Moon v. Lesikar, 230 S.W.3d 800 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).
Father created a trust, named himself and Son as the initial
trustees, indicated that he could revoke or amend by giving written
notice to the trustee, and named himself as the sole beneficiary during
his life. Many transactions subsequently occurred including a sale of
trust property to Son at a price considerably below market value.
Daughter (a remainder beneficiary of the trust) claimed that this sale
was in breach of duty. The trial court disagreed and rendered a summary
judgment in favor of Son. Daughter appealed.
The appellate court affirmed holding that Daughter had no standing to
complain about the sale. The court acknowledged that normally a
beneficiary is an interested person under Trust Code § 111.004(7) and
thus would have standing to bring an action under Trust Code § 115.001.
However in this case, Daughter, a mere contingent beneficiary, was
complaining about a transaction made by the settlor of a revocable
trust. The court recognized that this was a matter of first impression
in Texas and thus examined cases from other jurisdictions. The court
concluded that since Father was both the settlor and the trustee and had
full power to revoke the trust, the vesting of Daughter’s contingent
interest was subject to Father’s discretion until his death.
Daughter then claimed that Father’s revocation did not comply with Trust
Code § 112.051(c) because it was not in writing. The court concluded
that conveying the property out of the trust was a clear indication of
Father’s intent to revoke and that he was not required to give himself
written notice of the revocation. The court explained how absurd it
would be to require Father (as settlor) to send himself (as trustee) a
letter stating that he is revoking a portion of the trust.
Moral: Even if the trustee and the settlor with the power to revoke are
the same person, all changes should be placed in writing to avoid later
disputes over what actually happened.
Note: A lengthy concurring opinion discussed the judge’s opinion that
Daughter had standing as a remainder beneficiary but that Daughter still
would lose on the merits.