Estate of Little, No. 05-18-00704-CV, 2019 WL 3928755 (Tex. App.—Dallas Aug. 20, 2019, pet. denied).


Fiduciary Duties to Contingent Beneficiary

Both the trial and appellate courts held that a revocable trust’s non-settlor co-trustee does not owe fiduciary duties to the trust’s contingent beneficiaries “regarding the settlor’s decisions to exclude assets from the revocable trust and instead deposit those assets in a survivorship account favoring the co-trustee as the sole surviving party.” The court justified its holding based on the settlor’s retention of “the prerogative to dispose of the assets under his or control and he or she sees fit.”

The court also held that the contingent beneficiaries did have standing to complain about the non-settlor co-trustee’s conduct under Property Code § 115.011 because they are interested persons as defined by Property Code § 111.004(7). However, the contingent beneficiaries lack standing to complain about the settlor’s decisions made in his capacity as the settlor of the trust not to place property in the trust. The property subject to dispute was never transferred into the trust and thus the co-trustee could not have fiduciary duties with regard to that property.

Moral:  Property must be transferred to a trust before a trustee owes fiduciary duties to the trust beneficiaries with respect to that property.