Austin Trust Co. as Trustee of the Bob and Elizabeth Lanier Descendants Trusts v. Houren, No. 21-0355, 2023 WL 2618534 (Tex. Mar. 24, 2023).


Settlement Agreement


Wife established a marital trust for Husband. Husband’s will exercised a power of appointment Wife granted him in the trust to give all remaining assets to trusts in favor of their children. After Husband died, claims were made that Husband violated his fiduciary duties by distributing excessive funds ($37+ million) to himself. All parties signed a family settlement agreement resolving all issues. Nonetheless, the trustee of trusts to which Husband appointed the remainder of the trust property asserted that it was entitled to these funds. The trial court agreed with the executor of Husband’s estate that the settlement agreement barred the trustee’s claim. The trustee appealed.


The Supreme Court of Texas affirmed the Houston Fourteenth Court of Appeals affirmance in Austin Trust Co. as Trustee of the Bob and Elizabeth Lanier Decendants[sic] Trusts v. Houren, 647 S.W.3d 913 (Tex. App.—Houston [14th Dist.] 2021, no pet. h.).

The court recognized that trustees and executors owe “a fiduciary duty of full disclosure of all material facts known to them that might affect the beneficiaries’ rights.” Id. at *14 and Property Code § 114.005.


The court first examined the release of a debt and whether the alleged creditors are also entitled to full disclosure. The court explained that these parties were not estate beneficiaries and thus the executor did not owe them fiduciary duties. In addition, even if these parties were to be considered creditors of the estate, the executor would not owe them fiduciary duties. Thus, the release was effective with regard to the alleged debt claim.


Second, the court reviewed the release with respect to a release of fiduciary duty. The court side-stepped having to resolve the issue of how factors from prior cases with regard to releases of fiduciary interact because Property Code § 114.005 expressly allows beneficiaries to release the trustee from liability if they have full information. After an extensive examination of the facts, the court concluded that the beneficiaries had full information, that is, “full knowledge of all the material facts which the trustee knew” and thus the release was effective. Id. at *26, quoting Slay v. Burnett Trust, 187 S.W.2d 377, 390 (Tex. 1945). In addition, all parties were represented by independent counsel.


Moral:  Before signing a settlement agreement, be sure you are in agreement with all of the terms. It is difficult to bring a claim when settlement remorse sets in.