USA – TEXAS Law and Practice Contributed by: Perrin Clark, Ytterberg Deery Knull LLP
• the granting of temporary restraining orders and injunctions; • the issuing of orders compelling fiduciaries to per - form certain duties and undertake certain actions; • the issuing of declaratory judgments; • the ordering of trust reformations; • the ordering of rescissions of a trust instrument or other transaction; • the reduction of fiduciary compensation; • the ordering of the posting of fiduciary bonds; • the removal and replacement of fiduciaries; • the appointment of guardians; • the imposition of liens; 6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries The use of corporate fiduciaries, either as executors or trustees, or in other fiduciary and agency capaci - ties, is prevalent in Texas. There are likely hundreds of foreign (non-Texas) national and international financial institutions operating in Texas and offering fiduciary services, either directly or through a dedicated sub - sidiary such as an affiliated trust company. In addi - tion, many Texas state-chartered banks, and quite a few independent Texas trust companies, offer fiduci - ary services. It is very common for an estate plan to include a corporate fiduciary, at least as a fiduciary of last resort, and corporate fiduciaries routinely serve in nearly every fiduciary and agency capacity in Texas. 6.2 Fiduciary Liabilities If a fiduciary fails to administer an estate or a trust according to the terms of the will or trust instrument, or fails to act in accordance with the law, or other - wise breaches their duties, a beneficiary can bring suit against the fiduciary and seek various remedies, as discussed in 5.2 Mechanism for Compensation . Beyond the terms of the will or trust instrument, as the case may be, and beyond the provisions of the Texas Code, a fiduciary owes a beneficiary various duties arising from the common law, including, without limi - tation, a duty of loyalty, a duty of care, and a duty of good faith and fair dealing. Importantly, a fiduciary • the imposition of receiverships; and • the imposition of constructive trusts.
may be personally liable for monetary damages if the fiduciary breaches their fiduciary duties. Various mechanisms exist to protect a fiduciary from personal liability, including, without limitation: • statutorily approved delegation of certain activities by the fiduciary, such as investment management, to qualified persons; • directed trusts that, by their terms, delegate certain activities to a certain person or group of persons, such as investment management or decisions regarding distributions; • exoneration or reimbursement for certain expenses incurred in connection with estate or trust adminis - tration; • fiduciary liability insurance and similar insurance products; • periodic accountings to provide adequate disclo - sure and begin the running of applicable statutes of limitations with respect to certain potential claims; • court approval of fiduciary accountings; • exculpatory provisions in wills and trust instru - ments, which limit liability with respect to acts and omissions that may constitute simple negligence or even gross negligence; • indemnification provisions in wills and trust instru - ments, which allow for indemnification of the fidu - ciary in certain circumstances; and • releases from beneficiaries for certain acts and omissions or for certain periods of service. 6.3 Fiduciary Regulation In Texas, fiduciary actions are significantly regulated by the Texas Estates Code and the Texas Trust Code, among other statutes. These laws have codified much of what previously was part of the common law gov - erning fiduciary actions. One important part of the regulations is the Texas Uniform Prudent Investor Act found in Chapter 117 of the Texas Trust Code, which codified the prudent investor rules, subject to modern portfolio theory. See 6.4 Fiduciary Investment . 6.4 Fiduciary Investment Under Texas law, a trustee has a duty to comply with the Texas Uniform Prudent Investor Act unless oth - erwise provided in the trust instrument. Under the prudent investor rule, a trustee has a duty to invest
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