Recent Texas Case Shows Specific Language is Key to Ensuring a Trust is Enforced Properly

A recent opinion from the Fourth Court of Appeals in Texas illustrates the importance of having a lawyer draft or review the language in any trust to make sure that the grantor’s wishes are properly laid out. Continue reading to learn about the case and why specific language is key to ensuring enforced trusts. Contact an experienced Texas estate planning attorney with any questfions about trusts and wills.

Beneficiaries sue to stop trustee from selling property, in line with the wishes of the deceased

In a case entitled Estate of Rodriguez, a trust beneficiary sued to stop a trustee from selling real property owned by a testamentary trust. A testamentary trust is a trust contained in the will of a decedent, usually dealing with the distribution of the property in an estate and life insurance proceeds.

The trust in Rodriguez made clear that the grantor did not want a ranch, the relevant property in the trust, to be sold. When the trustee tried to sell the ranch, the beneficiaries of the trust sued to stop the sale, claiming they had the right to first refusal; that is, the right to buy the property from the trust before any other offers are considered. The court disagreed. The case turned on the exact language in the trust document, and in particular, which language was considered mandatory and legally binding as opposed to merely expressing the general wishes of the grantor.

The trust stated: “My Trustee can sell the corpus of this Trust, but it [is] my desire my ranch stay intact as long as it is reasonable.” It laid out the distribution plan should the property be sold, and stated that the trustee “shall have the sole and complete right to possess, control, manage, and dispose of each trust estate.”

Court holds grantor’s wishes are not legally binding if other “mandatory language” exists

On appeal, the court held that the language granting the trustee the sole right to distribute the property, namely the word “shall,” was “mandatory language,” while the language expressing the grantor’s “desire to keep the Ranch intact” was “precatory.” The court explained: “Generally, courts construe words akin to ‘want,’ ‘wish,’ ‘request,’ and ‘desire’ as precatory in their ordinary sense and not as imposing a legal obligation.” Such language may become mandatory if the document shows that that language demonstrates the testator’s clear intentions in distributing the property. Here, the “precatory” language was weakened because the document elsewhere used mandatory language like “shall.”

The court also rejected the beneficiaries’ interpretation of the alleged “right to first refusal” language in the document. The could held that the relevant language–that if a beneficiary “wants to sell their portion of the properties they can only sell it to the remaining beneficiaries”–limited only the beneficiaries’ right to sell to whomever, and did not limit the trustee from selling.

The case is an important reminder that courts look to the exact language used in trusts and other legal documents, regardless of the general wishes of the drafter or intended beneficiaries.

If you have questions about how to properly execute your will or a trust, get effective, detail-oriented and efficient legal help by contacting a Houston estate planning attorney at the Leigh B. Meineke Law Firm at 832-706-0244.