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Pickelner v. Adler, 229 S.W.3d 516 (Tex. App.—Houston [1^st Dist.] 2007, pet. denied).

Trusts

Semi-Secret Trust

Testatrix’s will provided that the residuary of her estate passed to Beneficiary (the attorney who drafted the will) “to be distributed in accordance with the specific instructions I have provided him.”  Testatrix provided these instructions verbally to Beneficiary and they were also found in her handwriting on the back of an envelope.  The trial court held that it could not give effect to these oral instructions and that the residuary gift was void.  (No argument was made that the handwritten note was sufficient to be a codicil to her will.)  The court explained that the handwritten note was not in existence at the time Testatrix signed her will and thus the note could not have been incorporated by reference into her will. The court also noted that it is against public policy for an attorney to draft a will for an unrelated person and to name himself as a beneficiary of that will.  (This will was prepared before the effective date of Probate Code § 58b which automatically voids such gifts.)  The court held that Testatrix lacked trust intent and that consequently this property passed to Testatrix’s heirs by intestate succession.  Intended Recipient under her oral instructions appealed.

The appellate court affirmed the result.  The court engaged in an extensive discussion of the types of trusts recognized by Texas law, express, resulting, and constructive, as well as the concepts of the “secret trust” and the “semi-secret trust.”  Unlike the trial court, the appellate court held that it was clear that Testatrix intended to create a trust and that Beneficiary was to receive only legal title to property.  Because the trust lacked essential terms (the names of the beneficiaries), it was a semi-secret trust, that is, a resulting trust, so Beneficiary holds the property for Testatrix’s successors in interest (her heirs).

Moral:  Trust terms should be clearly stated in the trust, be it inter vivos or testamentary.  It is not prudent to rely on oral instructions.

 Estate Administration

Settlement Agreements

The appellate court agreed with the trial court that an alleged family settlement agreement was not enforceable because all of the heirs and beneficiaries did not sign the agreement and it would have distributed assets contrary to the rights of individuals who did not sign the agreement.

Moral:  All heirs and beneficiaries need to sign a family settlement agreement before it will be effective.

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