Thursday, April 23, 2020
Texas Courts Conflict On Whether Contingent Remainder Beneficiaries Have Standing To Assert Claims Regarding Trust Administration
Two different appellate courts in Texas have recently published opinions with differing views on whether a contingent remainder beneficiary has standing to sue a trustee for a trust administration issue.
In one of the cases, 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 . The beneficiaries of the trust, also children of the settlor, sued the non-settlor trustee for allowing that to happen, and the trial court granted the trustee summary judgement. The beneficiaries appealed. The appeals court the beneficiaries had standing to bring the claim under Texas Property Code Section 115, and that an interested party includes simply a beneficiary, defined in Tex. Prop. Code § 111.004(2) as “a person for whose benefit property is held in trust, regardless of the nature of the interest.” However, the claims still failed because the settlor of a revocable trust had the authority to remove assets from the trust. Father as settlor and co-trustee had the power to revoke the Trust and was the sole beneficiary of the Trust while alive. Father was free to fund the Trust and dispose of its property as he saw fit.” Furthermore, any fiduciary duty of the co-trustee was owed solely to the father while he was still alive. The summary judgement was affirmed.
In Berry v. Berry, a son and his daughter sued his mother and her brothers regarding a trust and family partnership regarding the operation of a ranch and family business. The defendants asserted that both plaintiffs lacked standing; the appellate court found that the son as present beneficiary of the trust had standing to bring a claim but that the daughter, just a contingent beneficiary, did not. The court of appeals noted a case from 1942 that stated: “[a]n expectant heir has no present interest or right in property that he may subsequently inherit and consequently he cannot maintain a suit for the enforcement or adjudication of a right in the property.”
See David Fowler Johnson, Texas Courts Conflict On Whether Contingent Remainder Beneficiaries Have Standing To Assert Claims Regarding Trust Administration, LexBlog, April 17, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.