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Bequest Management

Beneficiaries Release $37 Million Claim

November 30, 2023
Beneficiaries Release $37 Million Claim

(Originally published on LinkedIn on July 21, 2023)

Our firm has written extensively about risks embedded in receipts and releases. The beneficiaries in Austin Trust Company v. Houren, 664 S.W.3d 35 (Tx. 2023) have learned that lesson the hard way.

The decedent (Bob Lanier) was the trustee and sole beneficiary of a marital trust (Trust). During his lifetime, he distributed $37 million from the Trust to himself, leaving about $6 million at the time of his death. Various relatives (Relatives) were to receive that residuum.

To expedite the settlement of the Trust and unrelated assets of Lanier’s probate estate, all interested parties executed an agreement (Release) that included broad releases of any claims against the Trust or arising out of its administration. All parties, including the Relatives, had full financial information about the Trust and had the opportunity to obtain legal and financial advice.

Subsequent to the execution of the Release, the Austin Trust Company – by now representing the interests of the Relatives – concluded that Bob Lanier’s $37 million distribution was improper and filed suit against Bob’s successor trustee (Jay Houren) to compel him to seek recovery of those funds, presumably from Lanier’s estate. Houren argued that the Release barred that claim.

The case was litigated, appealed and finally made it all the way to the Supreme Court of Texas. The high court upheld the Release!  The Relatives never got to litigate the merits of their $37 million claim because they affixed their signatures to what likely appeared to be a simple release. The moral of the story? Beneficiaries, including charitable beneficiaries, need to know what they are signing. If there is any doubt, seek expert counsel before putting pen to paper.

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