In the administration of trusts, trustees are often called upon to make difficult decisions. One of the most consequential, and often overlooked, is the duty to pursue claims on behalf of the trust. Whether those claims involve reimbursement, breach of contract, or recovery of misappropriated assets, the trustee’s obligation is not optional. It is a legal duty, and failure to act can expose the fiduciary to personal liability.

This article explores the legal framework governing a trustee’s duty to pursue claims, the risks of inaction, and how trustees can protect themselves while fulfilling their obligations to beneficiaries.

The Fiduciary Duty to Act

Under Texas law, trustees are fiduciaries who owe a duty of loyalty and a duty of prudence to the beneficiaries of a trust.[i] These duties require the trustee to act in the best interests of the trust and its beneficiaries, including taking reasonable steps to preserve and recover trust assets.[ii]

When a potential claim arises—such as a reimbursement owed to the trust estate, or a dispute over property characterization—the trustee must evaluate whether pursuing the claim is in the trust’s best interest.[iii] If the claim is viable and could materially benefit the trust, the fiduciary is obligated to act.

This duty is not discretionary. Courts have consistently held that a trustee’s failure to pursue a claim that could benefit the trust may constitute a breach of fiduciary duty.

Why Trustees Sometimes Hesitate

Despite the clear legal obligation, trustees may hesitate to pursue claims for several reasons:

• Family dynamics: In many cases, the trustee is also a family member, and the claim may be against another relative or estate.
• Uncertainty about the law: Trustees may be unsure whether the claim is legally valid or how to quantify it.
• Fear of litigation: Pursuing a claim may lead to costly and contentious litigation, especially if the opposing party is unwilling to cooperate.

While these concerns are understandable, they do not excuse inaction. A trustee who fails to act may be held personally liable for any loss to the trust resulting from that failure.

Personal Liability for Fiduciary Inaction

Texas courts have made clear that fiduciaries can be held personally liable for breach of duty. If a trustee fails to pursue a claim that would have benefited the trust, and the trust suffers a loss as a result, the trustee may be required to compensate the trust from their own assets.

This liability is not limited to intentional misconduct. Even negligent failure to act, such as ignoring a reimbursement claim or failing to investigate a property dispute, can result in personal exposure. It is imperative that a serious trustee have the capacity and willingness to manage and pursue litigation.

A forthcoming Shields Legal case study details how we managed a claim for reimbursement from a marital estate that was responsible for partly funding a trust at decedent’s passing. Thankfully, the trustee was receptive to our advice, and the matter resulted in a significant gain for the trust beneficiaries.

Best Practices for Trustees

To avoid personal liability and fulfill their fiduciary duties, trustees should:

1. Investigate potential claims promptly: If there is any indication that the trust may have a legal claim, the trustee should seek legal advice and gather relevant documentation.
2. Document the decision-making process: Trustees should keep records of their analysis, legal opinions received, and reasons for pursuing or declining to pursue a claim.
3. Communicate with beneficiaries: Transparency helps build trust and reduces the risk of disputes. Beneficiaries should be informed of potential claims and the trustee’s plan for addressing them.
4. Act in good faith and with diligence: Even if a claim is ultimately unsuccessful, a trustee who acts reasonably and in good faith is far less likely to face liability.

Conclusion

Trustees are not passive custodians.  Rather, they are active stewards of the trust’s interests. When a claim arises, the fiduciary must act. Failure to do so is not just a missed opportunity—it is a breach of duty that can carry serious consequences. At Shields, we help trustees navigate these complex issues with clarity and confidence. If you are a fiduciary facing a potential claim, or a beneficiary concerned about trustee inaction, we invite you to contact us for a confidential consultation.

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[i] Tex. Prop. Code § 113.051.
[ii] Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 199 (Tex. 2002)
[iii] Tex. Prop. Code § 113.019.