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Trust Code Toolbox for locking down the runaway trustee


By P. Keith Staubus

There is a wide array of legal tools available to address a trustee who, convinced of their absolute discretion as to the investment of the trust assets and as to distributions to the beneficiaries, becomes obstinate in their duty to provide information to the beneficiaries, to make appropriate distributions to the beneficiaries, or to invest and diversify the investments of the trust.

Beneficiaries have long had available traditional extraordinary relief pursuant to the Texas Civil Practice and Remedies Code and the Texas Rules of Civil Procedure, including receivership (T. C. P. R. C. 64.001, et seq.), injunctive relief (T. C. P. R. C. 65.001, et seq.), the appointment of an auditor (T. R. C. P. 172), as well as other equitable common law remedies. In addition to these traditional tools, the Texas Trust Code now codifies the relief available to the beneficiary.

Judicial Trust Supervision

Texas Trust Code §115.001, which became effective January 1, 2006, provides that “the court may intervene in the administration of a trust to the extent that the court’s jurisdiction is invoked by an interested person or is otherwise provided by law. A trust is not subject to continuing judicial supervision unless the court orders continuing judicial supervision.” Thus, the Trust Code authorizes the court to intervene and supervise the administration of the trust during the pendency of the lawsuit, as well as granting permanent relief. While it is true that the administration of a trust is not normally supervised by a court in Texas, commentator Frank N. Ikard, Jr. has concluded that “clearly, the case law in Texas has long held that courts have the equitable jurisdiction to administer a trust.” The Trust Code now clearly authorizes such judicial supervision.

Trust Code §114.008 specifically empowers a court to remedy breaches of trust in the following ways:

(1) compel the trustee to perform the trustee’ duty or duties;

(2) enjoin the trustee from committing a breach of trust;

(3) compel the trustee to redress a breach of trust, including compelling the trustee to pay money or to restore property;

(4) order a trustee to account;

(5) appoint a receiver to take possession of the trust property and administer the trust;

(6) suspend the trustee;

(7) remove the trustee as provided under Section 113.082;

(8) reduce or deny compensation to the trustee;

(9) subject to Subsection (b), void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property of which the trustee wrongfully disposed and recover the property or the proceeds from the property; or

(10) order any other appropriate relief.

As to the injunctive relief provided for under the Trust Code, there is authority for the proposition that the beneficiary can seek not only to enjoin fiduciary breaches during the pendency of the case, but also to enjoin the trustee from utilizing trust assets to fund their defense (Trust Code § 113.018: the trustee has a right to employ attorneys when “reasonably necessary in the administration of the trust.”). When a beneficiary’s claim involves a claim of self-dealing or other conflict of interest, the beneficiary has a solid argument that the trustee should fund the legal defense personally while the case is pending.

Note that Subsection (10) of Trust Code § 114.008 grants the court broad discretion to “order any other appropriate relief.” Clearly, the Trust Code gives a court broad discretion to fashion extraordinary relief to address the runaway trustee.

Forum

An important consideration for the beneficiary prior to seeking extraordinary relief is the selection of the forum for filing suit. In counties such as Dallas, Collin, Tarrant, and Denton Counties, a beneficiary has the option to file suit in a statutory Probate Court (Probate Code §5(e)). In counties that do not have statutory Probate Courts, lawsuits concerning trusts must be brought in the District Court. The statutory Probate Court generally has the advantage of a significantly less crowded docket, and more familiarity with the fiduciary duties and other issues relating to trusts, and therefore is normally the preferred forum for relief.

Ultimately, the beneficiary has a right to seek recovery of their attorney’s fees from the trust or from the trustee (Trust Code § 114.064) incurred in pursuing the relief, in addition to the other remedies provided under Trust Code § 114.008.

Thus, a trust beneficiary may invoke the broad supervisory powers of the Probate Court under the Texas Trust Code to obtain extraordinary and permanent relief, in addition to the relief provided by the Rules of Civil Procedure, the Civil Practice and Remedies Code, and other common law equitable relief.

P. Keith Staubus is a partner with Staubus & Randall, L.L.P., and is immediate Past Chair of the Probate, Trusts & Estates Section of the Dallas Bar.

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Frequent Asked Questions

Estate planning is the arrangement of transferring a person’s assets and property after their death. The estate plan you create may consist of cars, homes, life insurance, assets, real estate, jewelry, and other types of personal property. When you create an estate plan, you must sign it in front of a notary public.

Even if you don’t have many assets, it’s still a good idea to create an estate plan, so that loved ones won’t argue over who gets what when you pass away. Your estate plan will ensure everything you own goes to specified parties and doesn’t end up in the wrong hands.

Typically, those with extensive or complex assets will hire an estate planning lawyer to help draft their will. Many use a will to divide personal property, such as a home, among their family members. When you’re preparing your will, you need to make sure you meet specific legal requirements. Having a witness present when you’re signing the documents is crucial.

Of course, it’s possible to draft a will on your own, especially if you don’t have significant assets to leave behind. However, hiring an estate planning lawyer can ensure that your documents comply with current law, and that everything gets divided among your family the way you want, so there’s no confusion.

A power of attorney is a legal document giving power to one person (an agent or attorney-in-fact) to act on your behalf if you become incapacitated. When you create a power of attorney, you can designate a specific person and decide how much authority they will have.

An attorney-in-fact would maintain records of all decisions made on your behalf. Some decisions could include recommending a guardian for dependents or minor children and financial decisions. They could also make decisions about healthcare.

If you allow your power of attorney the authority to stop, give, or withhold medical treatment, you can leave instructions on which services you want and don’t want, when to stop life-saving measures, and when to cease specific treatments.

It’s devastating to lose a loved one, and the last thing anyone wants to do is handle their affairs. However, you must ensure property and assets go to the right people, and everyone follows their final wishes.

The first thing you should do when your loved one passes away is to request a copy of a legal pronouncement of death. You should also notify close friends and family of their death. If necessary, arrange for the supervision of dependents or minor children. You’ll also be able to find instructions on how to move forward with their plans from their will or trust.

A trust is a document that places your assets into a trust fund to transfer to a beneficiary upon your death. Most people will create a trust to speed up the process of settling their estate. You can also protect your assets, reduce taxes, and prevent probate.

With a trust, you’re not only able to control who your assets go to but also how the money gets disbursed. This is especially beneficial if the person you’re leaving money to doesn’t know how to save and spend properly. You can create a payment schedule with a specified amount paid to them on a weekly or monthly basis, rather than as a lump sum.

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"Before retaining the guidance of the Staubus & Randall firm, I was at my wit's end trying to close an uncle's estate as a co-executor. In addition to dealing with difficult heirs, I had other pressing business issues coming up immediately on estate land in the middle of the Eagleford Shale including dealings with pipeline, seismic, oil & gas, and construction companies. The local bank also refused to give me access to information relating to the estate. This quickly became the most stressful and desperate time in my life...and then I found Joseph Legere who truly became my guardian angel. He was able to get all issues resolved efficiently and the estate fully closed. His professionalism, immense legal knowledge on a wide variety of topics, and amazing communication skills took the burdens off of me and quickly got closure. I am forever indebted to this firm for giving me my life back."

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Karen

"I have required legal representation twice in my life in two separate will contests. Both times I sought assistance from Keith Staubus and Staubus/Randall. Their service, approach, and determination to obtain results exceeded the other attorneys in each case. Mr. Staubus has always come across as genuine while being direct. He gets the process done in a timely manner with results. I will certainly use him again when and if any new challenges arise.”

David

"After my husband's death, I was devastated by having to defend against a vicious dispute over my husband's estate. Julie Blankenship and Keith Staubus made me feel very comfortable in this distressing situation. They were very tough and did an excellent job for me in obtaining a summary judgment in my favor without a full jury trial. I was glad to have them and Diane Walker in my corner to help me achieve an excellent result - I won! If I ever had to go back to probate court, I would hire them again.” - (will and trust construction case)

Flo

"If you need intervention for someone you love but don't know where to turn or who to turn to, Julie Blankenship and Keith Staubus helped me through the most difficult and stressful time in my life with a much loved family member. I now believe that good will triumph over evil. They fought for what was right, and good prevailed." (contested guardianship and will contest)

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John

"I was represented by Keith Staubus as an income beneficiary in a lawsuit with the trustee of a family trust. Utilizing the expertise of a forensic accountant and his own trust expertise, Keith was able to negotiate a judicial modification of the trust providing for the buyout of my income interest for a substantial lump sum payment out of the trust, resulting in a win-win situation for all of the parties. I highly recommend Staubus/Randall for any trust disputes and trust modification actions."

Kathy

"I have been a wealth management specialist and retirement plan consultant with the Dallas/Fort Worth financial community for over 20 years. I have engaged Ryan Randall to work with a number of my best clients over the years, including business owners, professionals and families. My clients always appreciate Ryan’s straightforward approach to estate planning, asset protection planning and business succession planning. He makes even the most sophisticated estate planning strategies understandable."

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What planning we can sue for?

When a loved one dies, and the execution of their estate plan begins, many disputes can arise among family members. Despite the decedent's creation of a good estate plan, problems can occur if a power of attorney doesn’t perform their duties or someone’s unhappy with the division and distribution of assets.

The most common disputes estate lawyers see include:

Bad fiduciary selection

A majority of disputes arise when the power of attorney, executor, or trustee doesn’t correctly perform their duties when their loved one dies. That failure is called a breach of fiduciary duty. Common breaches include:

  • Failure to file tax returns
  • Using assets for personal benefit
  • Failure to provide tax and accounting information to beneficiaries
  • Dividing and distributing assets improperly

To avoid these issues, you should ensure your loved one chooses the right fiduciary during the process of planning their estate. Careful selection can ensure there’s no breach of duty, and they act in the deceased’s best interest.

Will or Trust Contest

When someone contests a trust or will, it’s either because they don’t think it’s legally valid or believe someone influenced the creator into making decisions they didn’t want to make.

To be legal, the creator of the will must sign under specific circumstances and in a particular manner. In Texas, the person must meet the following requirements:

  • Be at least 18 years of age;
  • Be of sound mind, meaning they’re able to make decisions and understand the consequences of a will;
  • Sign the will themselves;
  • Signature of at least two witnesses; and
  • List at least one beneficiary.

Improper execution of a will is less common than undue influence. Many will argue that the creator of the trust or will made their decisions because of another party. The person accused of undue influence could be a friend, caregiver, professional advisor, or family member.

Distribution of property

Sometimes conflicts will arise when the creator of a will or trust intends to leave someone their property but dies before they can change their estate plan to reflect that decision. Other instances create conflicts when beneficiaries believe the distribution of property is unfair or inequitable.

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How should I handle estate law disputes?

If you come across the disputes listed above or any other types of disputes, there are options for resolving them. The remedy you choose will depend on the particular conflict and the people involved.

  • Remove the executor: If there’s a problem with the executor of the estate, you might need to replace or remove them. Finding a replacement can be difficult, especially finding one that all parties are happy with. However, it’s the best decision to ensure everyone is satisfied with how the estate gets handled. The best choice would be a neutral third party who doesn’t hold any biases.
  • Litigation: To litigate a dispute, you must be an inheritor and have sufficient grounds for pursuing a lawsuit. Most people will litigate if they believe there was an improper distribution of the property or suffered a financial loss because someone mismanaged the estate.
  • Mediation: This is the best option for individuals who want to settle the issues amicably, timely, and inexpensively. Mediations usually bring about quick results and cost less than litigation. You also have complete control over the outcome because there isn’t a judge or jury involved.

The Firm

The attorneys at Staubus and Randall have over 100 years of combined experience in estate planning, probate, and litigation. We have the knowledge and skills to tackle complex legal issues, such as guardianships, will contests, fiduciary litigation, and trust litigation. We can also handle routine matters, such as estate administration, probating wills, heirship determinations, and other probate court matters.

Staubus and Randall received a preeminent AV rating from Martindale-Hubbell, which is the highest rating possible from a peer-rated legal service. This rating recognizes our hard work, dedication, and the case results we’re able to achieve.

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