeding.4Link to the text of the note Specifically, the statutory probate court has concurrent jurisdiction [*10]  with district courts in actions enumerated in Section 32.007. Tex. Est. Code § 32.005(a); see also Tex. Est. Code § 32.007. Section 32.007 of the Texas Estates Code provides that a statutory probate court has concurrent jurisdiction with a district court over several types of actions, including “a personal injury, survival, or wrongful death action by or against a person in the person’s capacity as a personal representative.” See id. § 32.007(1).

Id. The court then discussed Rule 202:

Texas Rule of Civil Procedure 202 provides a mechanism for requesting court authorization of pre-suit depositions to either (1) perpetuate or obtain testimony for use in an anticipated lawsuit, or (2) investigate a potential claim or suit. Tex. R. Civ. P. 202.1. … A Rule 202 petition must “be filed in the proper court of any county . . . .” Tex. R. Civ. P. 202.2(b). This court has previously held that “[a] proper court to entertain a Rule 202 petition is a court that would have subject-matter jurisdiction over the underlying dispute or anticipated lawsuit; thus, we must look to the substantive law of the underlying dispute or anticipated action to determine jurisdiction.”

Id. The court then analyzed the petitioners’ claims and held that the statutory probate court had subject matter jurisdiction over those claims:

The claims Petitioners seek to investigate include survival claims. “A personal injury action survives to and in favor of the heirs, legal representatives, and estate of the injured person.” The personal representative of Rhogena’s estate is the proper party to bring a survival claim to recover damages Rhogena suffered before her death. … Accordingly, the potential survival claims Petitioners seek to investigate by the Rule 202 proceeding are matters “related to a probate proceeding” and therefore fall within a statutory probate court’s subject matter jurisdiction. Moreover, Estates Code section 32.007 provides separately that a statutory probate court has concurrent jurisdiction with the district court in, among other lawsuits, “a personal injury, survival, or wrongful death action by or against a person in the person’s capacity as a personal representative.” Jo Ann Nicholas is alleged to be Rhogena’s mother and has explained in the Rule 202 petition her desire to investigate, and her interest in, a potential wrongful death claim against the City. An action to recover damages for the wrongful death of a decedent is for the exclusive benefit of the surviving spouse, children, and parents of the deceased.

Id. Therefore, the court held that the trial court had subject matter jurisdiction over the Rule 202 petition and affirmed the denial of the plea to the jurisdiction.

In Ron v. Ron, a wife created a trust with her husband as a trustee, a friend as a trust protector, and their children as the beneficiaries. No. 3:19-CV-00211, 2020 U.S. Dist. LEXIS 52507 (S.D. Tex. February 4, 2020). The wife alleged that the husband made inappropriate transfers of community property to the trust before and after their divorce and that the trust protector inappropriately added the husband as a beneficiary of the trust. The wife sued the trust protector for breach of fiduciary duty and other similar claims. The trust protector filed a motion to dismiss, arguing that he did not owe her any fiduciary duties.

The federal magistrate discussed the trust protector role in Texas:

The trust protector’s role is relatively new in modern trusts. Thus, “there is little authority discussing the role of trust protectors, which the [Texas] Trust Code only recognized in 2015.” In re Macy Lynne Quintanilla Tr., No. 04-17-00753-CV, 2018 WL 4903068, at *5 (Tex. App.—San Antonio Oct. 10, 2018, no pet.) (citing Tex. Prop. Code § 114.0031). The Texas Trust Code provides that a trust protector has only the power and authority granted to him by the trust terms, which may include: (1) the power to remove and appoint trustees, advisors, trust committee members, and other protectors; (2) the power to modify or amend the trust terms to achieve favorable tax status or to facilitate the efficient administration of the trust; and (3) the power to modify, expand, or restrict the terms of a power of appointment granted to a beneficiary by the trust terms. Tex. Prop. Code § 114.0031(d). See also In re Macy Lynne Quintanilla Tr., 2018 WL 4903068, at *5. The Texas Trust Code recognizes that a trust protector may be a fiduciary or nonfiduciary. See Tex. Prop. Code § 114.0031(e).


The wife contended that the trust created a formal fiduciary relationship between herself and the trust protector. The Trust expressly stated that the “Trust Protector’s authority is conferred in a fiduciary capacity.” Id. The trust also provided that: “The purpose of a Trust Protector is to direct my Trustee in certain matters concerning the trust, and to assist, if needed, in achieving my objectives as expressed by the other provisions of my estate plan hereunder.” Id. In the wife’s view, the use of “my objectives” and “my estate plan hereunder” demonstrates that the trust protector’s duties were owed to her. The magistrate disagreed:

In my view, nothing in Section 4.01 of the Trust creates a fiduciary relationship between Stein and Suzanne. If anything, the provision strongly suggests that the fiduciary relationship is between Stein and the Trustee—who Stein is to “direct” and “assist”—or perhaps, between Stein and the Trust—which contains Suzanne’s memorialized objectives. The mere fact that Section 4.01 references Suzanne’s objectives means nothing when the Trust explicitly states that “[a]ll provisions of this agreement are to be construed to accomplish these objectives.” Given this reality, literally every provision in the Trust is expressly intended to achieve Suzanne’s objectives. Surely, this does not mean that every individual implicated by a given provision has entered a fiduciary relationship with Suzanne.

Id. The wife also argued that the following trust provision created a duty:

To the extent that I have provided in this agreement that a Trust Protector holds any power or authority in a fiduciary capacity, the Trust Protector has no general duty to monitor or remain informed about the trust. Specifically, and not in limitation of the foregoing, the Trust Protector has no duty to investigate the action or inactions of the Trustee, to audit the books of the trust, to review the investments of the trust, or to evaluate the performance of the trust portfolio, unless at least one trust beneficiary or some other interested party (i) files a written complaint with the Trust Protector alleging a breach of trust and detailing the matters the Trust Protector should investigate, audit, review, or evaluate, or (ii) requests an action that I have authorized the Trust Protector to perform. If the Trust Protector possesses the power to direct, consent to, or veto the actions of a Trustee described in the written complaint, I direct that the Trust Protector defer to the Trustee’s judgment except in those instances in which the Trust Protector can find no rational basis for the Trustee’s actions, or failure to act, and the Trust Protector shall only suffer liability for failing to act if the trust surfers monetary loss and the Trust Protector made no reasonable inquiry when alerted that the Trustee might have breached the Trustee’s fiduciary duties; or, even if the Trust Protector made a reasonable inquiry, no other reasonable person would have failed to take action against the Trustee under those circumstances.

Id. The magistrate, once again, disagreed with the wife and held that “nothing in this language implies or even suggests the existence of a fiduciary relationship between Stein and Suzanne.” Id. Rather, “the provision clearly states that only a ‘trust beneficiary or some other interested party’ can file a complaint capable of getting the Trust Protector to act in accordance with the provision.” Id. The magistrate concluded that as the wife was neither a trust beneficiary nor an interested party, that the trust protector did not owe a fiduciary duty to her. Id. (citing Lee v. Rogers Agency, 517 S.W.3d 137, 159-60 (Tex. App.—Texarkana 2016, pet. denied) (“[A] settlor who under the terms of the Trust does not manage any of the aspects of the Trust and does not stand to inherit any of the trust assets is not an ‘interested person’ who has standing to bring an action against a trustee or to bring other proceedings related to a trust under the Texas Property Code.”)).

The magistrate then looked to see if Texas law (as opposed to the trust document) created a duty from the trust protector to the wife. The magistrate considered a provision of the Texas Trust Code that mentions trust protectors and their fiduciary duty. The magistrate stated:

Section 114.0031(a)(1) of the Texas Trust Code states: “‘Advisor’ includes protector.” Tex. Prop. Code § 114.0031(a)(1). Section 114.0031(e) then provides: If the terms of a trust give a person the authority to direct, consent to, or disapprove a trustee’s actual or proposed investment decisions, distribution decisions, or other decisions, the person is an advisor. An advisor is a fiduciary regardless of trust terms to the contrary except that the trust terms may provide that an advisor acts in a nonfiduciary capacity if: (1) the advisor’s only power is to remove and appoint trustees, advisors, trust committee members, or other protectors; and (2) the advisor does not exercise that power to appoint the advisor’s self to a position described by Subdivision.

Id. (citing Tex. Prop. Code § 114.0031(e). The magistrate noted that this section discusses the trust protector in his role as advisor to the trustee and suggests that the fiduciary relationship is between the trust protector and trustee or between the trust protector and the trust itself. The magistrate held that the Texas law does not create a fiduciary duty between the trust protector and the settlor.

After briefly analyzing the wife’s informal confidential relationship allegation, which the magistrate disagreed with, the magistrate recommended dismissing the wife’s claims against the trust protector.

David F. Johnson, lead writer for the Texas Fiduciary Litigator blog, was selected to receive the JD Supra Readers’ Choice Award in Wealth Management. The annual award recognizes top authors and firms who were read by C-suite executives, in-house counsel, media, and other professionals across the JD Supra platform during 2019.

JD Supra’s Readers’ Choice Awards encompass 26 different categories and are based on timeliness as well as proven, ongoing importance. In each category, 10 authors are recognized for consistently highest readership and engagement within that category for all of 2019. In total across all categories, only 235 authors were selected from more than 50,000 who were published on the platform last year.

David serves as the managing shareholder of Winstead’s Fort Worth office. He maintains an active trial practice focused on advising and representing clients in the financial services industry. David has a triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization

David F. Johnson, lead writer for the Texas Fiduciary Litigator blog, presented his paper on “Joint Account Litigation in Texas” to the Texas Bankers Association via a webinar on April 29, 2020. This presentation addresses the creation, ownership, and disputes that arise from joint accounts.  It also addresses who owns money in an account during the parties’ life times, the language that is sufficient/necessary to create survivorship effect, community property issues arising from joint accounts, issues arising from missing account agreements, a bank’s potential liability for not properly setting up a survivorship account, bank’s rights and defenses arising from transfers from joint accounts, and general litigation issues surrounding disputes arising from survivorship accounts.  See below for a copy of the presentation paper and slides.

In Fox v. Fox, a father deeded real property in Louisiana to one of his sons. No. 14-18-00672-CV, 2020 Tex. App. LEXIS 2211 (Tex. App.—Houston [14th Dist.] March 17, 2020, no pet. history). The father later died, and his sons had a dispute regarding whether the deed was effective. A different son was his executor in Texas, and the son that was the recipient of the gift filed a declaratory judgment petition in his estate to establish that the deed was effective. The executor filed a plea to the jurisdiction, arguing that the Texas court did not have jurisdiction over the deed concerning real property in Louisiana. The trial court granted the plea, and an appeal was filed. Continue Reading Texas Probate Court Did Not Have Subject Matter Jurisdiction Over A Title Dispute To Real Property In Louisiana

In Bethany v. Bethany, a party filed a motion to remove his brother as executor of their mother’s estate. No. 03-19-00532-CV, 2020 Tex. App. LEXIS 2350 (Tex. App.—Austin March 20, 2020, no pet.). The movant also sought costs and expenses incurred by him incident to removal, including reasonable attorney’s fees. In his response to the motion, the respondent similarly moved for costs and expenses in defending against removal, including reasonable attorney’s fees. Following a hearing, the trial court denied the motion but did not address the issue of attorney’s fees. The movant appealed, and the respondent filed a motion to dismiss the appeal because the order was not a final judgment.

The court of appeals noted that appeals may generally be taken only from final judgments. “Probate proceedings are an exception to the ‘one final judgment’ rule; in such cases, ‘multiple judgments final for purposes of appeal can be rendered on certain discrete issues.’” Id. However, “[n]ot every interlocutory order in a probate case is appealable.” Id. The test is whether the order “dispose[s] of all parties or issues in a particular phase of the probate proceedings.” Id. The court agreed with the respondent and dismissed the appeal:

This phase of the probate proceedings involved Paul’s motion to remove Stephen as independent executor. That motion and Stephen’s response to the motion included claims for costs and expenses, including reasonable attorney’s fees, incident to the removal proceedings. However, the trial court’s written judgment did not dispose of those claims or address them in any manner. It is well established that an order that does not dispose of all pending claims, including attorney’s fees, is not a final order. Accordingly, we grant Stephen’s motion to dismiss the appeal and dismiss the appeal for want of jurisdiction.


Recorded Webinar

David F. Johnson, lead writer for the Texas Fiduciary Litigator blog, discusses the topic of beneficiaries requesting loans from trustees. There are multiple issues that arise regarding the trustee’s authority to do so under the trust’s language and statutory and common law, and the loan’s impact on duties of loyalty, confidentiality, impartiality, and proper management of a trust’s assets. The presentation will also cover due diligence and other practical considerations in documenting the loan as well as alternatives to decrease a trustee’s risk when facing these types of lending transactions.


Trust Loans to Beneficiaries – Paper

Trust Loans to Beneficiaries – PowerPoint

Texas has recently had two opinions that seemingly take opposite views on whether a contingent remainder beneficiary has standing to sue a trustee for trust administration issue.

In In re Estate of Little, a settlor of a revocable trust withdrew trust assets and deposited them into an account with rights of survivorship with one child as the beneficiary. No. 05-18-00704-CV, 2019 Tex. App. LEXIS 7355 (Tex. App.—Dallas August 20, 2019, pet. denied). His other children, who were beneficiaries of the revocable trust, sued the non-settlor co-trustee for allowing that to happen. The trial court granted summary judgment for the co-trustee, and the beneficiaries appealed.

The court of appeals first held that the beneficiaries had standing to bring their claims. The co-trustee argued that as contingent beneficiaries of a revocable trust, the beneficiaries had no standing to complain about what the settlor chose to do with his money during his lifetime. The court of appeals disagreed with this argument: Continue Reading Texas Courts Conflict On Whether Contingent Remainder Beneficiaries Have Standing To Assert Claims Regarding Trust Administration

On April 9, 2020, the governor suspended certain statutes concerning appearance before a notary public to execute a self-proved will, a durable power of attorney, a medical power of attorney, a directive to physician, or an oath of an executor, administrator, or guardian. These suspensions temporarily allow for appearance before a notary public via videoconference when executing such documents, avoiding the need for in-person contact during the COVID-19 pandemic.

The following conditions will apply whenever this suspension is invoked:

A notary public shall verify the identity of a person signing a document at the time the signature is taken by using two-way video and audio conference technology.

A notary public may verify identity by personal knowledge of the signing person, or by analysis based on the signing person’s remote presentation of a government-issued identification credential, including a passport or driver’s license, that contains the signature and a photograph of the person.

The signing person shall transmit by fax or electronic means a legible copy of the signed document to the notary public, who may notarize the transmitted copy and then transmit the notarized copy back to the signing person by fax or electronic means, at which point the notarization is valid.

Continue Reading Notary Services In A World of Social Distancing: Texas Temporarily Allows For Videoconference Notarization In Addition To Online Notary Services