Co-Trustees and Disputes over Trust Management in Texas

EDITOR’S NOTE:

While most trusts have one, and only one, trustee, some trusts are set up with so-called co-trustees. Most of the time, this arrangement can work well. However, our Dallas-based attorneys have seen instances in which co-trustees are not in agreement up to and including trust disputes and trust litigation under Texas law. That said, a co-trustee has certain opportunities to communicate disagreement to his or her co-trustee, and in fact, should generally do so in writing.

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What if my Co-Trustee Goes Rogue?

Occasionally we see trusts that name two or more individuals to serve as co-trustees. Sometimes spouses will serve as co-trustees, and other times, the spouses will name children to serve as co-trustees. It is often at this sibling level that disputes arise between the co-trustees. One of the sibling co-trustees may be funneling funds away

Disputes over Trust Management in Texas

Disputes over Trust Management in Texas

from the trust; the co-trustee could simply be withholding information; or one of the co-trustees could be entirely uninvolved in the trust administration and so as not to have an understanding of the trust administration.

In those situations, a client who is the co-trustee will ask what she can do to protect herself against the bad acts of the other co-trustee. The first place we look to answer that question is the document that creates the trust. If the trust does not have a provision governing conduct of co-trustees, we then look to the Texas Trust Code for the default rules.

The Texas Trust code provides that a co-trustee who does not join in an action of the other co-trustee is not liable for the acts of the other co-trustee unless the co-trustee fails to exercise reasonable care to 1) prevent the co-trustee from committing a serious breach of trust; and 2) compel a co-trustee to right a serious breach of trust. Even then, if a co-trustee does not agree with the conduct of the majority of the co-trustees (assuming there are more than two), then the dissenting co-trustee should notify the majority co-trustees in writing of the dissent.

The bottom line for a co-trustee is that it is imperative to stay informed of all material facts of a trust, and to be vocal and take action if the co-trustee does not agree with another trustee’s conduct.

EDITOR’S SUMMARY

If you are thinking of setting up a trust as a form of estate planning, our Dallas-based attorneys are ready to help. And, if you are facing any type of potential trust litigation or dispute, we can assist in that as well. Every situation is unique, so interested parties are urged to reach out to Burdette & Rice, as one of the top trust law firms in Texas for a consultation. We can review the facts with you, and give advice on possible issues with respect to the law. Indeed, if you are thinking of setting up a trust with a co-trustee, it is even more important to dot the I’s and cross the T’s in the Lone Star state!