Texas Property Code 112.054 – Judicial Modification, Reformation, or Termination of Trusts
(a) On the petition of a trustee or a beneficiary, a court may order that the trustee be changed, that the terms of the trust be modified, that the trustee be directed or permitted to do acts that are not authorized or that are forbidden by the terms of the trust, that the trustee be prohibited from performing acts required by the terms of the trust, or that the trust be terminated in whole or in part, if:
(1) the purposes of the trust have been fulfilled or have become illegal or impossible to fulfill;
(2) because of circumstances not known to or anticipated by the settlor, the order will further the purposes of the trust;
(3) modification of administrative, nondispositive terms of the trust is necessary or appropriate to prevent waste or impairment of the trust’s administration;
(4) the order is necessary or appropriate to achieve the settlor’s tax objectives or to qualify a distributee for governmental benefits and is not contrary to the settlor’s intentions; or
(5) subject to Subsection (d):
(A) continuance of the trust is not necessary to achieve any material purpose of the trust; or
(B) the order is not inconsistent with a material purpose of the trust.
(b) The court shall exercise its discretion to order a modification or termination under Subsection (a) or reformation under Subsection (b-1) in the manner that conforms as nearly as possible to the probable intention of the settlor. The court shall consider spendthrift provisions as a factor in making its decision whether to modify, terminate, or reform, but the court is not precluded from exercising its discretion to modify, terminate, or reform solely because the trust is a spendthrift trust.
Terms Used In Texas Property Code 112.054
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Common law: The legal system that originated in England and is now in use in the United States. It is based on judicial decisions rather than legislative action.
- Continuance: Putting off of a hearing ot trial until a later time.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Guardian: A person legally empowered and charged with the duty of taking care of and managing the property of another person who because of age, intellect, or health, is incapable of managing his (her) own affairs.
- Person: includes corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. See Texas Government Code 311.005
- Trustee: A person or institution holding and administering property in trust.
(b-1) On the petition of a trustee or a beneficiary, a court may order that the terms of the trust be reformed if:
(1) reformation of administrative, nondispositive terms of the trust is necessary or appropriate to prevent waste or impairment of the trust’s administration;
(2) reformation is necessary or appropriate to achieve the settlor’s tax objectives or to qualify a distributee for governmental benefits and is not contrary to the settlor’s intentions; or
(3) reformation is necessary to correct a scrivener’s error in the governing document, even if unambiguous, to conform the terms to the settlor’s intent.
(c) The court may direct that an order described by Subsection (a)(4) has retroactive effect. The reformation of a trust under an order described by Subsection (b-1) is effective as of the creation of the trust.
(d) The court may not take the action permitted by Subsection (a)(5) unless all beneficiaries of the trust have consented to the order or are deemed to have consented to the order. A minor, incapacitated, unborn, or unascertained beneficiary is deemed to have consented if a person representing the beneficiary’s interest under § 115.013(c) has consented or if a guardian ad litem appointed to represent the beneficiary’s interest under § 115.014 consents on the beneficiary’s behalf.
(e) An order described by Subsection (b-1)(3) may be issued only if the settlor’s intent is established by clear and convincing evidence.
(f) Subsection (b-1) is not intended to state the exclusive basis for reformation of trusts, and the bases for reformation of trusts in equity or common law are not affected by this section.