Texas Court of Appeals: A Trustee Cannot Appear Pro Se — The Unauthorized Practice of Law Sinks an Appeal

A recent Texas Court of Appeals decision delivers a clear and important reminder for trustees, settlors, and families who rely on trusts: a non-lawyer trustee cannot represent the trust in court. Doing so constitutes the unauthorized practice of law (UPL) and can result in the dismissal of the entire case.

The Case

In Almericas Veterans Mortgage Trust v. Brock & Scott, the Third Court of Appeals dismissed an appeal filed by the trust’s pro se trustee.  The trustee, Ronnie Dansby, filed a notice of appeal on behalf of Almericas Veterans Mortgage Trust after receiving an adverse trial-court order. The Court of Appeals promptly notified him that, under Rule 7 of the Texas Rules of Civil Procedure, a trustee may not appear pro se in a representative capacity. Rule 7 permits individuals to represent only themselves,  not other persons or entities. Only a licensed attorney may represent a trust.

Because no attorney filed an amended notice of appeal on the trust’s behalf, the court dismissed the appeal. The court relied on established Texas authority which holds that a non-attorney trustee who files pleadings or appears for the trust engages in the unauthorized practice of law.

Why This Matters for Aging-in-Place and Elder Law Planning

Many clients name a trusted family member as successor trustee of their revocable living trust, believing the trustee can handle “everything” without hiring a lawyer. This case shows the limits of that assumption.

• A trust is a separate legal arrangement. When a trustee acts on behalf of the trust in litigation, the trustee is representing another’s interests, not merely his or her own.
• Filing a notice of appeal, a motion, or any pleading for the trust is considered the practice of law under Texas law.
• Courts will dismiss cases, sometimes after significant time and expense have already been invested, if the trust is not properly represented by counsel.

This rule applies not only in Texas but in most states. The principle is the same: non-lawyers may represent themselves, but they may not represent others (including a trust or an estate).

Practical Takeaways for Trustees and Families

• Do Not File Pleadings Pro Se on Behalf of a Trust: Do not file pleadings pro se on behalf of a trust. Even a simple notice of appeal can trigger dismissal.

• Budget for Legal Representation:  When a trust becomes involved in litigation (foreclosure defense, creditor claims, beneficiary disputes, etc.), the trustee must retain licensed counsel.

• Choose Successor Trustees Carefully: Name individuals who understand that professional legal help will be required for court matters, and consider naming a corporate or professional trustee when complex assets or potential disputes exist.

• Review Your Trust Language: Confirm that the trust authorizes the trustee to hire attorneys and pay legal fees from trust assets.

• Act Quickly If a Pro Se Filing Has Already Occurred: Many courts will allow a short window for a licensed attorney to appear and cure the defect.

Bottom Line

A well-drafted revocable living trust can avoid probate and provide excellent management during incapacity or after death. But the trust itself is not a “self-help” vehicle in the courtroom. Trustees who attempt to represent the trust without a license risk having their case dismissed, and may themselves face accusations of unauthorized practice of law.

If you serve as a trustee (or expect to), treat litigation as a professional matter that requires licensed counsel. Protecting the trust’s assets and the beneficiaries’ interests is far more important than trying to save a legal fee.

Buying/Selling a Business- Nuts and Bolts

This office often consults with clients regarding the sale of a business, typically in settlement of an estate.   The following is general information that can aid a client or a client's family in understanding the process and available options. 

I.  Corporations/Limited Liability Companies

Most business sales/purchases of corporations or companies (limited liability companies) are either executed through an Asset Purchase Agreement (APA) or a full equity/stock acquisition (also called a stock purchase, share purchase, or equity purchase). They differ fundamentally in what is being bought, how ownership and risk transfer, tax treatment, complexity, and continuity of operations.

A.  Core Distinction:  Asset Purchase vs. Full Acquisition

• Asset purchase: The buyer acquires specific assets (and typically only specifically assumed liabilities, if any) of the target business under an Asset Purchase Agreement. The seller’s legal entity continues to exist afterward and retains any excluded assets, liabilities, and the sale proceeds.  This seller's legal entity is typically either terminated or repurposed immediately after the sale. 
  cantrellfirm.com
• Full acquisition (stock/equity purchase): The buyer acquires all (or substantially all) of the ownership interests (shares of a corporation or units/membership interests of an LLC) from the owners. The buyer takes ownership of the entire legal entity itself, including all its assets and all its liabilities (known and unknown).
  cantrellfirm.com

Side-by-Side Comparison

Aspect	Asset Purchase	Full Equity/Stock Acquisition
What is transferred	Selected assets (equipment, IP, inventory, contracts, goodwill, etc.) and only agreed liabilities	Entire ownership of the legal entity (and therefore everything it owns and owes)
Seller’s entity after closing	Continues to exist; holds retained assets/liabilities and sale proceeds	Transferred to buyer; seller(s) exit ownership
Liability exposure	Limited: buyer assumes only liabilities expressly listed in the APA	Broad: buyer inherits all historical and contingent liabilities
Tax treatment (buyer)	Often favorable: step-up in tax basis of assets to fair market value; ability to amortize goodwill (typically over 15 years  in the U.S.)	Usually less favorable: carryover (historical) tax basis; no automatic step-up (unless special elections such as IRC §338(h)(10) or similar are available and elected)
Tax treatment (seller)	Often less favorable: potential ordinary income on certain assets; possible double taxation for C-corporations (entity-level tax + shareholder tax)	Often more favorable: typically capital gains treatment at the owner level; single level of tax in many cases
Contracts, licenses & permits	Usually require individual assignment and third-party consents; non-assignable items may not transfer	Generally continue automatically with the entity (subject to change-of-control clauses)
Employees & benefits	Often treated as new hires by the buyer; benefit plans usually do not transfer and must be recreated	Continuity—employees remain with the same employer; plans generally stay in place
Complexity & process	More complex and time-consuming: asset-by-asset transfers, title changes, consents, possible sales/use taxes	Simpler transfer of ownership interests; fewer mechanical steps
Business continuity	Potential disruption; buyer may need to re-establish relationships and re-title assets	High continuity; operations, contracts, and identity of the business remain largely intact
Typical preference	Preferred by buyers (liability control + tax benefits)	Preferred by sellers (tax efficiency + cleaner exit)

B.  Key Advantages and Disadvantages

Asset Purchase

• Buyer Advantages:
• Ability to cherry-pick desirable assets and leave unwanted liabilities behind.
• Tax step-up and amortization benefits that can improve after-tax cash flow.
• Reduced risk of unknown historical claims (e.g., environmental, employment, tax, or product liability).

• Buyer Disadvantages / Seller Advantages:

• Administrative burden and cost of transferring individual assets and obtaining consents.
• Risk that key contracts, licenses, or customer relationships cannot be assigned.
• Potential sales tax or transfer taxes on assets.
• Seller (especially a C-corp) may demand a higher price to compensate for less favorable tax treatment.

Full Equity Acquisition:

•  Buyer Advantages:

• Operational and contractual continuity with minimal disruption.
• Simpler mechanics and often faster closing once diligence is complete.
• Avoids the need to retitle assets or renegotiate every contract.

• Buyer disadvantages:

• Full assumption of all liabilities, including contingent and unknown ones.
• No automatic tax basis step-up (unless a special election is available and agreed).
• Greater due-diligence burden because the entire historical risk profile transfers.

C.  Practical Considerations

• Buyers commonly prefer asset deals when the target has significant contingent risks, when only part of the business is desired, or when maximizing tax benefits is a priority.
• Sellers commonly prefer equity deals for tax efficiency, simplicity, and a complete exit.
• Deal structure is heavily negotiated and influenced by the target’s entity type (C-corp, S-corp, LLC/partnership), the presence of minority owners, regulatory licenses, and tax elections that can sometimes make a stock deal taxed more like an asset deal (or vice versa).
• In both cases, the definitive agreement (APA or Stock/Equity Purchase Agreement) will contain detailed representations, warranties, indemnities, purchase-price adjustments, and closing conditions that allocate risk between the parties.

In short: an asset purchase lets the buyer acquire the business operations selectively while leaving the legal shell (and many risks) behind; a full equity acquisition transfers the entire legal entity and everything that comes with it. The choice is driven primarily by risk allocation, tax consequences, and the desire for operational continuity. Legal, tax, and accounting advice specific to the jurisdiction and parties is essential for any actual transaction.

II.  Sole Proprietorship

A sole proprietorship has no separate legal entity. The business and the owner are legally the same "person." There are no shares, units, or ownership interests that can be transferred independently of the individual.

• A true “full acquisition”/equity or stock purchase is not possible. You cannot buy the “company” itself because none exists as a distinct legal person.
• Virtually every acquisition of a sole proprietorship is structured as an asset purchase. The buyer buys specific assets (equipment, inventory, customer lists, goodwill, intellectual property, etc.) directly from the individual owner.
• Liabilities stay with the seller personally unless the buyer expressly assumes them in the agreement. The buyer generally does not inherit unknown personal liabilities of the sole proprietor simply by buying assets.
• Tax treatment follows the sale of individual assets (ordinary income on inventory/depreciation recapture, capital gain treatment on other items, allocation of purchase price under the residual method). The IRS generally treats the sale of a business as the sale of its individual assets.
  irs.gov
• Continuity issues (contracts, licenses, employees) still arise and often require third-party consents or new agreements, just as in a corporate asset deal.

In short, the classic “asset vs. stock” choice largely disappears; the deal is almost always an asset purchase.III.  Partnership: General Partnership, Limited Partnership, LLP, etc.

Partnerships are entities, so both structures remain available, but with different mechanics and tax rules than corporations:

• Purchase of Partnership Interests:  This is the equity equivalent of a stock purchase.  The buyer acquires ownership interests from the partners. This can transfer the entire entity. Tax treatment is more complex than a corporate stock sale. Gain on “hot assets” (unrealized receivables and inventory) is often ordinary income rather than pure capital gain. A §754 election can allow the buyer a step-up in the inside basis of partnership assets. Buying 100% of the interests is sometimes treated, for the buyer, similarly to an asset purchase under certain IRS rulings.
  irs.gov
• Asset purchase: The partnership sells selected assets (and may or may not distribute the proceeds or liquidate). Liability exposure for the buyer is limited to what is assumed, similar to a corporate asset deal. Tax consequences flow through to the partners.
• Liability Exposure:  Liability after sale depends largely on the type of partnership.  In a general partnership, partners typically have unlimited personal liability; buying interests can expose the buyer to that history unless carefully structured. Limited partnerships and LLPs offer more protection.
• Continuity:   Continuity of contracts, licenses, and employees is generally better with an interest purchase (the entity continues), but change-of-control or consent provisions can still apply.  In other words, continuity depends upon the partnership agreement, the specific relationship/contract at issue, and the terms of the sale. 

Overall, the buyer preference for asset deals (liability control + basis step-up) and the seller preference for equity deals still exist, but partnership tax rules (especially hot assets and basis adjustments) add extra complexity that does not apply to pure corporate stock sales.IV.  Online Self-Help / Informational ResourcesThere are free, non-commercial or government-affiliated educational materials and checklists that can help buyers and sellers understand the process and protect themselves through better due diligence and awareness. They are not, however, substitutes for professional legal, tax, or accounting advice.

• IRS (tax-focused, highly authoritative):

• Sale of a Business:  The IRS "Sale of a Business" overview page explains that a business sale is generally treated as the sale of individual assets, with links to relevant forms and rules.
• Sales and Other Dispositions of Assets: IRS Publication 544 covers allocation of purchase price, residual method, and capital vs. ordinary treatment of gain/loss.
• Partnerships: Publication 541 provides specific rules for sales of partnership interests.

• SCORE:   SCORE is a nonprofit organization and resource partner of the U.S. Small Business Administration. Its network of more than 10,000 volunteer mentors provides free, expert business mentoring, education and resources to entrepreneurs.  Among these are articles and webinars covering:

• Buying and Selling a Business:  Numerous articles and webinars, some state-specific, educate business owners and prospective buyers.

• Due Diligence:  SCORE offers checklists for buying or selling a business (covers financials, assets, contracts, legal standing, employees, etc.).
• Information Gathering: “Questions to Ask When Buying or Selling an Existing Business” checklist.
• Loans and Financing:  SCORE provides information and checklists regarding obtaining business loans. 
• Valuation: Articles and checklists on the due-diligence and valuation process.

• SBA and SBDCs:  The U.S. Small Business Administration (SBA) and related Small Business Development Centers offer:

• Guidance: General guidance on managing and transferring businesses, including the need for a formal sales agreement that specifies assets or ownership interests.
• Resources: Various free checklists from SBDCs (e.g., business buyer’s checklists that explicitly ask whether the deal is an asset or stock/interest purchase and what liabilities will be assumed).

• Other: Practical informational aids can be acquired from:

• Business Centers:  Free due-diligence checklists are published by university-affiliated or state small-business centers that walk through financial review, physical assets, contracts, UCC filings, licenses, and employee issues.

These materials equip clients to ask better questions, prepare stronger due-diligence requests, and recognize major red flags before signing anything. Because entity type, state law, and tax elections vary widely, the resources themselves repeatedly note that professional advice remains essential for the actual transaction documents and tax planning.

Court Protects an Estate Sued By An Annuity Company For Over-payment: Companies Should Know When Their Customers Die

ID 179769815 © Artur Szczybylo | Dreamstime.com

An annuity company sued a customer’s estate for not reporting the death of his wife, which resulted in him receiving larger monthly payments after her death than he was entitled to under the contract.  The customer died in 2013, and the annuity company discovered the over-payments in 2014. In 2016, the annuity company filed suit against the customer’s estate for the over-payments. Both parties filed summary judgment motions, and the trial court entered judgment for the annuity company. The estate appealed.  

The court of appeals reversed and rendered judgment for the estate. The court first addressed the annuity company’s breach of contract claim. The court held that the contract did not expressly or impliedly require the surviving spouse to report the death of the first spouse. The court held:

"In sum, the annuity contract, taken as a whole, does not evidence an intent to impose an implied obligation on Harold to notify Principal of Emily’s death or an implied obligation to return money Harold received in excess of the stated contract amount. Moreover, it is undisputed that this was Principal’s contract. “In Texas, a writing is generally construed most strictly against its author and in such a manner as to reach a reasonable result consistent with the apparent intent of the parties.” Principal, a sophisticated commercial enterprise, did not include express provisions requiring Harold to notify Principal of Emily’s death or to return money received in excess of the stated contract amount. The annuity contract, as written, does not evidence an intent to imply these obligations. Because we conclude the annuity contract, taken as a whole, does not support imposition of an implied obligation on Harold to notify Principal of Emily’s death or an implied obligation to return money Harold received in excess of the stated contract amount, Principal cannot show Harold breached the annuity contract."

The court then reviewed the annuity company’s "money-had-and-received" claim. The court described the claim: 

“Money had and received is an equitable doctrine designed to prevent unjust enrichment. To prevail on a claim for money had and received, the plaintiff need only prove that the defendant holds money which in equity and good conscience belongs to the plaintiff.” 

The court held that the claim was barred by the two-year statute of limitations  because the annuity company did not file its claim within two years of discovering the over-payments.

Finally, the court rejected the annuity company’s fraud by nondisclosure claim. According to the courty, in order to establish fraud by non-disclosure:

“Principal must prove: (1) Harold deliberately failed to disclose material facts; (2) Harold had a duty to disclose such facts to Principal; (3) Principal was ignorant of the facts and did not have an equal opportunity to discover them; (4) by failing to disclose the facts, Harold intended to induce Principal to act or refrain from acting; and (5) Principal relied on the non-disclosure, which resulted in injury.” 

The court held that the annuity company had an equal opportunity to discover its customer’s death:

Principal had an equal opportunity to discover Emily’s death. Principal had internal procedures in place to discover this very type of information. Angela Essick, Principal’s corporate representative, testified that between 2001 and the present, Principal utilized a third-party company and the Social Security Master Index to provide it with a list of names and social security numbers of the deceased on a quarterly basis. Principal would compare these names and social security numbers with those of its annuitants. Principal failed to discover Emily’s death through these channels because it never obtained Emily’s social security number. Principal cannot rely on its internal oversight to claim it did not have an equal opportunity to discover Emily’s death.

Accordingly, the court dismissed all of the annuity company’s claims and rendered judgment for the estate of the customer.

The case has serious implications  for annuity companies specifically, to be sure, but generally for any company involved in the financial services industry.  The case also has serious implications for agents, as they might be expected by their contacting principals to protect them from loss by reporting timely the death of customers.  Agents should be cognizant of changes to agreements and contracts, and should consider these carefully in establishing business practices.

For the consumer, the decision is welcome, but should not be relied upon in expecting protection from continuing to collect and use funds they are not legally entitled to keep; the company in this case may have recovered from the estate had it acted more quickly in filing its claim.

The decision in the case is at first glance surprising, but as is often the case with surprising results, heavily dependent on a set of facts that are unlikely to occur.  Administrators, Executors, and Trustees should follow counsel's guidance regarding treatment of estate funds, and notification of third parties.   

The case is In re Estate of Scott, No. 04-19-00592-CV, 2020 Tex. App. LEXIS 4059 (Tex. App.—San Antonio May 27, 2020, no pet. history).

Ohio Makes Trust Contests More Difficult

ID 108096044 © Designer491 | Dreamstime.com

A new law, commonly referred to as HB 595, has made significant changes to Ohio probate law that could affect your will or trust. The law is far-reaching, and contains much more information than can be addressed in a single blog post, but there are many developments that could  impact you, your loved ones, or your or their estate plans. 

One of the important developments is that HB 595 changes the law dealing with some legal challenges to a revocable trust made irrevocable by the death of the creator (grantor/settlor) of the trust. The actions involved include:

• Contesting the validity of the trust;
• Contesting the validity of an amendment to the trust made during the settlor's lifetime;
• Contesting a revocation of the trust during the settlor's lifetime; or
• Contesting the validity of a transfer made to the trust during the settlor's lifetime.

Under the new law, a person seeking to file a legal action contesting the trust in any of the foregoing ways MUST do so within the EARLIER of:

• The date that is two years after the settlor's death, OR
• The date that is six months from the date on which the trustee sent the person filing the action a copy of the trust instrument and notice of the trust's existence, along with the trustee's name and address and time allowed for beginning an action.

HB 595 also establishes that no person may contest the validity of a trust as to facts already decided.  If the settlor submitted the trust to probate court during his or her lifetime, and the court declared the trust valid under Ohio law, the trust is effectively incontestible, at least as to the parties that were notified.  Under the new law,  a person may still contest the validity of the trust as to those particular facts, if the person should have been named as a defendant to the action to declare validity and was not, or was not properly served.

What does this mean for you? If you are the settlor of a trust, it means you have more tools available to ensure that a trust you create will not be challenged. If you are an heir or a beneficiary  a trust, it means you may have a much harder time challenging the validity of a trust, or of an amendment to, revocation of, or transfer to that trust.  If you are a successor trustee of a trust made irrevocable by the death of the creator, you should provide an initial notification to beneficiaries that will start the six month limitation as soon as possible.   

Protecting Your Deceased Loved Ones From Identity Theft

We've all been warned about protecting ourselves from identity theft, but one group of victims can't take action to protect themselves—the dead. Identity thieves steal the identities of more than 2 million deceased Americans a year, according to fraud prevention firm ID Analytics. Fortunately, there are steps that you can take to discourage identity thieves from targeting a deceased loved one.

 

Part of the reason the deceased make prime targets for scam artists is that it can take up to six months for credit agencies to be notified about a death. As soon as possible, you should send copies of your loved one's death certificate through certified mail to the three major credit reporting agencies—Equifax, Experian, and TransUnion. Along with a certified copy of the death certificate, you should include papers certifying that you are the executor or person representing the deceased; the decedent's full name, date of birth, and Social Security number; the decedent's most recent address; and the date of death. You should also request that the credit bureaus put a "deceased -- do not issue credit" alert on the decedent's credit files.

In addition, you should send copies of the death certificate to any banks, insurers, credit card companies, or other financial institutions where the deceased had accounts. You should also cancel the decedent's driver's license by notifying the state motor vehicles department.

One way that identity thieves find victims is by looking through obituaries. When writing your loved one's obituary, try to avoid information that might be useful to identity thieves such as date of birth, mother's maiden name, or the decedent's address. Think about what information someone would need to open a bank account and avoid including that in the obituary.

Once the proper agencies and institutions have been notified, you should continue to monitor the decedent's credit report for a year to make sure there are no problems.  A free copy of the three credit agencies’ reports is available annually to executors or trustees.  Go to: www.annualcreditreport.com.

For more information from Bankrate about protecting a deceased relative from identity theft, click here.

Questions to Ask Before Serving as Trustee

Being asked to serve as the trustee of the trust of a family member is a great honor. It means that the family member trusts your judgment and is willing to put the welfare of the beneficiary or beneficiaries in your hands. 

But being a trustee is also a great responsibility. You need to accept your responsibility fully informed and with your eyes wide open. Here are six questions to ask before saying "yes":

• May I read the trust? The trust document is your instruction manual. It tells you what you should do with the funds or other property you will be entrusted to manage. Make sure you read it and understand it. Ask the drafting attorney any questions you may have.

• What are the goals of the grantor (the person creating the trust)? Unfortunately, many trusts say little or nothing about their purpose. They give the trustee considerable discretion about how to spend trust funds with little or no guidance. Often the trusts say that the trustee may distribute principal for the benefit of the surviving spouse or children for their "health, education, maintenance and support." Is this a limitation, meaning you can't pay for a yacht (despite arguments from the son that he needs it for his mental health)? Or is it a mandate that you pay to support the surviving spouse even if he could work and it means depleting the funds before they pass to the next generation? How are you to balance the needs of current and future beneficiaries? It is important that you ask the grantor while you can. It may even be useful if the trust’s creator can put her intentions in writing in the form of a letter or memorandum addressed to you.

• How much help will I receive? As trustee, will you be on your own or working with a co-trustee? If working with one or more co-trustees, how will you divide up the duties? If the co-trustee is a professional or an institution, such as a bank or trust company, will it take responsibility for investments, accounting and tax issues, and simply consult with you on questions about distributions? If you do not have a professional co-trustee, can you hire attorneys, accountants and investment advisors as needed to make sure you operate the trust properly?

• How long will my responsibilities last? Are you being asked to take this duty on until the youngest minor child reaches age 25, in other words for a clearly limited amount of time, or for an indefinite period that could last the rest of your life? In either case, under what terms can you resign? Do you name your successor, does the trust  or does someone else?

• What is my liability? Generally trustees are relieved of liability in the trust document unless they are grossly negligent or intentionally violate their responsibilities. In addition, professional trustees are generally held to a higher standard than family members or friends. What this means is that you won't be held liable if for instance you get professional help with the trust investments and the investments happen to drop in value. However, if you use your neighbor who is a financial planner as your adviser without checking to see if he has run afoul of the applicable licensing agencies, and he pockets the trust funds, you may be held liable. A well-respected Massachusetts attorney who served as trustee on many trusts used a friend as an investment adviser who put the trust funds in risky investments just before the 2008-2009 stock market crash. The attorney was held personally liable and suspended from the practice of law. So, be careful and read what the trust says in terms of relieving you of personal liability.

• Will I be compensated? Often family members and friends choose to serve as trustees without compensation. If the duties are especially demanding, however, it is appropriate for trustees to be paid for service. The question, then, is how much. Professionals generally charge an annual fee of 1 to 2 percent of assets in the trust. So, the annual fee for a trust holding $1 million would be $10,000. Institutions and professionals generally charge a higher percentage for  smaller trusts and a lower percentage for larger trusts. If you are performing all of the work for a trust, including investments, distributions and accounting, it would be inappropriate to charge a similar fee. If, however, you are paying others to perform these functions or are acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. A typical fee in such a case is a quarter of what the professional trustee charges, or .25 percent (often referred to by financial professionals as 25 basis points). In any case, it's important for you to read what the trust says about trustee compensation and discuss the issue with the grantor.

If after getting answers to all these questions you feel comfortable serving as trustee, you should accept the role. It is an honor to be asked and you will provide a great service to the grantor and beneficiaries.

For a list of things to do after being appointed a trustee, click here.

For more on the different kinds of trusts, click here.