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Trusts

Section 867 Management Trusts

Termination

    Bank of Texas, N.A., Trustee v. Mexia, 135 S.W.3d 356 (Tex. App.—Dallas 2004, pet. filed).

    The court created a guardianship management trust for Minor under Prob. Code § 867.  Less than one year later, Guardian filed an application to terminate the trust.  The court examined the investments and found that they had lost approximately $300,000.  Accordingly, the court terminated the trust because doing so would be in Minor’s best interest.

    Trustee appealed arguing that the standard to terminate a trust is whether the settlor’s intent has been met, not whether termination is in Minor’s best interest.  Prop. Code § 112.054.  Trustee pointed to Prob. Code § 870 which permits the court to terminate a management trust for an incompetent ward if doing so is in the ward’s best interest but which does not include a best interest standard if the beneficiary is a minor.

    The court rejected Trustee’s argument.  The court focused on Prob. Code § 867 which authorizes the court to create a trust if it is in the minor’s best interest and Prob. Code § 869 which allows the court to terminate a management trust at any time.  Accordingly, the trial court could terminate the management trust because doing so was in Minor’s best interest.

    Moral:  Despite unclear statutory language, the court may terminate a Section 867 management trust if doing so is in the ward’s best interest, regardless of whether the ward is a minor or an incompetent.

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