Common Reasons for Creating a Spendthrift Trust

Nearly all of us have relatives who need extra help managing their income and assets. When we can, we try to find ways to help them. In some instances, you might have a grandson or granddaughter who’s having trouble holding down a steady part-time job during college – or trying to make ends meet after battling a lengthy addiction. Your troubled relative might also be older and starting to struggle with handling all his monthly financial affairs.

Whatever the individual’s special needs may be, you can often help by making the person a beneficiary of a spendthrift trust.

How Should You Define This Type of Trust to the Beneficiary?

You may first want to simply say that, because you greatly care for this individual, you want to remove all or most of her current money management problems from her life. You can then say that you’ve named the person as a beneficiary of a special trust account that will be managed by a trustee. You should then quickly point out that you’ll be personally choosing the exact terms governing the trust so the trustee can properly meet specific needs of the beneficiary.

Should the beneficiary ask if she can personally manage the money, you must be ready to say that you have considered that alternative and prefer to disburse the funds over time. You might also note your desire to prevent the funds from being taken by untrustworthy creditors. (Of course, there are legal exceptions that do allow some creditors to reach these funds, and they’ll be briefly addressed below).

It’s also useful to tell the beneficiary that the funds or property that you’ll be placing in the trust as its creator (grantor) are generally referred to as the trust principal.

What Basic Terms and Provisions Are Normally Included in a Spendthrift Trust?

As your Houston estate planning lawyer will tell you, specific language must be included in the trust document, making it clear that you’re creating a spendthrift trust, in keeping with Texas law. This enabling language is designed to fully protect all the property and funds that you’re placing in the trust from others who might try to illegally reach them. All of this is clearly explained in the Texas Property Code, Title 9, entitled “Trusts.”

Your spendthrift trust language will clearly state that since the beneficiary has no right to directly reach and control the funds – neither can most creditors. Most grantors also include some specific language indicating that they are trying to provide for the beneficiary’s general needs.

As the grantor/settlor you must also clearly state all the trustee’s rights, duties and obligations while administering the trust. The trustee’s job can be a very difficult one, especially if the beneficiary decides to legally challenge the trustee by demanding large sums of money for serious medical, educational or basic living expenses not expressly referenced in the trust.

When Can Creditors & Other Parties Successfully Obtain Funds from a Spendthrift Trust?

The laws in most states allow creditors that can prove that a beneficiary owes them money for basic “necessities” (like shelter or food) to win judgments and collect funds from these types of trusts. Other legal obligations that can be paid out of spendthrift trust funds (once legal action has been taken) include child support, alimony or support of a past (or current) spouse and certain government claims.

When funds are periodically released to a beneficiary, creditors can also try to obtain them based on judgments they’ve obtained. 

Please feel free to contact one of our Murray Lobb attorneys to learn more about the various types of trusts and other estate planning tools that we can draft to meet all your needs, including a spendthrift trust.

Tortious Interference with Inheritance:  Not a Valid Claim in Texas

The Supreme Court of Texas states in its Archer v. Anderson opinion (published in June 2018) that “there is no cause of action in Texas for tortious interference with inheritance.” This ruling was based on the court’s holding that there are other adequate, valid remedies for pursuing inheritance-related claims without doing so under this specific tort that conflicts with Texas probate law.

The basic facts set forth in the Archer case.

Stated succinctly, Archer v. Anderson involved a man named John R. “Jack” Archer who had married and divorced four times and never had any children of his own. In a 1991 Will, Archer left the bulk of his estate to his brother and his six children (a generous sum was also left to charities). Seven years later, Jack Archer suffered a stroke that left him very confused, disoriented and delusional.

Multiple parties soon stepped in at different times, trying to coerce Mr. Archer into changing his estate plans. Guardianship proceedings were also pursued. Eventually, the Archer family sued Jack Archer’s attorney, Ted Anderson, for breach of fiduciary duty, legal malpractice, and intentional infliction of emotional distress. (They also sued others on Mr. Archer’s behalf).

Anderson passed away in March 2006 and Jack Archer died one month later. After Jack’s 1991 Will was probated, the Archers received their bequests under it. (Many other complex events also transpired, eventually leading both sides to file appeals that were addressed in this Supreme Court of Texas opinion).

Tortious interference with an inheritance has never been formally recognized in Texas.

The Supreme Court of Texas clearly notes that neither its predecessors on the bench – nor the State’s legislature – have ever formally recognized the claim of tortious interference with inheritance. However, over the years, various parties have repeatedly argued that such a claim was basically implied in other cases.

How should Texans respond and protect themselves based on this ruling?

Parties who believe that their contractual right to inherit from someone has been thwarted by a third party due to fraud, undue influence, issues involving testamentary capacity, or drafting irregularities — can still petition a court for help. A probate court could set aside certain gifts based on the offering of proper evidence – and might also correct a wrongful act by imposing a constructive trust so that no one will be unjustly enriched.

Of course, however parties proceed, they must be ready to cover court costs and attorney fees on their own.

To further combat fraud, it’s crucial for all family members to stay very actively involved with their elderly or disabled loved ones.

When few people keep in touch, numerous parties claiming to be friends or caregivers can find both cruel and hidden ways to steal from elderly or disabled people’s estates. (If you haven’t already done so, be sure to read The New Yorker article entitled, “How the Elderly Lose Their Rightsand AARP’sFraud in the Family.”

Please feel free to contact Murray Lobb so we can help you with all your estate planning needs. We can also provide you with legal advice on how you should proceed if you believe anyone is currently trying to defraud you (or a loved one) of any estate funds.

How Should You Respond to Potentially False I-9 Documentation?

At present, the federal government expects companies to carefully examine all I-9 documents presented by job applicants and to ask questions about required paperwork that looks like it may have been altered. Once you receive proper documents that look valid, you must keep your copy of the completed I-9 form on file, ready to share it with ICE (Immigration and Customs Enforcement) upon request. In some cases, you may be given only three days’ notice to produce these documents for all your employees.

To help employers fulfill their duties, ICE provides general guidelines that describe how all I-9 document reviews should be handled. These guidelines are further referenced below, along with topics you should address with your human resource staff to help them avoid accidentally discriminating against applicants and employees while simply trying to obtain fully updated, accurate documents.

What federal law established the need to obtain I-9 documents from job applicants?

Congress passed the Immigration Reform and Control Act (IRCA) back in 1986. It requires employers to obtain job applicant documents that validate each person’s right to work in this country. This task is handled by fully completing a Form I-9 document for each job applicant. To help establish their legal status, applicants can produce such items as:  a driver’s license, a Permanent Resident Card, a US passport, a birth certificate and a Social Security card.

Can some I-9 documents be acceptable even when they initially look questionable?

The simple answer to that question is “Yes.” However, you should always keep notes in your file concerning any odd documents that you first believed might be false – and keep a copy of them. As ICE notes on its website, there are times when a worker may show you documents indicating different last names – and that may be acceptable if the job applicant can provide you with a reasonable explanation for the varied listings.

While employers must be respectful and open-minded while handling required I-9 tasks, they should be acting in agreement with previously established, written employee guidelines clearly noting that all new hires and established employees can be fired for providing any false job applicant documents. When you haven’t already created such written guidelines and acceptable standards of employee conduct, you may later find yourself accused of discriminating against an applicant or employee based upon his or her immigrant (or special ethnic) status.

This type of scenario often unfolds when an employee informs you after being hired that one or more documents given to you before being hired was fraudulent or invalid. This tends to occur when the employee is trying to provide you with newly updated, valid documents.

This specific type of issue was presented to the Department of Justice (DOJ) back in 2015. Unfortunately, instead of issuing an advisory opinion, the DOJ simply noted that employers should already be prepared to handle these types of issues — based on established employee conduct guidelines. Otherwise, they risk being sued for one of at least four employment-related forms of discrimination.

Is it true that some employers have been heavily fined for I-9 violations?

Yes. One of the largest fines recently imposed by the Office of the Chief Administrative Hearing Officer (OCAHO) involving I-9 irregularities was against Hartmann Studios. That company was required (in July of 2015) to pay $600,000 in civil penalties. (That amount had been reduced from the original penalty sought of $812,665.) When Hartmann was undergoing a new inspection back in 2011, the company employed over 700 workers.

While that large sum of money is quite high, it’s important to recognize that Hartmann Studios was unable to provide any I-9s for some of its employees who had been terminated and needed an extension of time to produce documents for others.

What steps can our office (or company) take now, to make sure were fully complying with all current I-9 document guidelines?

If you haven’t already done so, give serious thought to signing up for the US government’s
E-Verify program that can help you properly process all your I-9 documents. By visiting this government website, you can learn more about how this program works. Your usage of this service may help establish your good-faith attempt to properly handle all I-9 duties.

You may also want to ask your lawyer if you should require all newly hired (and established) employees to sign a form that clearly indicates their awareness that they may be immediately fired for their dishonesty if you ever learn that they’ve provided you with any fraudulent I-9 documents. If you do this, you’ll need to strictly apply this standard.

Please contact our Murray Lobb law office so we can answer any other questions you may have about properly handling all I-9 documents. We can also provide you with advice on drawing up a general employee handbook — that also fully alerts all employees to the possible consequences of supplying your company with fraudulent I-9 documents.