Legal experts generally agree that, in most instances, the relationship between a trustee and the trust’s beneficiaries is good. Unfortunately, there are those situations in which that is not the case. Most often, the problem can be summarized by the classic one-liner uttered by the hardened warden in the Paul Newman cult classic, Cool Hand Luke: “What we have here is failure to communicate.” What can a trust beneficiary do if the trustee has failed or refused to provide relevant financial reports and accountings?
Is the Trust Revocable or Irrevocable?
The first means of forcing the provision of accounting is sometimes referred to as the “nuclear” approach; it only works when the trust is “revocable.” In such instances, the trustor (the person who established the will) maintains legal ownership of the trust assets and has the power, under the trust document itself, to make changes. The trustor can either revoke the entire trust or, if the language allows, name a new trustee.
Beneficiaries Have Right to Reasonable Accountings
If the trust is irrevocable, or if the trustor is not willing to go nuclear with the revocable trust, the beneficiaries still have important rights from three separate sources.
The Trust Document Itself
The first source of power is the trust document or “instrument” itself. Generally speaking, the terms of the trust instrument control (unless they violate Texas law). If, therefore, the trustee is required by trust language to make quarterly or annual reports and fails to do so, a Texas court can compel the accounting.
Texas Statutory Law
Tex. Prop. Code § 113.051 requires the trustee to administer the trust in good faith according to its terms and Texas statutory law. Under that statute, the trustee also assumes all the duties imposed on trustees at common law. There is no statutory duty to disclose without a request. Moreover, Tex. Prop. Code § 113.151 does require the trustee to make periodical accountings upon the beneficiary’s request. If the beneficiary has to compel an accounting from the trustee, § 113.151 allows the court to require the trustee to pay the beneficiary’s reasonable attorney’s fees and costs.
The American system of jurisprudence is actually older than America itself. The “common law” generally refers to that part of English law that was derived from customs and judicial precedent rather than from statutory law itself. At common law, a trustee was required to make disclosures and accountings to all beneficiaries. Additionally, the trustee was forbidden to favor himself (or herself) over the trust’s beneficiaries. The trustee was also required to invest trust assets reasonably (allowing for any specific directions in the trust instrument itself) and, where possible, seek diversity in the trust assets.
Failure to Disclose is Usually a Sign of Bigger Issues
Where the trustee has failed or refused to disclose relevant facts to a beneficiary or refused to provide a periodic accounting, something more is likely lurking beneath the surface. The longer a beneficiary postpones a reckoning with the trustee, the more likely that significant damage will be done to the trust’s assets. Trust litigation is complex. Retaining an experienced attorney is generally key to any success.
The attorneys at Romano & Sumner have more than 20 years of combined experience providing expert legal assistance to clients. We represent clients in all types of trust litigation, and also represent clients in preparation of trusts and wills. At Romano & Sumner, LLC, we take pride not only in our professionalism, but also our client service. We know that each situation is unique. We return phone calls within one business day. We keep clients informed. We complete the work within the allotted time frame. Call us at 281-242-0995 or complete our online contact form.