Ayers v. Mitchell, 167 S.W.3d 924 (Tex. App.—Texarkana 2005, no pet.).
Mother, Father, Daughter, and Son opened a joint bank account
consisting of funds contributed by Mother and Father. Over time,
Daughter obtained sole control over these funds and refused to return
them to Father after Mother’s death. The trial court determined that
Mother and Father had created an irrevocable oral trust with Daughter as
the trustee and thus agreed with Daughter that Father could not regain
the funds. The appellate court reversed.
The court began its analysis with Property Code § 112.004 which provides
that a trust must be in writing unless it satisfies the oral trust
exception for personal property. For an oral trust of personal property
to be enforceable, there must be a transfer of trust property to a
trustee who is neither the settlor nor a beneficiary provided the
transferor expresses trust intent either at or before the time of the
transfer. The court reviewed the facts and determined that Father had
not made a completed transfer of the bank account funds and thus no
trust existed even though Father had expressed the requisite trust
intent.
The court recognized that the Trust Code does not define the term
“transfer.” After examining cases dealing with the ownership of funds in
multiple-party accounts, the court held that a transfer “must divest the
[settlor] of all dominion and control over the trust res.” Ayers at 929.
Father did not transfer the funds because he remained on the account and
thus had the right to make withdrawals at any time. In addition, there
was evidence of several occasions where Father directed the use of the
funds in the account.
Note: In dicta, the court explained that even if Father had created a
trust, it would have been revocable and the evidence established its
revocation. For example, Father’s filing this lawsuit and asking for his
money would have revoked any trust that he may have created.
Moral: All trusts should be in writing and the writing should clearly
express the settlor’s intent.