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Moon v. Lesikar, 230 S.W.3d 800 (Tex. App.—Houston [14^th Dist.] 2007, pet. filed).

Trusts

Standing of Contingent Beneficiary of Revocable Trust

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.

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