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Duties · 6 min lekti
Good faith, according to the terms and the Code
Section 113.051 provides that the trustee shall administer the trust in good faith according to its terms and the Trust Code and, absent contrary terms, shall perform all the duties the common law imposes on trustees. Good faith is the floor under every other rule: an honest effort to carry out the settlor's purposes for the beneficiaries' benefit, with the instrument read as written and the Code's defaults applied where the instrument is silent.
The common law the section imports supplies the familiar fiduciary duties — loyalty, impartiality among beneficiaries, care, keeping the trust property separate and identified, and keeping beneficiaries informed. Chapter 113 then names specific limits: a trustee may not buy or sell trust property from or to the trustee, a relative or a business associate except as the section allows (§113.053), and may not lend trust funds to the trustee or certain related persons (§113.052). Those are the loyalty duty made concrete.
The prudent investor rule: chapter 117
For investments, chapter 117 adopts the Uniform Prudent Investor Act. Section 117.004 provides that a trustee shall invest and manage trust assets as a prudent investor would, considering the purposes, terms, distribution requirements and other circumstances of the trust, and shall exercise reasonable care, skill and caution. Decisions about individual assets are judged not in isolation but as part of the portfolio and of an overall strategy with risk and return objectives suited to the trust.
The rule is a default: §117.003 provides that the instrument may expand, restrict, eliminate or otherwise alter it, and that a trustee who acts in reasonable reliance on the instrument's provisions is not liable to a beneficiary to that extent. Where the instrument says nothing, the chapter's companions apply — the duty to diversify unless the purposes are better served without it (§117.005), the duty to review the assets within a reasonable time after taking office (§117.006), loyalty (§117.007), impartiality among beneficiaries with differing interests (§117.008) and the rules for delegation (§117.011).
What prudence looks like in a file
Prudence is judged by conduct at the time, not by results afterward. The record a Texas trustee keeps is therefore the evidence of prudence: the review of the assets on taking office and the decisions made about retaining or selling them (§117.006), the reasons for keeping a concentrated holding if one is kept (§117.005), the engagement and periodic review of any investment agent (§117.011), and the dates and amounts of every transaction with principal and income separated as §113.152 requires of an accounting.
A trustee with special skills is held to them (§117.004 provides that a trustee who has special skills or expertise, or is named in reliance on them, has a duty to use them). A trustee without them is not expected to become an investment professional overnight — but is expected to recognize when to hire one, and to supervise the hire.
Where the instrument moves the line
Many Texas instruments speak directly to prudence: they authorize retaining the family business or the ranch regardless of diversification, direct a particular investment adviser, or exculpate the trustee for ordinary negligence. Section 117.003 honors those terms for the investment rule; §111.0035 honors the instrument generally, while listing the mandatory rules no instrument can override and the limits §114.007 places on exculpation clauses — a term that relieves a trustee of liability for a breach committed in bad faith, intentionally or with reckless indifference is unenforceable.
Reading the instrument's investment and exculpation language beside chapter 117 is one of the first jobs a licensed Texas attorney can do for a new trustee; it changes what prudence requires in the particular trust without changing the duty to act in good faith.
Lwa yo, mo pou mo
General duty
§ PR.113.051 ↗Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.
Prudent investor rule
§ PR.117.003 ↗Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.
Standard of care; portfolio strategy; risk and return objectives
§ PR.117.004 ↗Eksplikasyon klè e senp; tèks egzak lwa a poko ateste nan bibliyotèk nou an. Gade lwa ofisyèl la nan lyen ki anwo a.
Kesyon moun poze souvan
What is the prudent investor rule in Texas?
Chapter 117 of the Property Code: a trustee shall invest and manage trust assets as a prudent investor would, considering the trust's purposes, terms, distribution requirements and circumstances, with reasonable care, skill and caution, judged at the portfolio level (§117.004). The instrument may alter the rule, and a trustee who relies reasonably on the instrument is not liable to that extent (§117.003).
Does a Texas trustee have to diversify?
By default, yes: §117.005 provides that a trustee shall diversify the investments of the trust unless the trustee reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying. Instruments often address retained family assets directly, and §117.003 gives those terms effect.
Is a trustee liable whenever an investment loses money?
Prudence is measured by the process at the time of the decision, in the context of the whole portfolio — not by hindsight on a single asset (§117.004). A trustee who reviewed the assets, considered the circumstances the section lists, documented the reasons and monitored any agent has the record the standard contemplates. Whether a particular loss is a breach is a question for a licensed Texas attorney on the facts.
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