Here is a summary of the key issues surrounding trusts and divorce in Texas:
One Spouse is Beneficiary of the Trust
The terms of a trust can become an issue in a divorce case if one spouse is a beneficiary of the trust. The court may need to determine if trust assets should be considered community property or the separate property of one spouse. Relevant factors include when the trust was created, the source of funds used to create it, and the degree of control exercised by the beneficiary spouse.
One Spouse is the Trustee of a Trust
If one spouse is the trustee of a trust, the other spouse may allege a breach of fiduciary duty regarding the administration of the trust during the marriage. Issues could arise over distributions made or not made to the beneficiary spouse.
Prenuptial Agreement Impacting a Trust
The enforceability of a prenuptial agreement that impacts trust assets may be challenged in a divorce case. A spouse can argue the agreement was unconscionable or that there was not fair and reasonable disclosure of assets.
Fraud with Execution of Wills & Trusts
Drafts of wills and trusts not executed by a spouse may be sought in discovery to investigate allegations of fraud or improper intent regarding estate planning during the marriage. There are disputes over whether draft documents are privileged.
Trusts funded during Marriage
When a trust is created and funded during a marriage, there can be disputes over whether it was done with community property. There may be tracing issues to determine if separate property was used.
Validity of a Trust when a Spouse is Deceased
If one spouse is deceased, the surviving spouse may dispute the validity of a trust created by the deceased spouse, arguing issues like lack of capacity or undue influence. This impacts the surviving spouse’s inheritance rights.
The key is analyzing the timing and funding of any trusts relative to the marriage, the degree of control and access to trust assets by the spouses, and whether trust terms improperly deprive a spouse of community property rights.
The court must balance these factors under Texas law and precedent.
Supporting Cases:
- 16.03 Alternatives to Guardianship of the Estate | Texas Estate Planning | Treatises | Texas
- Messner v. Boon, 466 S.W.3d 191 | TX Court of Appeals and Court of Civil Appeals Cases from 1892 | Cases | Texas | Jan 28, 2015
- In re Poe Trust, 673 S.W.3d 395 | TX Court of Appeals and Court of Civil Appeals Cases from 1892 | Cases | Texas | Jul 28, 2023
- § 10.07 Judicial Construction of Wills | Texas Estate Planning | Treatises | Texas
- Saks v. Rogers, 2017 Tex. App. LEXIS 6923 | TX Court of Appeals and Court of Civil Appeals Cases from 1892 | Cases | Texas | Jul 26, 2017
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