Texas Wesleyan Law Review


Lori Campbell

Document Type



"Loan me my money!" Texas trustees are hearing this plea from trust beneficiaries who need access to trust funds because of drastic declines in income produced from trust investments and the decrease in available credit. Beneficiaries, who want to preserve the trust funds for the next generation, are requesting loans to meet their temporary cash needs. These beneficiaries typically have full intentions to repay-when the good times roll. The Texas Trust Code, however, does not provide express authority to lend trust funds to beneficiaries. Instead, trustees rely on the Code's broad, implied investment powers or stretch their discretionary distribution authority to lend funds instead of disbursing them. Using implied investment powers to lend ties the hands of trustees, likely requiring investment loan underwriting and terms. This is likely the intent of any grantor making loans to family. Using discretionary authority restricts the purpose of the loan to only those purposes authorized by the document. This Comment explores the sources of trustee authority to lend and how each source impacts credit writing, terms, and collateral requirements for the loan. In addition, this Comment recommends a solution to the Texas legislature- adopting the lending provisions in section 816 of the Uniform Trust Code. These provisions not only expressly authorize lending to trust beneficiaries but also permit flexible underwriting standards that benefit trust beneficiaries and carry out the purpose of the trust. Drafters have the advantage; they can clear up the ambiguity in the Texas Code with the stroke of a pen. This Comment suggests drafting options that will assist trustees in making lending decisions that carry out the grantor's intent and provide for the grantor's family long after the grantor is able.



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