Texas trusts are governed by the Texas Trust Code, a body of law that differs in several important ways from the Uniform Trust Code adopted in many other states. Texas presumes that a trust is revocable unless it says otherwise, has its own decanting statute, allows trusts to last up to 300 years for trusts created after a 2021 change in the law, and does not permit most self-settled asset protection trusts. Anyone creating, serving as trustee of, or inheriting from a Texas trust benefits from understanding these rules.
This page is the Holmes Law overview of trust law in Texas: how trusts are created, the main types used in estate planning, trustee duties, modification and decanting, spendthrift protection, the rule against perpetuities, and how trust income is taxed. Detailed pages cover the Texas revocable trust, Texas irrevocable trusts, special needs trusts, and charitable trusts. For the broader planning picture, visit the Texas estate planning hub.
The Texas Trust Code
The Texas Trust Code is found in Subtitle B of Title 9 of the Texas Property Code, beginning at § 111.001. It covers the creation, validity, modification, and termination of trusts (chapter 112), trustee powers and duties (chapter 113), trustee liability and rights (chapter 114), and judicial proceedings involving trusts (chapter 115). Related chapters address principal and income (chapter 116) and prudent investing (chapter 117, the Texas version of the Uniform Prudent Investor Act).
Texas did not adopt the Uniform Trust Code as a whole. Instead, the Trust Code has been amended over the years, sometimes borrowing UTC concepts and sometimes going its own way. That is why guidance written for UTC states, including some neighboring states and many online sources, may not apply to a Texas trust.
Default rules and mandatory rules
Under Property Code § 111.0035, the terms of the trust generally prevail over the Trust Code’s default provisions, but certain rules cannot be overridden. For example, a trust cannot eliminate the trustee’s duty to act in good faith and in accordance with the trust’s purposes, and cannot fully limit the court’s power to take action in the interest of justice. Section 111.0035 also limits the extent to which a trust can waive the trustee’s duty to respond to a beneficiary’s demand for an accounting.
Creating a Valid Trust in Texas
Under Property Code § 112.002, a trust may be created by a property owner’s declaration that the owner holds property as trustee for another, by a transfer of property to a trustee during the owner’s lifetime, by a will, or by the exercise of a power of appointment. The settlor must show an intent to create a trust, and the trust must have identifiable property, a beneficiary, and a trustee (although a trust will not fail for lack of a trustee).
Property Code § 112.004 imposes a statute of frauds: a trust in either real or personal property is generally enforceable only if there is written evidence of the trust’s terms bearing the signature of the settlor or the settlor’s authorized agent, with limited exceptions. Oral trusts are rarely a sound idea in Texas.
Types of Trusts Used in Texas Estate Planning
Texans commonly use the following trusts:
- Revocable living trusts, which avoid probate for funded assets, manage property during incapacity, and serve as the primary dispositive document. See the Texas revocable trust page.
- Testamentary trusts, created in a will and funded through probate, often for children or beneficiaries needing management.
- Irrevocable trusts, including life insurance trusts, spousal lifetime access trusts, dynasty trusts, and certain Medicaid planning trusts.
- Special needs trusts that supplement, rather than replace, government benefits for a person with a disability.
- Charitable remainder and charitable lead trusts that combine giving with income or transfer tax planning.
- Court-created trusts, such as trusts for minors or incapacitated persons under Property Code § 142.005 and management trusts under Estates Code chapter 1301.
Revocable by Default: Property Code § 112.051
Texas takes the opposite approach from many states on revocability. Under Property Code § 112.051, a settlor may revoke a trust unless it is irrevocable by the express terms of the instrument creating it or of an instrument modifying it. In other words, a Texas trust that is silent on the question is revocable.
This matters in two directions. A trust intended to be irrevocable, such as a life insurance trust, must say so expressly, or it will not accomplish its tax or asset protection goals. And a trust drafted in another state under a different default may behave differently than expected once its settlor lives in Texas. Section 112.051 also requires that a revocation, modification, or amendment of a trust created by a written instrument be in writing, so an informal oral change to a written Texas trust is not effective.
Trustee Duties Under Texas Law
A Texas trustee is a fiduciary. The core duties come from the trust instrument, the Trust Code, and Texas common law.
Administering the trust
Under Property Code § 113.051, the trustee shall administer the trust in good faith according to its terms and the Trust Code, and in the absence of contrary terms, the trustee must perform all duties imposed by the common law. Those duties include loyalty, avoiding self-dealing, impartiality among beneficiaries, and keeping trust property separate and identified.
Prudent investing
Chapter 117 of the Property Code adopts the prudent investor standard. Trustees must invest and manage trust assets as a prudent investor would, considering the purposes, terms, and distribution requirements of the trust, and must diversify unless special circumstances make diversification imprudent. Texas trusts often hold family ranchland, closely held businesses, and mineral interests, and the trust instrument can modify the diversification duty when the settlor wants those assets retained.
Informing and accounting
Property Code § 113.060 requires the trustee to keep beneficiaries reasonably informed about the administration of the trust and the material facts necessary for them to protect their interests. Under § 113.151, a beneficiary may demand a written statement of accounts, and the trustee must provide one within the statutory period. If the trustee fails to do so, the beneficiary may ask a court to compel an accounting.
Exculpation limits and removal
A trust may relieve a trustee of some liability, but Property Code § 114.007 makes an exculpation provision unenforceable to the extent it relieves the trustee of liability for breach of trust committed in bad faith, intentionally, or with reckless indifference, or for profits derived from a breach. A court may remove a trustee under § 113.082 for reasons including material breach, insolvency, or other cause.
Directed trusts and trust protectors
Texas permits trust instruments to give an advisor or trust protector authority over investment decisions, distributions, or other matters. Property Code § 114.0031 addresses the respective duties and liabilities of the advisor and the directed trustee. These arrangements are increasingly common in trusts holding family businesses.
Notice and Contest Timing in Texas
Unlike California, Texas does not have a statute requiring the trustee of a formerly revocable trust to send a formal notice that starts a short, trust-specific contest period after the settlor’s death. The trustee’s duty to keep beneficiaries informed under § 113.060 still applies, and a well-run administration provides early information to beneficiaries as a matter of good practice.
Challenges to a Texas trust, such as claims of lack of capacity or undue influence, are governed by general limitations principles rather than the two-year will contest period in Estates Code § 256.204. Timing issues in trust litigation are fact-specific, and anyone considering a challenge or defending a trust should get advice promptly.
Texas enforces forfeiture clauses in trusts under Property Code § 112.038, subject to the same exception that applies to wills: the clause is unenforceable against a beneficiary who shows that probable cause existed for the action and that it was brought and maintained in good faith.
Modifying and Terminating Texas Trusts
A revocable trust can be amended or revoked by the settlor under § 112.051. Irrevocable trusts are harder to change, but Texas provides several paths.
Under Property Code § 112.054, a court may modify or terminate a trust when the purposes have been fulfilled or become illegal or impossible, when circumstances not known to or anticipated by the settlor make modification further the trust’s purposes, when modification of administrative provisions is necessary or appropriate to prevent waste or impairment of administration, when necessary to achieve tax objectives consistent with the settlor’s intent, or when the beneficiaries consent and continuing the trust is not necessary to achieve a material purpose, among other grounds.
The Trust Code also includes provisions for combining and dividing trusts, and for terminating trusts that have become uneconomical to administer. The trust instrument itself can build in flexibility through powers of appointment, trust protector powers, and trustee powers to amend administrative provisions.
Decanting in Texas
Decanting allows a trustee to distribute assets from an existing irrevocable trust into a new trust with different terms. Texas authorizes decanting in Subchapter D of chapter 112 of the Property Code, beginning at § 112.071.
Texas distinguishes between trustees with full discretion and trustees with limited discretion. Under § 112.072, a trustee with full discretion, meaning a power to distribute principal that is not limited or modified in any manner, has broad authority to change beneficial interests within statutory limits. Under § 112.073, a trustee whose discretion is limited, such as by a standard of health, education, maintenance, and support, may decant only if the beneficiaries’ interests in the second trust are substantially similar to those in the first.
Texas requires notice before decanting. Under § 112.074, the trustee must give written notice of the proposed distribution to certain beneficiaries at least 30 days before exercising the power. Decanting also has limits: it generally cannot be used to eliminate certain beneficial interests that have vested, to reduce a mandatory distribution right, or to materially limit a trustee’s fiduciary duties in a way the statute prohibits. A trustee may also ask a court to approve a decanting.
Spendthrift Protection
Texas enforces spendthrift provisions. Under Property Code § 112.035, a settlor may provide that a beneficiary’s interest in income or principal may not be voluntarily or involuntarily transferred before it is paid, and a declaration that the trust is a spendthrift trust is sufficient. That generally protects a beneficiary’s interest from the beneficiary’s creditors until distribution.
There is a key exception. Under § 112.035(d), if the settlor is also a beneficiary of the trust, a spendthrift provision does not prevent the settlor’s creditors from reaching the settlor’s interest. Texas therefore does not permit domestic asset protection trusts of the kind recognized in some other states. The Texas irrevocable trusts page discusses the limited statutory exceptions, including certain trusts for a spouse.
The Rule Against Perpetuities in Texas
The Texas Constitution, in Article I, § 26, prohibits perpetuities. Property Code § 112.036 applies the common-law rule to trusts, generally requiring an interest to vest within a life or lives in being plus 21 years. In 2021, the Legislature amended § 112.036 so that, for a trust created on or after September 1, 2021, an interest must vest within 300 years after the effective date of the trust. Trusts created before that date remain subject to the traditional rule, and Texas has special rules for charitable trusts.
The 300-year period makes long-term dynasty trusts practical for Texas settlors without moving the trust to another state. It also makes trust drafting more important, because a trust that lasts for generations will need workable provisions for trustee succession, modification, and distributions far into the future.
Trust Income Tax in Texas
Texas has no personal income tax. As a result, income earned by a Texas trust is generally subject only to federal income tax, not state income tax, which is a meaningful difference from California. A revocable trust is generally a grantor trust for federal income tax purposes, so its income is reported on the settlor’s return. After the settlor’s death, or for a non-grantor irrevocable trust, the trust files its own federal return, and trust income tax brackets are compressed, reaching the top rate at a much lower level of income than individual brackets. Distributions to beneficiaries generally carry income out to them.
The Texas franchise tax is a separate matter. It applies to certain business entities, and questions about business trusts or trusts that operate businesses should be analyzed separately. Texas also has no state estate or inheritance tax. The federal estate tax reaches only a small fraction of estates, but it remains relevant for larger Texas families.
Where Trust Disputes Are Heard in Texas
Under Property Code § 115.001, district courts have original and exclusive jurisdiction over most proceedings concerning trusts, and statutory probate courts also have jurisdiction over trust matters under the Estates Code. In the larger metropolitan counties, trust disputes often proceed in the statutory probate courts. Venue rules in chapter 115 generally look to where the trust is administered.
Frequently Asked Questions
Is a Texas trust revocable if it does not say?
Yes. Under Property Code § 112.051, a Texas trust is revocable unless it is made irrevocable by its express terms. A trust intended to be irrevocable must say so clearly.
Does Texas follow the Uniform Trust Code?
No. Texas has its own Texas Trust Code in the Property Code, which has adopted some UTC concepts but differs in important ways, including the default of revocability and its rules on notice, decanting, and perpetuities.
Can a Texas trust last forever?
Not forever, but a trust created on or after September 1, 2021 can last up to 300 years under Property Code § 112.036. Earlier trusts are subject to the traditional rule of lives in being plus 21 years.
Can I protect my own assets with a Texas trust?
Generally not from your own creditors. Under Property Code § 112.035(d), a spendthrift clause does not protect a settlor who is also a beneficiary. Trusts for others, however, can protect beneficiaries from their creditors.
Can a beneficiary demand an accounting from a Texas trustee?
Yes. Under Property Code § 113.151, a beneficiary may make a written demand for an accounting, and a court can compel one if the trustee does not respond.
Does a Texas trust pay state income tax?
No. Texas has no personal income tax, so trust income is generally taxed only at the federal level.
Speak With a Texas Trust Attorney
Holmes Law drafts and advises on revocable, irrevocable, special needs, and charitable trusts for Texas clients, and helps trustees understand their duties under the Texas Trust Code. Michael Holmes is licensed in Texas and works with clients remotely throughout the state. To discuss a Texas trust, contact Holmes Law. You can also read more about estate planning and Texas elder law.