Trust Litigation

Trust litigation in Texas involves disputes related to the creation, management, or distribution of assets held in a trust. These disputes can arise between trustees, beneficiaries, and sometimes third parties. Here are the various types of trust litigation commonly encountered in Texas:

1) Disputes Over the Validity of a Trust

• Lack of Mental Capacity: Allegations that the settlor (creator of the trust) lacked the mental capacity to create the trust.
• Undue Influence: Claims that the settlor was coerced or manipulated into creating or modifying the trust.
• Fraud: Allegations that the trust was created under false pretenses or deceitful circumstances.

 2) Breach of Fiduciary Duty

• Trustees in Texas owe fiduciary duties to the beneficiaries, including loyalty, prudence, and full disclosure.
• Common Claims:
  • Failure to Disclose: Perhaps the most common basis for breach of fiduciary duty is the failure to provide basic information as well as information about acts that materially affect the trust assets or its beneficiaries.
  • Self-Dealing: The trustee uses trust assets or his position of trust for personal gain.
  • Mismanagement: Poor investment decisions or failure to preserve trust assets.
  • Failure to Distribute Assets: Delaying or withholding distributions owed to beneficiaries.
  • Lack of Transparency: Failing to provide required accountings or other trust-related information.

3) Trustee Removal and Replacement

• Beneficiaries or co-trustees may file litigation to remove a trustee for:
  • Breaching fiduciary duties.
  • Conflicts of interest.
  • Incompetence or inability to manage the trust effectively.

4) Trust Interpretation and Ambiguity

• Disputes can arise over unclear or conflicting terms in the trust document.
• Beneficiaries may disagree on how the trust should be interpreted or whether specific provisions apply to certain assets.

5) Modification or Termination of a Trust

• Under Texas law, trusts can sometimes be modified or terminated if:
  • The settlor’s original intent is no longer achievable.
  • Circumstances have significantly changed since the trust’s creation.
• Disputes may arise over whether these conditions are met or whether all necessary parties consent.

6) Disputes Over Beneficiary Rights

• Exclusion or Removal: Claims that a beneficiary was unfairly excluded from the trust.
• Disputed Allocations: Arguments about unequal distributions or changes to beneficiaries.
• Claims of Forfeiture: Situations where a beneficiary’s actions (e.g., violating a no-contest clause) are alleged to disqualify them from receiving trust benefits.

7) Asset Disputes

• Ownership Challenges: Disputes over whether certain assets are part of the trust.
• Misappropriation of Assets: Claims that a trustee, beneficiary, or third party improperly removed or diverted trust property.

8) Trust Accounting Disputes

• Failure to Provide Accountings: Beneficiaries may sue if the trustee fails to provide regular and accurate financial accountings of the trust.  This is a breach of the trustee’s duty of full disclosure.
• Discrepancies in Accountings: Disputes over inaccuracies or inconsistencies in trust financial reports.

9) Creditor Claims Against Trust Assets

• Creditors may litigate to access trust assets to satisfy debts of the settlor or beneficiaries, especially if the trust’s protections are challenged.

10) Disputes Involving Trust Amendments

• Validity of Amendments: Allegations that amendments to the trust were made improperly or under duress.
• Conflicting Versions: Litigation to determine which version of the trust is valid when multiple amendments exist.

11) Challenges Involving Special Types of Trusts

• Irrevocable Trusts: Disputes over whether changes can or should be made to an irrevocable trust.
• Special Needs Trusts: Conflicts over the use of funds for the beneficiary’s care or allegations that the trust terms are being violated.
• Charitable Trusts: Disputes over whether the trust funds are being used for their intended charitable purposes.

12) Disputes Over No-Contest Clauses

• No-contest clauses discourage beneficiaries from challenging a trust. Litigation may arise over whether a beneficiary violated this clause and whether it should be enforced under Texas law.

13) Fraud or Forgery Claims

• Allegations that the trust document or its amendments were forged or fraudulently altered.

14) Third-Party Litigation

• Claims against advisors, attorneys, or financial institutions involved in the trust’s creation or administration for negligence or malpractice.

Resolving Trust Litigation

Trust disputes in Texas may be resolved through:

• Negotiation or Mediation: Beneficiaries and trustees may resolve disputes without court intervention.
• Litigation: A Texas probate or district court can adjudicate unresolved disputes.
• Arbitration: If the trust includes an arbitration clause, disputes may be resolved outside of court.

Navigating trust litigation requires expertise in Texas trust law. The attorneys at Baxter-Thompson Law are experienced in this area and can help ensure that your rights are protected and disputes are resolved effectively.

Trust litigation matters can be handled by our firm’s attorneys for an hourly fee or, sometimes, a contingent fee.  Whether a contingent fee is appropriate depends on the type of trust, the nature of the dispute involved, and what kind of distributions are available.