CHAPTER 114. LIABILITIES, RIGHTS, AND REMEDIES OF TRUSTEES, BENEFICIARIES, AND THIRD PERSONS
PROPERTY CODE
TITLE 9. TRUSTS
SUBTITLE B. TEXAS TRUST CODE: CREATION, OPERATION, AND
TERMINATION OF TRUSTS
CHAPTER 114. LIABILITIES, RIGHTS, AND REMEDIES OF TRUSTEES,
BENEFICIARIES, AND THIRD PERSONS
SUBCHAPTER A. LIABILITY OF TRUSTEE
Sec. 114.001. LIABILITY OF TRUSTEE TO BENEFICIARY. (a) The
trustee is accountable to a beneficiary for the trust property
and for any profit made by the trustee through or arising out of
the administration of the trust, even though the profit does not
result from a breach of trust; provided, however, that the
trustee is not required to return to a beneficiary the trustee's
compensation as provided by this subtitle, by the terms of the
trust instrument, or by a writing delivered to the trustee and
signed by all beneficiaries of the trust who have full legal
capacity.
(b) The trustee is not liable to the beneficiary for a loss or
depreciation in value of the trust property or for a failure to
make a profit that does not result from a failure to perform the
duties set forth in this subtitle or from any other breach of
trust.
(c) A trustee who commits a breach of trust is chargeable with
any damages resulting from such breach of trust, including but
not limited to:
(1) any loss or depreciation in value of the trust estate as a
result of the breach of trust;
(2) any profit made by the trustee through the breach of trust;
or
(3) any profit that would have accrued to the trust estate if
there had been no breach of trust.
(d) The trustee is not liable to the beneficiary for a loss or
depreciation in value of the trust property or for acting or
failing to act under Section 113.025 or under any other provision
of this subtitle if the action or failure to act relates to
compliance with an environmental law and if there is no gross
negligence or bad faith on the part of the trustee. The provision
of any instrument governing trustee liability does not increase
the liability of the trustee as provided by this section unless
the settlor expressly makes reference to this subsection.
(e) The trustee has the same protection from liability provided
for a fiduciary under 42 U.S.C. Section 9607(n).
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984. Amended by Acts 1984, 68th Leg., 2nd C.S., ch.
18, Sec. 13, eff. Oct. 2, 1984; Acts 1989, 71st Leg., ch. 341,
Sec. 2, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 846, Sec.
30, eff. Sept. 1, 1993; Acts 1997, 75th Leg., ch. 263, Sec. 1,
eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 1103, Sec. 8, eff.
Jan. 1, 2004.
Sec. 114.002. LIABILITY OF SUCCESSOR TRUSTEE FOR BREACH OF TRUST
BY PREDECESSOR. A successor trustee is liable for a breach of
trust of a predecessor only if he knows or should know of a
situation constituting a breach of trust committed by the
predecessor and the successor trustee:
(1) improperly permits it to continue;
(2) fails to make a reasonable effort to compel the predecessor
trustee to deliver the trust property; or
(3) fails to make a reasonable effort to compel a redress of a
breach of trust committed by the predecessor trustee.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec.
2, eff. Jan. 1, 1984.
Sec. 114.003. POWERS TO DIRECT. (a) The terms of a trust may
give a trustee or other person a power to direct the modification
or termination of the trust.
(b) If the terms of a trust give a person the power to direct
certain actions of the trustee, the trustee shall act in
accordance with the person's direction unless:
(1) the direction is manifestly contrary to the terms of the
trust; or
(2) the trustee knows the direction would constitute a serious
breach of a fiduciary duty that the person holding the power to
direct owes to the beneficiaries of the trust.
(c) A person, other than a beneficiary, who holds a power to
direct is presumptively a fiduciary required to act in good faith
with regard to the purposes of the trust and the interests of the
beneficiaries. The holder of a power to direct is liable for any
loss that results from a breach of the person's fiduciary duty.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec.
2, eff. Jan. 1, 1984.
Amended by:
Acts 2005, 79th Leg., Ch.
148, Sec. 19, eff. January 1, 2006.
Sec. 114.004. ACTIONS TAKEN PRIOR TO KNOWLEDGE OR NOTICE OF
FACTS. A trustee is not liable for a mistake of fact made before
the trustee has actual knowledge or receives written notice of
the happening of any event that determines or affects the
distribution of the income or principal of the trust, including
marriage, divorce, attainment of a certain age, performance of
education requirements, or death.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec.
2, eff. Jan. 1, 1984.
Sec. 114.005. RELEASE OF LIABILITY BY BENEFICIARY. (a) A
beneficiary who has full legal capacity and is acting on full
information may relieve a trustee from any duty, responsibility,
restriction, or liability as to the beneficiary that would
otherwise be imposed on the trustee by this subtitle, including
liability for past violations.
(b) The release must be in writing and delivered to the trustee.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec.
2, eff. Jan. 1, 1984.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
451, Sec. 8, eff. September 1, 2007.
Sec. 114.006. LIABILITY OF COTRUSTEES FOR ACTS OF OTHER
COTRUSTEES. (a) A trustee who does not join in an action of a
cotrustee is not liable for the cotrustee's action, unless the
trustee does not exercise reasonable care as provided by
Subsection (b).
(b) Each trustee shall exercise reasonable care to:
(1) prevent a cotrustee from committing a serious breach of
trust; and
(2) compel a cotrustee to redress a serious breach of trust.
(c) Subject to Subsection (b), a dissenting trustee who joins in
an action at the direction of the majority of the trustees and
who has notified any cotrustee of the dissent in writing at or
before the time of the action is not liable for the action.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec.
2, eff. Jan. 1, 1984.
Amended by:
Acts 2005, 79th Leg., Ch.
148, Sec. 20, eff. January 1, 2006.
Sec. 114.007. EXCULPATION OF TRUSTEE. (a) A term of a trust
relieving a trustee of liability for breach of trust is
unenforceable to the extent that the term relieves a trustee of
liability for:
(1) a breach of trust committed:
(A) in bad faith;
(B) intentionally; or
(C) with reckless indifference to the interest of a beneficiary;
or
(2) any profit derived by the trustee from a breach of trust.
(b) A term in a trust instrument relieving the trustee of
liability for a breach of trust is ineffective to the extent that
the term is inserted in the trust instrument as a result of an
abuse by the trustee of a fiduciary duty to or confidential
relationship with the settlor.
(c) This section applies only to a term of a trust that may
otherwise relieve a trustee from liability for a breach of trust.
Except as provided in Section 111.0035, this section does not
prohibit the settlor, by the terms of the trust, from expressly:
(1) relieving the trustee from a duty or restriction imposed by
this subtitle or by common law; or
(2) directing or permitting the trustee to do or not to do an
action that would otherwise violate a duty or restriction imposed
by this subtitle or by common law.
Added by Acts 2005, 79th Leg., Ch.
148, Sec. 21, eff. January 1, 2006.
Sec. 114.008. REMEDIES FOR BREACH OF TRUST. (a) To remedy a
breach of trust that has occurred or might occur, the court may:
(1) compel the trustee to perform the trustee's duty or duties;
(2) enjoin the trustee from committing a breach of trust;
(3) compel the trustee to redress a breach of trust, including
compelling the trustee to pay money or to restore property;
(4) order a trustee to account;
(5) appoint a receiver to take possession of the trust property
and administer the trust;
(6) suspend the trustee;
(7) remove the trustee as provided under Section 113.082;
(8) reduce or deny compensation to the trustee;
(9) subject to Subsection (b), void an act of the trustee,
impose a lien or a constructive trust on trust property, or trace
trust property of which the trustee wrongfully disposed and
recover the property or the proceeds from the property; or
(10) order any other appropriate relief.
(b) Notwithstanding Subsection (a)(9), a person other than a
beneficiary who, without knowledge that a trustee is exceeding or
improperly exercising the trustee's powers, in good faith assists
a trustee or in good faith and for value deals with a trustee is
protected from liability as if the trustee had or properly
exercised the power exercised by the trustee.
Added by Acts 2005, 79th Leg., Ch.
148, Sec. 21, eff. January 1, 2006.
SUBCHAPTER B. LIABILITY OF BENEFICIARY
Sec. 114.031. LIABILITY OF BENEFICIARY TO TRUSTEE. (a) A
beneficiary is liable for loss to the trust if the beneficiary
has:
(1) misappropriated or otherwise wrongfully dealt with the trust
property;
(2) expressly consented to, participated in, or agreed with the
trustee to be liable for a breach of trust committed by the
trustee;
(3) failed to repay an advance or loan of trust funds;
(4) failed to repay a distribution or disbursement from the
trust in excess of that to which the beneficiary is entitled; or
(5) breached a contract to pay money or deliver property to the
trustee to be held by the trustee as part of the trust.
(b) Unless the terms of the trust provide otherwise, the trustee
is authorized to offset a liability of the beneficiary to the
trust estate against the beneficiary's interest in the trust
estate, regardless of a spendthrift provision in the trust.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.032. LIABILITY FOR WRITTEN AGREEMENTS. (a) A written
agreement between a trustee and a beneficiary, including a
release, consent, or other agreement relating to a trustee's
duty, power, responsibility, restriction, or liability, is final
and binding on the beneficiary and any person represented by a
beneficiary as provided by this section if:
(1) the instrument is signed by the beneficiary;
(2) the beneficiary has legal capacity to sign the instrument;
and
(3) the beneficiary has full knowledge of the circumstances
surrounding the agreement.
(b) A written agreement signed by a beneficiary who has the
power to revoke the trust or the power to appoint, including the
power to appoint through a power of amendment, the income or
principal of the trust to or for the benefit of the beneficiary,
the beneficiary's creditors, the beneficiary's estate, or the
creditors of the beneficiary's estate is final and binding on any
person who takes under the power of appointment or who takes in
default if the power of appointment is not executed.
(c) A written instrument is final and binding on a beneficiary
who is a minor if:
(1) the minor's parent, including a parent who is also a trust
beneficiary, signs the instrument on behalf of the minor;
(2) no conflict of interest exists; and
(3) no guardian, including a guardian ad litem, has been
appointed to act on behalf of the minor.
(d) A written instrument is final and binding on an unborn or
unascertained beneficiary if a beneficiary who has an interest
substantially identical to the interest of the unborn or
unascertained beneficiary signs the instrument. For purposes of
this subsection, an unborn or unascertained beneficiary has a
substantially identical interest only with a trust beneficiary
from whom the unborn or unascertained beneficiary descends.
(e) This section does not apply to a written instrument that
modifies or terminates a trust in whole or in part unless the
instrument is otherwise permitted by law.
Added by Acts 1999, 76th Leg., ch. 794, Sec. 3, eff. Sept. 1,
1999.
SUBCHAPTER C. RIGHTS OF TRUSTEE
Sec. 114.061. COMPENSATION. (a) Unless the terms of the trust
provide otherwise and except as provided in Subsection (b) of
this section, the trustee is entitled to reasonable compensation
from the trust for acting as trustee.
(b) If the trustee commits a breach of trust, the court may in
its discretion deny him all or part of his compensation.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.062. EXONERATION OR REIMBURSEMENT FOR TORT. (a)
Except as provided in Subsection (b) of this section, a trustee
who incurs personal liability for a tort committed in the
administration of the trust is entitled to exoneration from the
trust property if the trustee has not paid the claim or to
reimbursement from the trust property if the trustee has paid the
claim, if:
(1) the trustee was properly engaged in a business activity for
the trust and the tort is a common incident of that kind of
activity;
(2) the trustee was properly engaged in a business activity for
the trust and neither the trustee nor an officer or employee of
the trustee is guilty of actionable negligence or intentional
misconduct in incurring the liability; or
(3) the tort increased the value of the trust property.
(b) A trustee who is entitled to exoneration or reimbursement
under Subdivision (3) of Subsection (a) is entitled to
exoneration or reimbursement only to the extent of the increase
in the value of the trust property.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.063. GENERAL RIGHT TO REIMBURSEMENT. (a) A trustee
may discharge or reimburse himself from trust principal or income
or partly from both for:
(1) advances made for the convenience, benefit, or protection of
the trust or its property;
(2) expenses incurred while administering or protecting the
trust or because of the trustee's holding or owning any of the
trust property; and
(3) expenses incurred for any action taken under Section
113.025.
(b) The trustee has a lien against trust property to secure
reimbursement under Subsection (a).
(c) A potential trustee is entitled to reimbursement from trust
principal or income or partly from both for reasonable expenses
incurred for any action taken under Section 113.025(a) if:
(1) a court orders reimbursement or the potential trustee has
entered into a written agreement providing for reimbursement with
the personal representative of the estate, the trustee of the
trust, the settlor, the settlor's attorney-in-fact, the settlor's
personal representative, or the person or entity designated in
the trust instrument or will to appoint a trustee; and
(2) the potential trustee has been appointed trustee under the
terms of the trust instrument or will or has received a written
request to accept the trust from the settlor, the settlor's
attorney-in-fact, the settlor's personal representative, or the
person or entity designated in the trust instrument or will to
appoint a trustee.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984. Amended by Acts 1993, 73rd Leg., ch. 846, Sec.
31, eff. Sept. 1, 1993.
Sec. 114.064. COSTS. (a) In any proceeding under this code
the court may make such award of costs and reasonable and
necessary attorney's fees as may seem equitable and just.
Added by Acts 1985, 69th Leg., ch. 149, Sec. 4, eff. May 24,
1985.
SUBCHAPTER D. THIRD PERSONS
Sec. 114.081. PROTECTION OF PERSON DEALING WITH TRUSTEE. (a) A
person who deals with a trustee in good faith and for fair value
actually received by the trust is not liable to the trustee or
the beneficiaries of the trust if the trustee has exceeded the
trustee's authority in dealing with the person.
(b) A person other than a beneficiary is not required to inquire
into the extent of the trustee's powers or the propriety of the
exercise of those powers if the person:
(1) deals with the trustee in good faith; and
(2) obtains:
(A) a certification of trust described by Section 114.086; or
(B) a copy of the trust instrument.
(c) A person who in good faith delivers money or other assets to
a trustee is not required to ensure the proper application of the
money or other assets.
(d) A person other than a beneficiary who in good faith assists
a former trustee, or who in good faith and for value deals with a
former trustee, without knowledge that the trusteeship has
terminated, is protected from liability as if the former trustee
were still a trustee.
(e) Comparable protective provisions of other laws relating to
commercial transactions or transfer of securities by fiduciaries
prevail over the protection provided by this section.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
451, Sec. 9, eff. September 1, 2007.
Sec. 114.082. CONVEYANCE BY TRUSTEE. If property is conveyed or
transferred to a trustee in trust but the conveyance or transfer
does not identify the trust or disclose the names of the
beneficiaries, the trustee may convey, transfer, or encumber the
title of the property without subsequent question by a person who
claims to be a beneficiary under the trust or who claims by,
through, or under an undisclosed beneficiary.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984. Amended by Acts 1987, 70th Leg., ch. 683, Sec.
4, eff. Aug. 31, 1987.
Sec. 114.0821. LIABILITY OF TRUST PROPERTY. Although trust
property is held by the trustee without identifying the trust or
its beneficiaries, the trust property is not liable to satisfy
the personal obligations of the trustee.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984. Renumbered from Sec. 114.082(b) by Acts 1987,
70th Leg., ch. 683, Sec. 4, eff. Aug. 31, 1987.
Sec. 114.083. RIGHTS AND LIABILITIES FOR COMMITTING TORTS. (a)
A personal liability of a trustee or a predecessor trustee for a
tort committed in the course of the administration of the trust
may be collected from the trust property if the trustee is sued
in a representative capacity and the court finds that:
(1) the trustee was properly engaged in a business activity for
the trust and the tort is a common incident of that kind of
activity;
(2) the trustee was properly engaged in a business activity for
the trust and neither the trustee nor an officer or employee of
the trustee is guilty of actionable negligence or intentional
misconduct in incurring the liability; or
(3) the tort increased the value of the trust property.
(b) A trust that is liable for the trustee's tort under
Subdivision (3) of Subsection (a) is liable only to the extent of
the permanent increase in value of the trust property.
(c) A plaintiff in an action against the trustee as the
representative of the trust does not have to prove that the
trustee could have been reimbursed by the trust if the trustee
had paid the claim.
(d) Subject to the rights of exoneration or reimbursement under
Section 114.062, the trustee is personally liable for a tort
committed by the trustee or by the trustee's agents or employees
in the course of their employment.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.084. CONTRACTS OF TRUSTEE. (a) If a trustee or a
predecessor trustee makes a contract that is within his power as
trustee and a cause of action arises on the contract, the
plaintiff may sue the trustee in his representative capacity, and
a judgment rendered in favor of the plaintiff is collectible by
execution against the trust property. The plaintiff may sue the
trustee individually if the trustee made the contract and the
contract does not exclude the trustee's personal liability.
(b) The addition of "trustee" or "as trustee" after the
signature of a trustee who is party to a contract is prima facie
evidence of an intent to exclude the trustee from personal
liability.
(c) In an action on a contract against a trustee in the
trustee's representative capacity the plaintiff does not have to
prove that the trustee could have been reimbursed by the trust if
the trustee had paid the claim.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.085. PARTNERSHIPS. (a) To the extent allowed by law,
a trustee who takes the place of a deceased partner in a general
partnership in accordance with the articles of partnership is
liable to third persons only to the extent of the:
(1) deceased partner's capital in the partnership; and
(2) trust funds held by the trustee.
(b) A trustee who contracts to enter a general partnership in
its capacity as trustee shall limit, to the extent allowed by
law, the trust's liability to:
(1) the trust assets contributed to the partnership; and
(2) other assets of the trust under the management of the
contracting trustee.
(c) If another provision of this subtitle conflicts with this
section, this section controls. This section does not exonerate a
trustee from liability for negligence.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2,
eff. Jan. 1, 1984.
Sec. 114.086. CERTIFICATION OF TRUST. (a) As an alternative to
providing a copy of the trust instrument to a person other than a
beneficiary, the trustee may provide to the person a
certification of trust containing the following information:
(1) a statement that the trust exists and the date the trust
instrument was executed;
(2) the identity of the settlor;
(3) the identity and mailing address of the currently acting
trustee;
(4) one or more powers of the trustee or a statement that the
trust powers include at least all the powers granted a trustee by
Subchapter A, Chapter 113;
(5) the revocability or irrevocability of the trust and the
identity of any person holding a power to revoke the trust;
(6) the authority of cotrustees to sign or otherwise
authenticate and whether all or less than all of the cotrustees
are required in order to exercise powers of the trustee; and
(7) the manner in which title to trust property should be taken.
(b) A certification of trust may be signed or otherwise
authenticated by any trustee.
(c) A certification of trust must state that the trust has not
been revoked, modified, or amended in any manner that would cause
the representations contained in the certification to be
incorrect.
(d) A certification of trust:
(1) is not required to contain the dispositive terms of a trust;
and
(2) may contain information in addition to the information
required by Subsection (a).
(e) A recipient of a certification of trust may require the
trustee to furnish copies of the excerpts from the original trust
instrument and later amendments to the trust instrument that
designate the trustee and confer on the trustee the power to act
in the pending transaction.
(f) A person who acts in reliance on a certification of trust
without knowledge that the representations contained in the
certification are incorrect is not liable to any person for the
action and may assume without inquiry the existence of the facts
contained in the certification.
(g) If a person has actual knowledge that the trustee is acting
outside the scope of the trust, and the actual knowledge was
acquired by the person before the person entered into the
transaction with the trustee or made a binding commitment to
enter into the transaction, the transaction is not enforceable
against the trust.
(h) A person who in good faith enters into a transaction relying
on a certification of trust may enforce the transaction against
the trust property as if the representations contained in the
certification are correct. This section does not create an
implication that a person is liable for acting in reliance on a
certification of trust that fails to contain all the information
required by Subsection (a). A person's failure to demand a
certification of trust does not:
(1) affect the protection provided to the person by Section
114.081; or
(2) create an inference as to whether the person has acted in
good faith.
(i) A person making a demand for the trust instrument in
addition to a certification of trust or excerpts as described by
Subsection (e) is liable for damages if the court determines that
the person did not act in good faith in making the demand.
(j) This section does not limit the right of a person to obtain
a copy of the trust instrument in a judicial proceeding
concerning the trust.
(k) This section does not limit the rights of a beneficiary of
the trust against the trustee.
Added by Acts 2007, 80th Leg., R.S., Ch.
451, Sec. 10, eff. September 1, 2007.