Don’t Mess with Texas Trusts – A Guide to Breach of Trust
Understanding Breach of Trust in Texas: Your Rights and Remedies
If you’re searching for information about breach of trust Texas, here’s what you need to know:
| Breach of Trust Texas: Quick Facts |
|---|
| Definition: A violation by a trustee of any duty owed to a beneficiary under Texas Property Code §111.004(25) |
| Time Limit to Sue: 4 years from when the breach was finded or should have been finded |
| Common Examples: Misappropriation of funds, self-dealing, failure to account, negligent investments |
| Available Remedies: Monetary damages, removal of trustee, accounting, asset recovery, appointment of receiver |
When someone establishes a trust in Texas, they place enormous faith in the person they name as trustee. But what happens when that trust is broken? A breach of trust Texas occurs when a trustee violates their fiduciary duties to the trust’s beneficiaries.
Under Texas law, trustees are held to exceptionally high standards. They must act with loyalty, care, good faith, prudence, and transparency. When these duties are violated, beneficiaries have legal rights to hold trustees accountable.
The Texas Trust Code defines a breach of trust as “a violation by a trustee of a duty the trustee owes to a beneficiary.” This straightforward definition covers a wide range of misconduct, from outright theft of trust assets to more subtle violations like failing to provide required information to beneficiaries.
If you suspect a trustee has breached their duties, you don’t have to accept the situation. Texas law provides powerful remedies that can include removing the trustee, forcing them to repay losses, and even holding them personally liable for damages.
As one Houston trust attorney noted in our research: “Very few fiduciaries actually ‘win’ a lawsuit filed against them” because judges and juries take these violations seriously. The law places the burden on the trustee to prove they acted properly once misconduct is alleged.
Breach of Trust Texas: Definitions & Fiduciary Duties
When someone agrees to serve as a trustee in Texas, they’re stepping into shoes that carry serious legal weight. It’s not just a title—it’s a position of profound responsibility.
Texas law takes trustee duties seriously. Under Texas Property Code §111.004(25), a breach of trust Texas is defined as “a violation by a trustee of a duty the trustee owes to a beneficiary.” Behind this straightforward definition lies a world of legal obligations that can have major consequences when not fulfilled.
What Is a “Breach of Trust Texas” Under the Code?
A breach of trust Texas happens whenever a trustee fails to meet their legal obligations to the beneficiaries. These breaches come in many forms—from the obvious (like taking money from the trust for personal use) to the less apparent (like making careless investments or keeping beneficiaries in the dark).
What many trustees don’t realize is that Texas law doesn’t require bad intentions to establish a breach. Even honest mistakes can constitute a violation if they show negligence or reckless indifference to beneficiary interests. The 2005 amendments to the Texas Trust Code (through HB 1190) reinforced these standards.
Some trustee duties are so fundamental that they can’t be waived—even if the trust document tries to eliminate them. These mandatory duties include:
- Acting in good faith
- Following the trust’s terms and purpose
- Putting beneficiaries’ interests first
Recent Texas court cases have emphasized these points. In fact, the courts have found that even a co-trustee acting alone without required consent can constitute a serious breach.
Core Fiduciary Duties Every Texas Trustee Owes
If you’re a trustee—or a beneficiary wondering if your trustee is fulfilling their obligations—here are the key duties that matter under Texas law:
Duty of Loyalty: This is the heart of a trustee’s obligations. Trustees must put the beneficiaries’ interests above their own, avoiding self-dealing, conflicts of interest, or using trust assets for personal benefit. As we often tell clients, “If it benefits you personally, think twice—then think again.”
Duty of Care: Trustees must manage trust assets with the same care they’d use for their own most important assets. This includes keeping detailed records, providing proper accounting, and making thoughtful decisions about trust property.
Duty of Impartiality: When a trust has multiple beneficiaries, the trustee can’t play favorites. Each beneficiary deserves fair consideration based on their rights under the trust.
Duty to Inform: Beneficiaries shouldn’t be left in the dark. Trustees must keep them reasonably informed about important trust matters and provide accountings when requested.
Prudent Investor Rule: Trust investments can’t be made on hunches or hot tips. Trustees must invest with careful consideration of risk, return, and the trust’s specific purposes and needs.
We’ve seen many well-meaning trustees stumble because they didn’t understand these fundamental duties. The consequences can be serious—from financial liability to removal as trustee.
For more detailed guidance on proper trust administration, you can visit our trust administration page for helpful resources.
Spotting Breaches & Immediate Remedies
When it comes to protecting your inheritance, timing is everything. Recognizing a breach of trust Texas early can make all the difference between preserving family wealth and watching it disappear.
The good news? Texas law gives beneficiaries powerful tools to address trustee misconduct. Under Texas Property Code Section 114.008, courts have extensive authority to right these wrongs, from ordering trustees to properly perform their duties to removing them entirely when necessary.
Common Real-World Examples in Texas Courts
Over the years, we’ve seen certain patterns of trustee misconduct emerge in courtrooms across Texas. These real-life examples might help you spot similar issues in your own situation:
Misappropriation of funds happens more often than you’d think. Just last year, we helped a family whose trustee had been quietly “borrowing” money from the trust for personal expenses, including a luxury car and vacation home renovations. This direct theft is perhaps the clearest example of a breach of trust Texas.
Self-dealing occurs when trustees put their interests ahead of beneficiaries. We once represented siblings whose trustee-uncle sold valuable family farmland to his golf buddy at 40% below market value—and received a suspiciously generous “finder’s fee” in return.
Commingling funds might seem innocent at first but creates serious problems. One trustee we encountered mixed trust money with his personal accounts “for convenience,” making it nearly impossible to determine which investments belonged to the trust versus his personal portfolio.
Below-market sales to friends or relatives represent another common breach. A trustee who sells trust property at a discount to someone they know is violating their duty of loyalty to beneficiaries.
Failure to account often serves as a warning sign of deeper problems. When a trustee becomes evasive about providing financial statements or explanations for transactions, they’re typically hiding something more serious.
Negligent investments can devastate trust assets. We’ve seen trustees concentrate all trust funds in risky ventures, completely ignoring the prudent investor rule that requires diversification and reasonable risk management.
Ignoring distribution schedules hurts beneficiaries who depend on trust income. When a trust document clearly states that beneficiaries should receive monthly payments, but the trustee makes distributions only when they feel like it, that’s a clear breach.
For more examples of problematic trustee behavior, visit our page on Trust and Will Disputes.
Fast Action a Beneficiary Can Take Today
If you suspect a breach of trust Texas, don’t wait for the situation to worsen. Here are immediate steps you can take to protect trust assets:
Demand a formal accounting of all trust activities. Under Texas law, you have the right to see where the money is going. A simple certified letter requesting detailed financial records can sometimes stop misconduct in its tracks. Trustees who have nothing to hide typically provide this information promptly.
Gather all relevant documents including the trust instrument, previous accountings, property deeds, and any correspondence with the trustee. These will be crucial if legal action becomes necessary.
Request a temporary injunction if trust assets are at immediate risk. We recently helped a client freeze trust accounts after finding the trustee was planning to sell the family’s historic downtown building at a fraction of its value.
Consider petitioning for receiver appointment in severe cases. A court-appointed receiver can take control of trust assets while disputes are resolved, preventing further damage.
Seek constructive trust remedies when assets have been wrongfully transferred. This legal tool can help recover property that rightfully belongs to the trust.
Contact experienced counsel who understands the complexities of trust litigation. The right attorney can help you determine whether you’re dealing with honest mistakes or deliberate misconduct.
For beneficiaries in Dallas facing potential trust breaches, our Dallas Trust Litigation team can provide personalized guidance custom to your situation.
Acting quickly not only protects assets but also preserves evidence that might otherwise disappear. Most trustees straighten up considerably once they realize beneficiaries are paying attention and know their rights under Texas law.
How to Sue a Trustee for Breach of Trust in Texas
When friendly conversations and demand letters fail to resolve a breach of trust Texas situation, litigation becomes necessary. While nobody wants to end up in court, sometimes it’s the only way to protect what rightfully belongs to beneficiaries.
Before you file that lawsuit, you should understand what you’re getting into. Trust litigation isn’t simple, but Texas law provides powerful tools for beneficiaries who have been wronged by trustees.
Your first big decision will be choosing the right court. If you’re dealing with a trust created by someone’s will (a testamentary trust), the probate court that handled the estate usually has jurisdiction. For trusts created during someone’s lifetime (inter vivos trusts), you’ll typically file in district court.
To win your case, you’ll need to establish three key elements:
- That a fiduciary relationship existed through the trust
- That the trustee breached their duties
- That this breach caused harm or damages
What makes breach of trust Texas cases unique is how the burden of proof works. While you initially need to show evidence of wrongdoing, once you’ve established basic misconduct, the burden often shifts to the trustee to prove they acted properly. This “burden-shifting” gives beneficiaries a significant advantage in court.
Filing the Petition & Serving the Trustee
The lawsuit begins with filing a petition that lays out your case. This document needs to clearly identify:
- All parties involved (you, other beneficiaries, the trustee, and anyone else with an interest)
- The trust itself and what duties the trustee had
- Exactly how the trustee breached their duties
- What remedies you’re asking the court to order
One tricky aspect of trust litigation involves who needs to be included in the lawsuit. Texas Rule 39 addresses “joinder of indispensable parties,” which sounds complicated but essentially means making sure everyone with a stake in the outcome is included. Good news: The Texas Supreme Court clarified in In re Trust A & Trust C that missing some parties rarely prevents the court from hearing your case, but it’s still best to include everyone when possible.
After filing, the petition must be formally served on the trustee according to Texas rules. The trustee then has about three weeks (20-21 days) to file their answer. If they fail to respond, you might be able to get a default judgment.
Available Court-Ordered Relief & Damages
When it comes to remedies for a breach of trust Texas, courts have extensive powers under Texas Property Code Section 114.008. The available remedies fall into two main categories:
| Monetary Remedies | Equitable Remedies |
|---|---|
| Compensation for losses | Compelling performance of duties |
| Disgorgement of profits | Enjoining the trustee from certain acts |
| Attorney’s fees | Removal of the trustee |
| Reduction of trustee compensation | Appointment of a receiver |
| Punitive damages (in cases of fraud or malice) | Voiding improper transactions |
| Imposing a constructive trust | |
| Tracing and recovering misappropriated assets |
Courts can mix and match these remedies to address the specific harm. In a recent case we handled, a trustee had “borrowed” nearly $50,000 from a family trust without permission. The court ordered full repayment with interest, stripped the trustee of their right to compensation, made them pay our client’s attorney’s fees, and ultimately removed them from their position.
These powerful remedies reflect how seriously Texas law takes the obligations of trustees. When a trustee breaks faith with beneficiaries, the consequences can be severe and far-reaching.
For complex trust litigation matters in Houston, our Houston trust litigation lawyers provide specialized representation with decades of courtroom experience in these exact types of cases.
Trustee Defenses, Third-Party Protections & Limitations
When facing allegations of a breach of trust Texas, trustees aren’t without options. The law provides several defenses that can shield trustees from liability. Understanding these defenses matters greatly whether you’re a trustee defending your actions or a beneficiary pursuing a claim.
Trustees facing allegations often feel overwhelmed. After all, trust litigation can be emotionally charged, especially when family relationships are involved. But Texas law recognizes that trustees need reasonable protections to fulfill their duties effectively.
Common Trustee Defenses
The most powerful defense is often the simplest: consent or release. Under Texas Property Code §114.005, trustees escape liability when beneficiaries consented to their actions, released them from responsibility, or later approved the transaction. But this shield disappears if the trustee obtained consent through deception or if the beneficiary lacked full information.
Exculpatory clauses in trust documents can limit trustee liability, but they have boundaries. Texas Property Code §114.007 won’t let these clauses protect trustees who act in bad faith, with reckless indifference, or commit intentional misconduct. We’ve seen cases where trustees believed they were protected by broad exculpatory language, only to find these limitations the hard way.
Trustees often defend themselves by showing they reasonably relied on the trust terms. This works best when the trust language is clear and the trustee’s interpretation makes sense. In one case we handled, a trustee made an unusual investment that seemed questionable until we showed how it aligned perfectly with the specific instructions in the trust document.
The statute of limitations defense frequently succeeds because many beneficiaries wait too long to take action. In Texas, you generally have four years to bring a breach of trust claim.
For directed trusts, Texas Property Code §114.0031 offers protection to trustees who follow instructions from properly appointed advisors or directors. This increasingly common trust structure divides responsibilities among different parties.
Even honest mistakes can be defensible. Texas Property Code §114.004 protects trustees who make good faith errors in judgment if they exercised reasonable care, skill, and caution. The law doesn’t expect perfection—just prudence and diligence.
In our years of experience, we’ve found that the trustees who fare best in court are those who kept detailed records, communicated openly with beneficiaries, and clearly documented their decision-making process.
Statute of Limitations: When the Clock Starts
The four-year deadline for filing a breach of trust Texas claim isn’t as straightforward as it might seem. The clock typically starts ticking when:
- The beneficiary actually finds the breach, or
- The beneficiary should have finded it through reasonable diligence
This “findy rule” can significantly extend the filing window, especially when trustees have concealed information or failed to provide required accountings.
For ongoing breaches like continuous mismanagement, the statute may restart with each violation. And if a trustee actively hid their misconduct, the doctrine of “fraudulent concealment” can pause the limitations period until the deception comes to light.
We represented a beneficiary who finded her trustee-uncle had been secretly selling trust assets for years. Though some sales occurred more than four years earlier, the court allowed claims for all transactions because he had deliberately concealed them from her.
The limitations period can be especially tricky with informal family trusts. When family members serve as trustees for their relatives, courts sometimes apply a more flexible approach to when the clock starts running.
How Third Parties Stay Protected
Texas law wisely protects innocent third parties who deal with trustees. Under Texas Property Code §114.081, people who interact with trustees in good faith, without knowing the trustee is exceeding their authority, receive protection as if the trustee acted properly.
This protection encourages normal business transactions with trusts. For example, if a bank accepts a trustee’s instructions to wire funds (which the trustee later misuses), the bank typically won’t be liable if it had no reason to suspect wrongdoing.
The law specifically states that third parties aren’t required to investigate a trustee’s powers or how they’re using them. This makes practical sense—imagine if every store had to review trust documents before accepting a trust credit card!
The bona fide purchaser shield is particularly important. If someone buys trust property in good faith and pays fair value, they generally keep the property even if the sale violated the trust. The beneficiaries’ remedy is against the trustee, not the innocent buyer.
Texas Property Code §114.086 streamlines transactions through “certification of trust” documents. These shortened summaries allow third parties to verify a trustee’s authority without seeing the entire trust document, protecting both trust privacy and third-party interests.
These protections create a balanced system where trustees remain accountable to beneficiaries while third parties can confidently transact with trusts.
For more information about situations involving potential embezzlement from trusts, you can review Cornell Law School’s explanation of embezzlement.
Frequently Asked Questions About Breach of Trust Texas
Can a trustee be personally liable for market losses?
One question we hear all the time in our office concerns whether trustees can be on the hook for investment losses. The answer isn’t a simple yes or no—it depends on how the trustee approached their investment duties.
Here’s the good news for trustees: Texas law doesn’t expect you to be a financial fortune-teller. Market downturns happen to everyone, and you won’t automatically be liable just because investments lose value.
However, you could find yourself personally responsible for those losses if you:
- Put all the trust’s eggs in one basket (failed to diversify)
- Made investments specifically prohibited in the trust document
- Ignored the trust’s purpose when selecting investments
- Set up investments and then essentially abandoned them without monitoring
I remember a client who came to us after their trustee invested nearly 80% of the family trust in cryptocurrency—against the explicit conservative investment strategy outlined in the trust document. When the crypto market crashed, we successfully held that trustee personally liable because they had clearly violated the prudent investor rule.
On the flip side, a trustee who creates a thoughtful, diversified portfolio aligned with the trust’s goals typically won’t face liability even during significant market downturns.
What happens to co-trustees who didn’t stop the breach?
“I didn’t do it—he did!” Unfortunately, this defense rarely works for co-trustees in Texas. When you agree to serve alongside other trustees, you take on responsibility not just for your own actions, but also for reasonable oversight of your co-trustees.
Under Texas Property Code §114.006, co-trustees have a legal duty to:
– Exercise reasonable care to prevent co-trustees from breaching the trust
– Take action to fix breaches when they happen
This means you could be on the hook for another trustee’s misconduct if you:
Participated in the wrongdoing, even in a small way
Approved the improper actions, either explicitly or by staying silent
Negligently enabled the breach by not paying attention
Failed to act once you knew something was wrong
The Texas Supreme Court recently reinforced this principle in In re Trust A & Trust C (2024), confirming that a co-trustee who acts alone without getting required consent has breached their duties.
There is some protection, though. Co-trustees aren’t automatically responsible for breaches they truly couldn’t have finded through reasonable attention to trust affairs. The key question is whether you were appropriately vigilant and took prompt action when red flags appeared.
Are criminal charges possible against a breaching trustee?
While most breach of trust Texas cases stay in civil court, trustees who cross certain lines can find themselves facing criminal charges alongside civil liability.
I’ll never forget sitting in a courtroom when a former trustee was led away in handcuffs after what began as a civil case revealed systematic theft from a family trust. It was a stark reminder that serious breaches can have consequences beyond money damages.
The most common criminal charges we see emerging from trust breaches include:
Theft/Embezzlement: Taking trust assets for personal use can trigger charges under Texas Penal Code §31.03, with penalties ranging from misdemeanors to felonies depending on the amount taken.
Fraud: Using deception to gain control of trust assets or cover up misdeeds can lead to fraud charges, which often carry substantial penalties.
Elder Exploitation: When the breach involves trusts benefiting seniors, Texas has special laws with improved penalties to protect vulnerable adults.
Criminal and civil cases operate on separate tracks. The district attorney decides whether to pursue criminal charges, while beneficiaries control civil litigation. This means a trustee could potentially face both a criminal trial (with possible jail time) and a civil lawsuit (seeking financial recovery) for the same misconduct.
While our primary focus is helping clients recover assets through civil remedies, we’ve developed strong working relationships with district attorneys throughout Texas. When appropriate, we coordinate with prosecutors to ensure all aspects of serious trust breaches are addressed.
Conclusion
When it comes to a breach of trust Texas, the consequences can be devastating for beneficiaries who depend on trust assets for their financial security and future. As we’ve explored throughout this guide, Texas law provides robust protections and remedies for those affected by trustee misconduct.
At Texas Probate Attorney, Keith Morris and Stacy Kelly bring over 40 years of combined experience to trust litigation matters. We understand that each breach of trust case is unique, involving not just legal issues but also complex family dynamics and emotional stakes.
Our approach combines aggressive litigation when necessary with practical solutions that protect our clients’ interests. We’ve successfully handled breach of trust cases throughout Texas, including Houston, Fort Worth, and Austin, recovering millions in misappropriated assets and removing unfit trustees.
If you suspect a breach of trust, time is often of the essence. While the statute of limitations provides four years to bring a claim, acting quickly can prevent further losses and preserve evidence.
We invite you to contact us for a consultation to discuss your specific situation. Our team will listen carefully to your concerns, evaluate the strength of your case, and develop a strategic plan custom to your needs and goals.
For more information about our probate and estate litigation services, please visit our probate and estate litigation page.
When it comes to Texas trusts, the law provides powerful tools to hold trustees accountable. Don’t hesitate to assert your rights as a beneficiary when a trustee fails to fulfill their fiduciary duties.