Section 142 Trusts

    Amaro v. Texas State Bank, 28 S.W.3d 789 (Tex. App.—Corpus Christi 2000), aff'd as modified, 87 S.W.3d 538 (Tex. 2002).


Read the summary of the Supreme Court of Texas opinion.


 Beneficiary of a multi-million dollar trust created under Property Code § 142.005 by the 206th District Court decided that he wanted to obtain the trust property free of trust.  He eventually obtained a court order from adifferent district court declaring that he had regained full capacity after which he demanded that Trustee transfer all trust assets to him.  Trustee complied but only after obtaining a court order from the original district court which terminated the trust and stated that Trustee had at all times properly and appropriately administered the trust.  The order also released Trustee of all liability.  Beneficiary contends that the court lacked jurisdiction to issue these orders.


 The appellate court found that the 206th District Court had continuing jurisdiction over the trust both under § 142.005 and the order creating the trust.  Accordingly, the 206th District Court was not bound by the other district court’s determination that Beneficiary had regained capacity.  The court also found that Trustee properly sought a declaratory judgment to determine whether Beneficiary had regained capacity and the trust had ended as well as to approve the final accounting and various fees.  However, the court held that the district court exceeded its jurisdiction when it determined that Trustee had no liability to the trust, had used a proper investment philosophy, and that all disbursements were proper.


 Moral:  The court’s authority to issue a declaratory judgment regarding a Section 142 trust is limited to “matters relating to the trust administration powers specifically given to the court by section 142 and the trust documents.”  Amaro at 796.


Read the summary of the Supreme Court of Texas opinion.