Generational trusts are often referred to as dynasty trusts. These financial resources are often created to preserve wealth for decades, providing benefits to children, grandchildren and beyond. These long-term arrangements are designed to offer financial stability, protect assets and safeguard wealth for future generations’ benefit.
However, even with careful planning, disputes can arise—especially when beneficiaries or other interested parties believe that the terms of a trust are unfair, outdated, mismanaged or being violated. In Texas, the terms of a generational trust can, in some cases, be litigated. And, in some cases, they should.
Taking action when action is warranted
A generational trust created in Texas is governed by the Texas Trust Code and any specific terms laid out in the trust document. While trust creators or settlors have broad discretion in structuring the terms of the trust, beneficiaries are not without opportunities for legal recourse under certain circumstances. When concerns arise about the administration or validity of a trust, litigation may be necessary to protect beneficiaries’ rights or enforce the settlor’s intent.
Common reasons for generational trust litigation in Texas include allegations of trustee misconduct, vague or conflicting terms, outdated restrictions and unequal treatment of beneficiaries. A trustee has a legal duty—a fiduciary duty—to act in the best interests of the trust and its beneficiaries. If a trustee is accused of mismanaging assets, self-dealing or failing to provide proper accounting, a court may intervene.
Litigation may also be initiated if beneficiaries believe that a trust’s terms were impacted by undue influence, fraud and/or mental incapacity at the time of creation. In such cases, a court can evaluate the circumstances surrounding the trust’s drafting and decide whether parts—or all—of the trust should be set aside.
In some situations, beneficiaries may seek to modify or terminate a generational trust. Texas law does allow courts to approve trust modifications under certain conditions, such as when the trust’s purpose has become impracticable or if all beneficiaries and the trustee agree to the change. However, modifying a trust without court approval can be risky and may lead to legal challenges.
At the end of the day, the terms of a generational trust can be litigated in Texas under certain conditions. If you are a beneficiary with concerns about a trust’s administration, or if you believe your rights are being violated, legal action may be necessary to resolve the issue and to better ensure that the trust’s purpose is properly fulfilled.