What are a trustee's duties during trust administration in Texas?

What is trust administration and when does it begin?

Trust administration is the process of managing a trust's assets and carrying out its terms, either during the settlor's lifetime (for an irrevocable trust) or after their death (for a revocable living trust that becomes irrevocable at death). When the person who created the trust dies, the successor trustee named in the trust takes over as the responsible party.

Unlike probate, trust administration is a private process. There is no mandatory court filing and no public record of the trust's assets or beneficiaries unless a dispute arises that requires court intervention. This privacy is one reason many Texas families use revocable living trusts as the centerpiece of their estate plan.

What does the Texas Trust Code require from a trustee?

The Texas Trust Code, found in Title 9 of the Texas Property Code, sets out a trustee's core duties. Some can be modified by the trust document itself; others cannot.

Duty of loyalty: The trustee must act solely in the interests of the beneficiaries, not in their own personal interests or those of third parties Duty to inform and report: The trustee must keep beneficiaries reasonably informed about the trust and provide accountings when required or upon request Duty to segregate assets: Trust assets must be kept separate from the trustee's personal assets and separately titled or identified as trust property Duty of prudent investment: The trustee must invest trust assets under the Uniform Prudent Investor Act, considering risk, return, and the trust's overall purposes Duty of impartiality: When there are multiple beneficiaries, the trustee must balance their interests; favoring income beneficiaries over remainder beneficiaries (or vice versa) without justification is a breach Duty not to delegate improperly: The trustee can hire advisors and agents for specific tasks but cannot hand off the core trustee role entirely Duty to enforce and defend claims: The trustee must pursue claims belonging to the trust and defend against claims that threaten trust assets

What are a successor trustee's first steps after the settlor's death?

The transition from the settlor's death to active trust administration involves several practical steps that should be taken promptly.

1. Obtain certified copies of the death certificate. These are required to transfer financial accounts, real estate, and other assets from the settlor's name into the trust's name or to beneficiaries.
2. Locate and review the trust document. Confirm who the beneficiaries are, what the distribution terms say, and whether any special provisions apply to specific assets.
3. Notify beneficiaries. The Texas Trust Code requires the trustee to notify qualified beneficiaries of the trust's existence, the trustee's identity and contact information, and the beneficiary's right to receive a copy of the trust document.
4. Take an inventory of trust assets. Identify all property held in the trust's name, including real estate, financial accounts, business interests, and personal property.
5. Obtain appraisals of non-cash assets. Real estate, closely held businesses, and certain personal property need professional valuations for accounting purposes and, in some cases, for tax reporting.
6. Open a trust checking account. A separate account in the trust's name, with the trustee as signatory, allows the trust's bills and expenses to be paid without commingling with personal funds.
7. File required tax returns. The trust may have its own tax identification number and filing obligations after the settlor's death; consult a tax advisor at this stage.
8. Distribute assets per the trust terms. After debts, taxes, and administrative expenses are addressed, distribute assets to beneficiaries as the trust directs, taking any specific gift provisions into account first.

What is the prudent investor standard in Texas?

Texas adopted the Uniform Prudent Investor Act, which requires trustees to invest and manage trust assets as a prudent investor would, considering the purposes and distribution requirements of the trust. The standard looks at the overall investment portfolio rather than evaluating each asset in isolation.

A trustee is not expected to generate maximum returns. They are expected to make reasonable, diversified investment decisions that balance risk against the trust's specific needs, including the need to make distributions to current beneficiaries while also preserving or growing assets for future ones. Concentration in a single stock, leaving large cash balances uninvested for extended periods, or making speculative investments without adequate justification can each constitute a breach.

What happens when a trustee breaches their duties?

A beneficiary who believes a trustee has breached their duties can seek relief through a Texas district court or probate court. Available remedies include surcharge of the trustee for losses caused by the breach, removal of the trustee and appointment of a successor, an accounting to determine what happened to trust assets, and disgorgement of any profit the trustee made from self-dealing.

Texas courts take trustee misconduct seriously. A trustee who treats trust assets as their own, makes loans to themselves from the trust, or consistently ignores accounting requests faces both civil liability and potential removal. Acting promptly on the obligations the trust document and the Texas Trust Code impose is not optional.

When should you speak with a Houston trust administration attorney?

This article provides general legal information, not legal advice. Trust administration involves specific statutory duties, tax considerations, and distribution decisions that depend on the trust's terms and the assets involved. A misstep by a trustee can create personal liability that lasts beyond the administration period.

The trust administration attorneys at Edison Legal assist successor trustees in Houston with the full range of administration tasks, from the initial beneficiary notice through final distribution and trust termination. Request a planning consultation to discuss your responsibilities as trustee and how to fulfill them correctly.