In this second installment of our series, we will cover some basic information necessary to understand how, when, and why Texas trust disputes occur. Our previous post provided an overview of the topics to be discussed throughout this series.
Most people have heard of trusts but are unaware of how they actually work. When a potential dispute arises, you should be aware of the basic terms and players involved in trust management and distribution. This awareness will help you understand and enforce your rights.
In this part of our series on trust disputes, we will help you understand how a Texas trust works and some basic legal terms applicable to trusts. To start, you should familiarize yourself with the following terms:
- A trust is a way to safeguard money or other property and provide a method for specific people to receive those assets.
- Trust Property
- A trust can be funded with anything that has value. Commonly, trusts are funded with cash, stocks, or bonds. But trusts can also hold mineral rights, a house, or shares of a business. Almost anything can be put into a trust.
- A trust must have at least one beneficiary. This means a person who will receive some or all trust property at some point in time. For example, a beneficiary may receive a small amount of interest at regular intervals or a big amount of property at some point in the future. Sometimes Texas law provides trust beneficiaries with an automatic set of rights, and the specific trust terms may expand or restrict some of those rights to the trust beneficiaries.
- The trustee is a person or company who manages the trust. Most importantly, the trustee must distribute trust funds or other property to the beneficiaries according to the terms of the trust. Depending on the trust terms, the trustee may have the power to decide how much to distribute. It may seem like the trustees have great power. In fact, trustees also have many serious responsibilities and must comply with the specific terms of the trust, the Texas Trust Code, and other Texas law on trusts.
- A settlor is the person who creates the trust, sets the terms of the trust, and funds the trust with their own property. In other words, the settlor makes the rules, but the trustee enforces the rules. The settlor may or may not be the same person as the trustee.
Now that you have a basic understanding of trusts, you are ready to learn about your rights and whether you have a claim. The next part of this series will address who can bring trust disputes and how to recognize a potential trust claim.
Still curious about how trusts work? The attorneys at The Johnson Firm are here to help. Our team of highly educated, experienced trust attorneys not only speaks the language of trusts—we practice them in Dallas and throughout Texas. If you think we can assist you, call us today.