Westerfeld v. Huckaby
15 Tex. Sup. Ct. J. 105, 1971 Tex. LEXIS 221, 474 S.W.2d 189 (1971)
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Rule of Law:
A self-declared, revocable inter vivos trust is not an invalid testamentary disposition merely because the settlor names herself trustee and reserves extensive powers, including a life interest and the rights to control the administration of the trust, collect all income, and amend or revoke the trust.
Facts:
- Virginia B. Miller owned two lots of real property in Houston, Texas.
- On November 7, 1966, Miller executed two 'Declarations of Trust,' one for each lot, declaring that she held the properties in trust for the benefit of Arthur L. Huckaby.
- The trust instruments provided that upon Miller's death, the successor trustee was to transfer the property to Huckaby.
- Miller, as settlor, reserved extensive powers, including the right to place liens on the property, to collect all income for her own benefit, to amend or revoke the trust in whole or in part at any time without Huckaby's consent, and to change the beneficiary.
- The documents also named Huckaby as the successor trustee in the event of Miller's death or legal incapacity.
- Contemporaneously with the trust declarations, Miller executed two quitclaim deeds transferring the properties from herself as an individual to herself as Trustee.
- Virginia B. Miller died on February 24, 1968.
Procedural Posture:
- Maurice Westerfeld, as temporary administrator of Virginia B. Miller's estate, filed suit against Arthur L. Huckaby in a Texas trial court.
- The suit sought to recover title to two lots and to have two trust instruments and two quitclaim deeds declared void.
- Following a trial before the court, judgment was rendered in favor of the defendant, Huckaby, upholding the trusts and deeds.
- Westerfeld, as appellant, appealed the trial court's judgment to the Texas Court of Civil Appeals.
- The Court of Civil Appeals affirmed the judgment of the trial court.
- Westerfeld, as petitioner, then sought and was granted a writ of error for review by the Supreme Court of Texas.
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Issue:
Does a self-declared trust, in which the settlor names herself as trustee and life beneficiary, and reserves the rights to revoke, amend, collect income, and control the property, fail as an invalid testamentary disposition for lack of compliance with the Statute of Wills?
Opinions:
Majority - Pope, Justice
No. A self-declared trust in which the settlor reserves extensive powers does not fail as an invalid testamentary disposition. The court held that the trust created a valid present interest in the beneficiary, even if that interest was subject to defeasance. The court reasoned that the 'illusory trust' doctrine from Land v. Marshall is limited to cases involving a non-consenting spouse's community property and does not invalidate a trust where a settlor deals with their own property. The court adopted the modern rule articulated in the Restatement (Second) of Trusts § 57, which states that reserving a life interest, the power to revoke, and the power to control the trustee does not render a trust testamentary. The court found Miller's intent to create a presently operative trust was evidenced by her appointment of a successor trustee to act not only upon her death but also upon her 'legal incapacity,' demonstrating a plan for lifetime management. Therefore, the trust was a valid inter vivos disposition and not a will substitute requiring compliance with testamentary formalities.
Dissenting - Steakley, Justice
Yes. The trust instruments should fail as an invalid testamentary disposition. The dissent argued that the arrangement was merely a contrived use of trust principles to make a disposition at death, without being genuinely effective during Miller's lifetime. Because Miller retained complete legal and equitable ownership through her extensive reserved powers, there was no meaningful separation of interests and she had no enforceable fiduciary duties to anyone. Huckaby received only a mere expectancy, not a present beneficial interest. The dissent concluded that the cumulative effect of the retained powers meant the transaction was a ceremony without present substance, and the provision for a successor trustee upon incapacity was too 'frail' a basis to validate what was otherwise a nullity as an inter vivos trust.
Analysis:
This decision officially aligns Texas law with the modern trend, as reflected in the Restatement (Second) of Trusts, strongly favoring the validity of revocable living trusts. It clarifies that the 'illusory trust' doctrine is a narrow tool to protect spousal community property rights, not a general basis for challenging trusts where the settlor retains extensive control. By upholding this trust structure, the court provided significant legal certainty for estate planners and validated a key tool used to manage assets during life, plan for incapacity, and avoid probate. The case establishes that as long as a present, albeit highly defeasible, interest is created, a revocable trust will be upheld against claims that it is an invalid testamentary substitute.
