Contingent trust beneficiary. A contingent trust beneficiary is one who does not have the right to receive benefits under a specific trust until the occurrence of a future event. Typically, a contingent beneficiary’s right to receive benefits under the trust would vest upon the death of one or more named beneficiaries. The question often arises as to what rights a contingent beneficiary has to protect his or her contingent rights.
Rights against trustee. In the recent case of Mayfield v. Peek, 446 S.W.3d 253 (Tex. App.—El Paso 2017, no pet. h.), the court held that the contingent beneficiary had standing to sue the Trustee of the trust.
Facts of case. This case arose out of a sister and brother—Mayfield and Bruce—fighting over an inheritance from their parents. The parents had created and placed several real properties and other assets into a revocable trust. Apparently, the parents became the vested beneficiaries of the trust upon its creation. Upon their death, the trust became irrevocable and Mayfield and Bruce would become the vested beneficiaries. Ten years after the creation of the trust, Bruce became the Trustee.
After the parents died, Mayfield sued Bruce sued one another. Mayfield sued Bruce for breaching his fiduciary duties as Trustee. The factual allegations included that, prior to the death of their parents, Mayfield and her brother Bruce had not spoken for 30 years. Bruce had managed to restrict his father’s access to Mayfield and others. Further, Bruce convinced the mentally impaired parents to transfer assets out of the trust for Bruce’s benefit and to terminate the trust.
Breach of fiduciary duty. Mayfield sued Bruce for breaching his fiduciary duties as Trustee by unduly influencing their mentally impaired parents into:
a. Wrongfully transferring assets out of the trust for Bruce’s benefit; and
b. Terminating the trust.
This apparently resulted in Mayfield receiving nothing from the trust after her parents died.
Jurisdictional issue. Bruce contended that Mayfield was only a contingent beneficiary of the revocable trust and as a contingent beneficiary she did not have standing to sue him. Thus, her claim should be dismissed.
Court’s holding. The appellate court held that under the Texas Trust Code both vested and contingent beneficiaries may have the right to sue a Trustee. Under the facts of this case, the contingent beneficiary—Mayfield—had standing to sue the Trustee—Bruce—and was allowed to go forward with her claim.