In Ackers v. Comerica Bank & Trust, N.A., a life-time beneficiary of a trust filed a claim for a declaration regarding whether certain contingent remainder beneficiaries were beneficiaries. No. 21-0233, 2022 Tex. LEXIS 997 (Tex. October 28, 2022)(Busby, J., Concurring). The trial court ruled that the claim was not ripe because the contingent remainder beneficiary class could not be determined until the life-time beneficiary died, which had not occurred. The court of appeals affirmed. The life-time beneficiary then sought Texas Supreme Court review. After briefing on the merits, the life-time beneficiary died, which then terminated the trust. The Court denied the petition for review after this death. However, one of the justices wrote an opinion concurring with the denial due to the death, but explaining that the lower courts incorrectly ruled on the ripeness issue.
The justice stated that the court of appeals’s conclusion on ripeness was “incorrect because it focuses solely on the Heirs’ contingent future interest in a remainder distribution of the ‘corpus of the trust’ upon Larry’s death, while ignoring their present rights as putative contingent remainder beneficiaries prior to the trust’s termination.” Id. “Because those present rights were also in dispute, the contingent nature of the future interests of Larry’s ‘then-living descendants’ does not render this suit unripe.” Id. The justice stated:
Although a contingent interest, by definition, is conditioned on the occurrence of an event that may or may not take place, this does not mean that every suit involving a contingent interest is unripe. Rather, the Trust Code allows “interested person[s]” to sue concerning a trust, and an interest can be “any interest, whether . . . present or future, vested or contingent.” … [T]he “contingent status” of an interest cannot render it insufficient because that conclusion “would essentially undo the [Trust Code’s] express grant of rights to parties with ‘contingent’ interests.” It would make no sense to hold that the Legislature, in enacting the Trust Code, gave trial courts jurisdiction over suits they can never hear because the nature of a contingent beneficiary’s interest renders them categorically unripe. Rather, chapters 111 and 115 of the Trust Code indicate that the mere involvement of contingent interests does not necessarily render a case unripe.
There are good reasons that the Trust Code authorizes contingent beneficiaries to sue: they have present as well as future rights that may be affected by a particular dispute. Among these are the right to sue for an accounting by the trustee and the right to sue to remove a trustee. By sending account statements to the Heirs, Comerica treated them as beneficiaries with present rights. The declaration Larry sought would resolve a real dispute regarding whether the Heirs are in fact beneficiaries with such rights.
A trustee owes fiduciary duties to the trust. One such duty is the duty of loyalty, which obligates the trustee to preserve the confidentiality of trust information. To facilitate a trustee’s compliance with its duties of disclosure as well as confidentiality, it is important that both trustees and beneficiaries have access to the judicial forum provided by the Legislature for resolving any disputes regarding present rights. A declaratory judgment regarding whether Comerica properly treated the Heirs as contingent beneficiaries would “actually resolve” this dispute.