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Understanding Trusts: Legal Purposes and Prohibited Conduct Under Texas Law

This overview addresses the creation and regulation of trusts under Texas law, specifically § 112.031, which permits trusts for any lawful purpose. It outlines prohibited trustee actions such as committing crimes or torts and emphasizes the importance of intent and conduct to maintain trust validity. Key cases, such as Hunt v. Carroll and relevant statutes like the Uniform Fraudulent Transfer Act, clarify the implications of trust management and creditor protection. The text also examines consequences associated with various family circumstances concerning trusts.

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Understanding Trusts: Legal Purposes and Prohibited Conduct Under Texas Law

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Presentation Transcript

  1. Trust Purposes

  2. General Rule – § 112.031 “A trust may be created for any purpose that is not illegal.”

  3. Prohibited Trustee Conduct —§ 112.031 • Commit a crime • Commit a tortious act • Commit an act contrary to public policy

  4. Standard • 1. Intent and effect (majority & Texas) • 2. Use of property (minority)

  5. Hunt v. Carroll – p. 49 • If married = nothing • If widow or divorce = $250/month • If remarry current husband = nothing • If live 20 years = entire estate

  6. Stewart – p. 55 • If x named as guardian, trust ends and property goes to others.

  7. Discrimination • Note 1, page 59

  8. Defrauding Creditors • Uniform Fraudulent Transfer Act (Texas version)

  9. Remedy • 1. If defrauding creditors, set aside conveyance to trust up to amount of claim. • 2. If otherwise improper purpose: • Resulting trust (settlor regains property), or • Permit trustee to retain property free of trust. • How decide?

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