Wednesday, May 20, 2020
Magistrate Suggests Dismissing a Settlor's Claim Against Trust Protector Because of a Lack of Fiduciary Duty
In the Texas case Ron v. Ron, a wife created a trust with her husband as a trustee, a friend as a trust protector, and her children as beneficiaries. The wife claimed 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 to the trust. The wife sued the trust protector for breach of fiduciary duty and the trust protector filed a motion to dismiss claiming that he did not owe her any fiduciary duties.
The federal magistrate stated that trust protector role is relatively new, so there is little to no authority discussing the role of trust protectors in Texas. The Texas Trust Code states that the trust protector only has the power and authority granted to him by the terms of the trust.
The wife argued that the trust itself created a formal fiduciary relationship between her and the trust protector as the trust expressly stated the "Trust protector's authority is conferred in a fiduciary capacity." The magistrate further stated that the language itself did not create a duty especially given the language, “[a]ll provisions of this agreement are to be construed to accomplish these objectives.” The magistrate stated that if they were to construe this language as creating a fiduciary duty, every individual implicated by this provision would be subject to a fiduciary relationship with the wife.
The magistrate held that the Texas law does not create a fiduciary duty between the trust protector and the settlor. and the magistrate recommended dismissing the wife’s claims against the trust protector.
See David Fowler Johnson, Magistrate Suggests Dismissing A Settlor's Claim Against Trust Protector Because of a Lack of Fiduciary Duty, Winstead, May 13, 2020.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.