Estates & Trusts

Court Affirmed Probate Order On The Ownership Of Farm Equipment Which Depended On The Location Of The Equipment At The Time Of The Decedent’s Death

In Halderman v. Ivy, the decedent’s will stated: “I give, devise and bequeath my 66.977 acres located on FM 1848 in Freestone County, Texas, including all livestock and farm equipment located thereon to my two children . . . in equal shares; provided, however, if either [of the children] shall predecease me, then her share shall be distributed to the survivor of the two, per capita.” No. 08-24-00070-CV, 2024 Tex. App. LEXIS 7773 (Tex. App.—El Paso October 31, 2024, no pet. history). The plaintiffs filed a petition asking for a declaratory judgment that a truck, tractor, loader, and hay spear were farm equipment located on the farm at the time of the decedent’s death. The trial court conducted a bench trial at which six witnesses testified, and the dispute centered on the location of the tractor, loader, and hay spear on the day the decedent died. The trial court found that there was not sufficient evidence to establish that the equipment was on the property at the time of the decedent’s death.
The court of appeals affirmed. The appellant argued that the finding was contrary to a judicial admission that the equipment was on the property. The court of appeals held that even if there was a judicial admission, it was waived when the appellant allowed contrary evidence to be admitted without objection: “a party relying on a judicial admission . . . must protect the record by objecting to the introduction of controverting evidence and to the submission of any issue bearing on the facts admitted. Here, Ms. Halderman cannot maintain that Ms. Ivy’s attorney’s statements were a judicial admission that the tractor was on the farm on the day Mr. Boyd died, when evidence contrary to the purported admission was heard without objection.” Id.
The court then held that there was conflicting evidence, and that the trial court’s finding was supported by sufficient evidence:
Ms. Halderman did not object to testimony that the tractor was not on the farm the day Mr. Boyd died; therefore, the trial court was left with conflicting evidence. Deputy Leatherman testified that while he confined himself to where Mr. Boyd’s body was found on the farm, he did not recall seeing a tractor. Ms. Ivy testified that the tractor was at the house when Mr. Boyd died. Mr. Rodell testified that sometime after Mr. Boyd died, Ms. Ivy asked him to get the tractor, which was at her house, and move it to his house. On the other hand, Mr. Lathrop testified that he drove by Mr. Boyd’s house once or twice a week and he never saw a John Deere tractor on the property. Ms. Halderman testified she obtained the video taken by Deputy Leatherman and “a yellow wheel” could be seen in the video. However, neither the video nor any screenshots from the video showing “a yellow wheel” were admitted in evidence. After considering and weighing all the pertinent record evidence, we determine that the credible evidence supporting the finding was not so weak or so contrary to the overwhelming weight of the evidence that the finding should be set aside and a new trial ordered. Furthermore, we defer to the fact-finder’s credibility determinations and we may not substitute our judgment for that of the fact-finder, even if we would have reached a different conclusion.

Id.

Court Affirms A Trial Court’s Order Granting A Receiver’s Request To Sell Real Property

In Estate of Richards, a probate court entered an order appointing a receiver of estate property. No. 11-23-00031-CV, 2024 Tex. App. LEXIS 8626 (Tex. App.—Eastland December 12, 2024, no pet. history). The receiver filed a motion to approve the sale of real estate due to it being unproductive. A beneficiary objected to the sale and filed a supplemental application for declaratory judgment. She also argued that the sale of a tract of real property would be improper when she had filed pleadings seeking the partition of the property and distribution of estate property. The trial court approved the sale, and the beneficiary appealed.
The court of appeals first held that the appeal was timely, in part because the notice of appeal was filed within the fifteen-day grace period after it was due. The court of appeals also held that the appeal was not moot. The appellant argued that the appeal was moot because the sale was already consummated (the appellant let the property be sold without seeking a stay of the order). The court noted:
The conveyance of property can moot an appeal. Generally, “[w]hen a party appeals an order appointing a receiver or authorizing sale of certain property and the property has been sold, the appeal of the order becomes moot.” The principle behind this general rule is that the trial court is no longer able to afford relief if the property has been conveyed to a third party that was not subject to the jurisdiction of the trial court.

Id. However, the court of appeals held that the appeal was not moot because the sale was to a beneficiary, who was a party to the suit, and that the transaction could therefore be rescinded.
The court then addressed the beneficiary’s argument that the trial court erred in ordering the sale when she had a request to distribute the estate pending. Section 360.001(a) of the Estates Code provides that:
At any time after the first anniversary of the date original letters testamentary or of administration are granted, an executor, administrator, heir, or devisee of a decedent’s estate, by written application filed in the court in which the estate is pending, may request the partition and distribution of the estate.

Id. (citing Tex. Est. Code Ann. § 360.001). “By their express terms, Sections 360.001 and 360.002 permit a designated class of individuals to request the partition and distribution of the estate or a portion of the estate.” Id. The receiver argued that this provision did not apply to an independent administration. The court of appeals did not address this issue: “We will assume without deciding that Chapter 360 is applicable to this probate proceeding.” Id. The court then held that there was evidence that supported the trial court’s order:
Leinenbach is incorrect in her interpretation of Chapter 360 and the manner in which the trial court applied it with respect to the sale of the Homeplace. Even if one assumes that Chapter 360 is applicable to this proceeding, its provisions do not compel the partition in kind of the Homeplace based upon the mere request of a devisee. Section 360.002(c) provides that the court “may distribute any portion of the estate the court considers advisable.” The emphasized language indicates that the probate court has a measure of discretion to determine whether to order the partition in kind of an item of estate property. Additionally, Section 360.102 is prefaced on the following condition: “If the court determines that the estate should be partitioned and distributed.” Furthermore, Section 360.151 only requires the appointment of commissioners to partition estate property if “the court has not previously determined that the estate is incapable of partition.” Here, the trial court found that the Homeplace “is not capable of being partitioned in kind.” This finding by the trial court is adverse to Leinenbach’s contention that she was entitled to compel the partition in kind of the Homeplace under Chapter 360. However, Leinenbach has not challenged this finding on appeal or the evidence supporting it. When an appellant does not challenge the trial court’s findings of fact, those findings are binding upon both the party and the appellate court. Accordingly, we overrule Leinenbach’s sole issue on appeal.

Id.

Effective Now: The Maryland Secondary Market Stability Act of 2025 Enacted and Codifies a New Licensure Exemption

The Maryland Secondary Market Stability Act of 2025 (the “Act”) was enacted and became effective as of April 22, 2025. The Act codifies a licensure exemption reversing guidance from the Maryland Office of Financial Regulation (“OFR”), which would have extended mortgage lender and installment lender licensure requirements to persons (including passive trusts) that acquire or are assigned residential mortgage loans or installment loans secured by properties in Maryland. For more background on this topic, see our previous alerts: Even Passive Trusts?!? Maryland Extends Mortgage Lender Licensure Requirements to Holders of Residential Mortgage Loans and Maryland Extends Lender Licensure Enforcement Deadline Amid Industry Pushback.
The Act provides that mortgage lender and installment lender licensure requirements do not apply to a person that acquires or is assigned a mortgage loan or installment loan, so long as that person does not:

otherwise make mortgage loans or installment loans,
act as a mortgage broker,
act as a mortgage servicer, or
directly service or collect on any installment loan.

See, e.g., Md. Code Ann., Fin. Inst. § 11-102(B) (effective Apr. 22, 2025). We note that the language of § 11-102 is only present in the Senate version of the companion legislation, however, both the Senate and House bills were enacted.
The Act also clarifies that the licensure requirements do not apply to a “passive trust.” “Passive trust” means a trust, established under the laws of Maryland or any other state, that: (1) acquires or is assigned mortgage loans in whole or in part, (2) does not make mortgage loans, (3) is not a mortgage broker or a mortgage servicer, and (4) is not engaged in servicing mortgage loans. See Md. Code Ann., Fin. Inst. §§ 11-501(P); 11-502(b)(13) (effective Apr. 22, 2025).
The Act provides a welcomed exemption and regulatory certainty in response to the upheaval following the Estate of Brown decision and subsequent OFR guidance. Secondary market participants should carefully evaluate whether their activities fall within the new exemption and stay informed of further developments in Maryland.

Pushback of Deadline for SNFs to Submit Significantly More Detailed Ownership and Control Information in New “SNF Attachment” to CMS Form 855A

With newly confirmed Dr. Mehemet Oz at its helm, the Centers for Medicare & Medicaid Services (CMS) maintained but delayed the deadline for its requirement that Skilled Nursing Facilities (SNFs) to report significantly expanded information to CMS about the ownership, management and relationships with private equity (PE) and real estate investment trusts (REIT), and newly defined “additional reportable parties” (ADPs).
Scheduled to take effect on May 1, 2025, CMS recently announced a three-month reprieve, pushing the deadline back to August 1, 2025. This comes at the same time that CMS is seeking suggestions on lowering the Medicare regulatory burden and simplifying Medicare reporting requirements.
The delay announcement came as a surprise since, as recently as Friday, April 11, CMS reminded SNFs about the May 1 deadline that was fast-approaching for the Off-cycle SNF Revalidation of all Medicare-enrolled SNFs. Originally issued on October 1, 2024, every SNF was required to complete the new Form 855A that was designed to improve transparency and accuracy in SNF enrollment data under new reporting rules that were finalized by CMS in the Medicare and Medicaid Programs; Disclosures of Ownership and Additional Disclosable Parties Information for Skilled Nursing Facilities and Nursing Facilities; Medicare Providers’ and Suppliers’ Disclosure of Private Equity Companies and Real Estate Investment Trusts, on November 17, 2023.
Effective October 1, 2024, CMS added the new “SNF Attachment” to Form 855A, the Medicare Enrollment Application for Institutional Providers. All SNFs must now revalidate CMS enrollment by submitting the updated form by August 1, 2025. Medicare-enrolled SNFs should have received a revalidation notice by the end of the calendar year 2024. Even if the letter got lost in the mail, CMS expects every Medicare enrolled SNF to contact their Medicare Administrative Contractor (MAC) to ensure they revalidate their enrollment before August 1, 2025, or risk what will be serious consequences.
CMS set the bar for disclosures high, and the consequences will be swift and painful for SNFs that fail to report enrollment information fully and accurately. Penalties may include notice of dis-enrollment or revocation of Medicare enrollment, which could result in a lapse in enrollment, leaving a non-compliant SNF unable to submit claims or receive reimbursements.
The updated 855A requires SNFs to disclose all ownership interest and managing control information on the new SNF Attachment, rather than in Sections 5 and 6 as previously required. SNFs will no longer fill out Sections 5 and 6 and instead must check a box in each section which states “Check here if you are a Skilled Nursing Facility and skip this section.”
The new SNF Attachment requires far more information and detail than previously required by Sections 5 and 6. While some of the disclosures previously required in these sections have carried over to the new SNF Attachment, there are several additional requirements. SNFs must now disclose:

All members of their governing body irrespective of business type;
If the SNF is an LLC, all owners must be reported regardless of ownership percentage;
If the SNF is a trust, all trustees;
All Additional Disclosable Parties (ADPs); and
Certain additional information about each ADP.

An Additional Disclosable Party (ADP) is defined broadly to include any person or entity that:

Exercises operational, financial, or managerial control over any part of the SNF,
Provides policies or procedures for any of the SNF’s operations,
Provides financial or cash management services to the SNF,
Leases or subleases real property to the SNF or owns a whole or part interest equal to at least 5% of the total value of property leased by the SNF,
Provides management or administrative services to the SNF,
Provides clinical consulting services to the SNF, and/or
Provides accounting or financial services to the SNF.

There is no minimum threshold for how long the ADP must have furnished the services, the extent of involvement with the SNF’s operations, or the volume of furnished services. If a person or entity performed any of the above-listed services, for any period of time, they must be disclosed as an ADP.
Furthermore, CMS has made it abundantly clear that SNFs should err on the side of disclosure if they are uncertain as to whether a party qualifies as an ADP. Additional information can be found in CMS Guidance for SNF Attachment on Form CMS-855A.
At approximately the same time SNFs were expected to be gathering the information to complete the new disclosures, CMS posted an appeal for regulatory relief titled “Unleashing Prosperity Through Deregulation of the Medicare Program Request for Information” (Medicare Deregulation RFI). Through this RFI, CMS asks for input “on approaches and opportunities to streamline regulations and reduce administrative burdens on providers, suppliers, beneficiaries, Medicare Advantage and Part D plans, and other stakeholders participating in the Medicare program . . . [in an] effort[ ] to reduce unnecessary administrative burdens and costs, and create a more efficient healthcare system. . .” Commenters are asked to identify “specific Medicare administrative processes, quality, or data reporting requirements, that could be automated or simplified to reduce the administrative burden on facilities and providers,” “changes [that could] be made to simplify Medicare reporting and documentation requirements without affecting program integrity,” and “documentation or reporting requirements within the Medicare program that are overly complex or redundant.” Some SNF industry stakeholders are looking at the RFI as an opportunity to get the Trump Administration to at least decrease the complexity of the increased SNF reporting requirements, if not eliminate as a redundant, duplicative and unnecessary administrative burden that will create financial strain on SNFs.

PBMs Score a Win in Federal Court Against State Regulation

A recent federal court decision has the potential to tip the balance in an ongoing series of skirmishes over state regulation of pharmacy benefit managers (PBMs).
In McKee Foods Corp. v. BFP Inc. d/b/a/ Thrifty Med Plus Pharmacy, the US District Court for the Eastern District of Tennessee declared that an “any willing pharmacy” requirement in Tennessee was preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), as amended. On one side, self-funded group health plans argue that ERISA allows them to comply with a single set of rules nationwide, rather than having to navigate a patchwork of different, overlapping, and sometimes conflicting state laws. On the other side are the states, which have a legitimate interest in ensuring prescription drug reimbursements are fair and reasonable and their citizens are protected from fraudulent, abusive, or misleading PBM practices. However, states have routinely misread a 2020 Supreme Court decision, Rutledge v. Pharmaceutical Care Management Association, to support extensive interference with the design and operation of employer-sponsored group health plans in a manner that may be preempted by ERISA.

In Depth

Enacted in 1974, ERISA made the regulation of employee benefit plans principally a matter of federal concern. The law broadly and generally preempts – or renders inoperative – state laws that “relate to” employee benefit plans. According to the Supreme Court’s Rutledge decision, ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA.” To “relate to” an ERISA plan, a law must either have a “connection with” or “reference to” such a plan.

“Connection with” preemption arises when either a law requires providers to structure benefit plans in particular ways, or acute (albeit indirect) economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage.
“Reference to” preemption arises in a different set of circumstances, namely where a state’s law acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law’s operation.

Citing Kentucky Association of Health Plans, Inc. v. Nichols, the McKee court held that Tennessee’s “any willing pharmacy” law had an impermissible connection with ERISA plans and was therefore preempted. In so holding, the court rejected the state of Tennessee’s reliance on Rutledge. Critically, Rutledge involved a form of cost regulation, not plan structure. By contrast, pharmacy networks – at issue in McKee – are plan structures.
McKee is consistent with the Tenth Circuit Court of Appeals decision in PCMA v. Mulready (now pending before the Supreme Court), which invalided an Oklahoma law compelling PBMs to comply with certain pharmacy network standards. The Tenth Circuit held that ERISA superseded the Oklahoma law because it generally compelled ERISA plans to structure benefits in certain ways. In reaching its decision, the Mulready court reviewed, summarized, and applied more than 20 years of Supreme Court jurisprudence, which can be summed up as follows: States have wide berth to regulate PBM pharmacy reimbursement rates and acquisition costs, but they may not interfere with plan operation and administration, including the design and structure of pharmacy networks.
Currently, fiduciaries and plan sponsors of self-funded group health plans with multistate operations are confronted with myriad conflicting and burdensome state PBM laws, as well as increased private plaintiff activity. Texas, Florida, and Arkansas are posing particular challenges at the moment; other states will likely follow. While MeKee is encouraging, it is of little help in the short run. To break the logjam, action is required, either by the Supreme Court or Congress.

ERISA in the Supreme Court: Implications of Cunningham v Cornell University

On April 17, 2025, the U.S. Supreme Court issued a unanimous opinion in Cunningham v Cornell University, addressing the pleading standard applicable to prohibited transaction claims under the Employee Retirement Income Security Act (ERISA).
Which Party Must Address Prohibitive Transaction Exemptions in a Motion to Dismiss?
Plan participants filed suit against plan fiduciaries, alleging that the fiduciaries had engaged in a prohibited transaction by retaining two of its recordkeepers and paying excessive recordkeeping fees to keep them. The question presented to the Supreme Court is an important procedural question: Who—at the motion to dismiss stage—had the burden of pleading and proving whether the service provider exemption applies?
The Supreme Court resolved a lower court split by ruling that it is not the participants’ responsibility to plead the absence of a prohibited transaction exemption. Instead, the plan sponsor must show that a prohibited transaction exemption applies as an affirmative defense. Exemptions are not—as the defense argued and the Second Circuit held—elements of the pleading, such that plaintiffs must demonstrate their absence to survive a motion to dismiss.
What are Prohibited Transactions and Why Are Exemptions Needed?
ERISA categorically bars certain “prohibited transactions” between a plan and a related party (a so-called “party-in-interest”) to prevent conflicts of interest subject to several detailed exemptions, which allow plans to interact or conduct business with a party-in-interest if certain requirements are met. Because of the extremely broad nature of the prohibited transaction rules, the retirement industry would have difficultly functioning without the prohibited transaction exemptions. For example, in the absence of the exemptions, virtually every payment of fees to a plan vendor for services would be a prohibited transaction. However, there is a commonly used statutory exemption for reasonable arrangements with service providers for the provision of necessary services as long as no more than reasonable compensation is paid.
Supreme Court Decision May Lead to More Litigation
As the concurring opinion noted, the motion to dismiss stage has become “the whole ball game” because the cost of discovery can often drive defendants to settle meritless suits based on purely financial considerations. The Supreme Court acknowledged that this lower standard for plaintiffs could open the floodgates to more litigation, and directed trial courts to use other methods and civil litigation rules to attempt to weed out meritless cases.
Recommended Actions
This is a procedural ruling steeped in technical principles of statutory construction and interpretation of civil litigation rules. Nonetheless, there is a simple takeaway for plan sponsors. The hurdle for participants to survive a motion to dismiss in a suit against plan fiduciaries just got easier, so it is more important than ever for plan sponsors to manage litigation risk by making themselves unattractive targets. This means plan sponsors and fiduciaries should focus on engaging in prudent, compliant and well-documented actions and plan administration processes, particularly in the areas of vendor selection and management and investment selection.

Taming the Tariffs: Employee Benefit Issues for Employers During Times of Economic Uncertainty – Group Employee Terminations

Many companies are scrambling to quickly assess how to reduce the business impact of the upheaval to U.S. manufacturing and trading with the recent onslaught of tariffs threatened or imposed by the United States and the related global response. Similar to the COVID-19 pandemic, employers may now be looking for ways to manage the impending financial impact of tariffs on their business, including trying to lower HR-related costs and obligations through larger-scale employee group terminations.
This article provides reminders of some of the employee benefits issues to consider if your company is considering group terminations as a way to tackle the business impact of tariffs. In our experience, employers often provide enhanced benefits for employees losing their employment as part of a group termination. While the enhanced benefits may add to the employer’s costs on a temporary basis, it is still less expensive in the long run than the ongoing costs of maintaining a larger active workforce.
Another cost-saving option an employer may consider is to reduce or suspend employer contributions to retirement plans, which is further discussed here.
This article does not address the employment aspects of a group termination, such as whether the group termination triggers federal or state WARN notice or other similar requirements and employers should consult their labor & employment counsel and advisors whenever considering a group termination of employees.
What Are the Impacts to Our 401(k) Plan for a Group Termination?
Vesting. When an employee terminates employment (whether in a single or group employee termination context), he or she will become eligible to receive a distribution of any vested benefit under the company’s 401(k) plan. While 401(k) plans rarely provide for full vesting when an employee experiences an employer-initiated termination of employment, if the group of terminated employees is large enough, then the 401(k) plan may experience a “partial plan termination,” which requires certain 401(k) plan accounts to become fully vested.
A 401(k) plan has a “partial plan termination” during a plan year if there is a significant change to the plan or a significant corporate event that affects the right of employees to vest in their plan benefits. While determining if a partial plan termination has occurred is a facts & circumstances test, current IRS guidance presumes that there is a partial plan termination when at least 20% of the 401(k) plan’s active participants experience an employer-initiated termination of employment (outside of a company’s “ordinary course” turnover) during a plan year or in connection with the same corporate event (e.g., a planned or coordinated reduction in force). When a partial plan termination occurs, the employer must fully vest any employee who left employment during the relevant plan year, including people who voluntarily left employment. There are several nuances to this analysis so we recommend that a company discuss any planned larger-scale reductions in force with its 401(k) plan recordkeeper and legal advisors to determine the application of the partial plan termination rules in that circumstance.
If a partial plan termination is not occurring, then you may also wish to consider whether to voluntarily vest 401(k) plan accounts for individuals affected by an employer-initiated group termination, provided the employee group is not disproportionately highly compensated (as defined under IRS rules). This will require a plan amendment and coordination with your 401(k) plan recordkeeper to administer the change.
Employer Annual Contributions. If your 401(k) plan provides employer contributions that require either a specific number of hours of service during the year and/or a last day of the year employment requirement as a condition for receipt of this contribution, you may wish to consider whether to waive those requirements for the employees affected by the group termination, provided the employee group is not disproportionately highly compensated. This will require a plan amendment; however, this plan provision need not be preserved in the plan going forward; for example, the amendment could be drafted to apply to employees experience a group termination only during a limited window of time (e.g., 2025) or so it applies only to terminations at a specific plant or location.
Eligible Plan Compensation. One other item to remember is that if severance benefits are provided to employees, severance pay may never be subject to 401(k) plan deferrals or, generally, be considered to determine employer contributions under a 401(k) plan. That contrasts with certain regular post-termination payments related to final pay or benefits for services provided (e.g., final paycheck or vacation cashout) that may be subject to 401(k) deferrals and related employer contributions, depending on how your 401(k) plan defines compensation. Coordinate with your 401(k) plan recordkeeper and payroll processers to make sure 401(k) plan deferrals and employer contributions are only applied to eligible compensation.
What About Severance?
Employers that either rarely offer severance benefits or that do so on an ad hoc basis will often adopt a more formal severance program in connection with group terminations. This can be especially helpful if there is an expectation that employees work through a specific date to receive severance; the promise of severance benefits can serve as a retention tool. Typical severance benefits include severance pay and sometimes outplacement benefits and subsidized COBRA premiums (see the next question for more about COBRA). Whether a severance program is considered a plan subject to ERISA rules depends on whether there is an “administrative scheme.” The rule of thumb is that if the severance benefits will be paid overtime under normal payroll practices, rather than in a lump sum, we recommend that the severance program be set up to be ERISA compliant. An ERISA compliant severance program needs to be in writing, include specific claims and appeals procedures, and provide a summary plan description (which can often also serve as the written plan document) to eligible employees. If the program covers over 100 employees, a Form 5500 would also need to be filed.
Unlike many ERISA benefits, there are no rules that require equal severance benefits, so highly compensated employees can receive richer severance benefits than lower-paid employees, or the benefits can vary by location or position. In addition, there is no legal requirement that the severance plan be continued indefinitely – it can remain in effect only for a finite period.
What Happens to Health Coverage for Employees Who Are Terminated?
In the normal course, terminated employees enrolled in an employer’s group health plan (whether that be medical, prescription drug, dental, vision, or health flexible spending accounts) can continue this coverage generally for up to 18 months under federal COBRA rules, or for smaller employers under state-specific “mini-COBRA” laws, by paying the full cost of such coverage.
Sometimes employers may choose (or be required under an employment contract or severance policy) to subsidize all or part of the terminated employee’s premium costs for COBRA continuation coverage. For example, you may let terminated employees continue to pay active employee rates for COBRA coverage. In that case, you need to be mindful of whether your health plan is a self-insured or fully-insured plan as there could be different tax reporting obligations on such subsidies based on how benefits are provided. If your health plan is fully insured, there are no tax consequences to the terminated employees because of the subsidized COBRA premiums. If your health plan is self-insured, however, and the subsidized COBRA premiums favor highly compensated employees, the amount of that subsidy may need to be treated and taxed as compensation. Note that if you choose to provide the subsidy as a cash payment regardless of whether the former employee spends it on COBRA coverage or otherwise, it is always considered taxable compensation even if they actually use it to buy COBRA coverage. Companies should take care to properly communicate, document, and tax report and withhold from any COBRA coverage subsidy benefits.
How Are Outstanding Stock Options or Other Equity Incentive Plan Awards Treated?
You will need to check the equity incentive plan documents and individual award agreements to properly determine any impact on outstanding awards in the event of an employee termination. In addition, you can’t stop there— you also need to make sure there are no other rules that may apply to an employee’s equity awards under an existing employment agreement, applicable severance policy, or any other individual contract. Unless the award provides for accelerated vesting on a termination of employment, any outstanding and unvested equity awards would typically be forfeited at termination of employment. In a group termination situation, employers often consider whether to provide for additional vesting if the plan or award agreement does not already require it. If additional vesting is desired, remember to check the equity plan or award agreement to determine the necessary process to approve the additional vesting, for example, whether approval of the board of directors or an officer is required to make that change.
Will the Company Need to Make Payments on Deferred Compensation Plans?
Possibly, depending on the terms of the deferred compensation plan. A termination from employment (called a “separation from service” under the Code Section 409A rules) is one of the permissible payment events under Code Section 409A for nonqualified deferred compensation plans. To the extent any terminated employees are participating in a deferred compensation plan, you will need to carefully review the plan and award agreements to determine any impact from the termination on vesting or payment obligations. If separation from service is a payment triggering event, the company will need to be ready to make those required payments, which will come from the company’s general assets unless the company has set up one of the limited ways that a company may set aside certain funds for deferred compensation obligations. The cash outlay for making these payments will need to be considered as part of the overall costs of a group termination.
Do the Same Considerations Apply for Employees Who Are Covered under a Collective Bargaining Agreement?
When considering employee terminations for any employees represented by a union, you should always first check the terms of the applicable collective bargaining agreements and consult with your labor advisors on the company’s obligations in connection with a group termination. While the summaries above do apply generally for employer-sponsored retirement and welfare benefits, there may be specific provisions in a collective bargaining agreement or under union-sponsored benefit plans that will require certain company actions or require the company to further bargain with the union in the event of a planned reduction in force.
Don’t Forget About Releases!
If you decide to provide enhanced benefits to employees in connection with a group termination, consider whether to condition those enhanced benefits on the impacted employees executing a general release of claims. It is difficult to condition enhanced 401(k) benefits on the provision of a release, but releases otherwise work well in connection with the other benefit enhancements discussed above. You should coordinate with your employment and benefits advisors for the appropriate form of any release of claims that employees will provide in connection with a group termination.

Not So Fast: DOL Releases Annual Funding Notice Guidance Just Before the Distribution Due Date

Takeaway

Plan administrators should review their plan’s 2024 annual funding notice against the model notice and determine whether their plan’s 2024 annual funding notice is compliant. If not, plan administrators are expected to take corrective action.

Court Reversed Order Holding That a Will Had Been Revoked Where There Was No Present Intent to Do So

In In re Estate of Wright, decedent’s son appealed an order finding that his mother died intestate. No. 13-23-00043-CV, 2024 Tex. App. LEXIS 8078 (Tex. App.—Corpus Christi November 21, 2024, no pet. history). The son alleged that on May 7, 2007, the mother executed a holographic will (2007 will) which had not been revoked. His brother filed an amended counter-application for probate of will in which he alleged that on July 20, 1993, the mother executed a will (1993 will) which had not been revoked. In his counter-application, the brother argued that the 2007 will was not valid because:
(1) [did] not purport to revoke the [1993 will] or any prior [w]ills, and could only be construed as a Codicil to the Will submitted herewith, (2) appear[ed] to be written on more than one occasion; (3) contain[ed] two separate dates[;] (4) contain[ed] a curving line over portions of its terms, which line is undated and unsigned; [](5) require[d] clarification as to the terms of the handwritten document itself, and more specifically the terms of the trust mentioned therein including the identity of its corpus, beneficiaries, and trustee(s); (6) was revoked by [Doris] in whole or in part because it indicates that it is “not right” [and] indicates the Decedent “will write new one[.]”

Id. The court held that the 2007 will was effective to revoke the 1993 will, but that the 2007 will was also revoked. So, the trial court held that the decedent died intestate.
The court of appeals reversed the trial court’s order, holding that the 2007 will had not been revoked:
As mentioned above, the trial court’s order concluded that “[Doris’s] May 1, 2007 Holographic Will was revoked by the January 16, 2014[] notations made and signed by [Doris] after her signature of the May 1, 2007 Holographic Will.” The order further concluded that Doris died intestate. In this case, the central dispute between the parties is whether Doris revoked the 2007 will with the language “Not right” and “Will write new one.”
Demry argues, among other things, that the language at issue is “patently not revocatory in nature” and “do[es] not rise to language upon which revocatory intent can be legitimately appended.” Neither of the parties have provided any case authorities holding the language at issue, or similar language, constitutes revocatory intent, and we have found none. Both parties cite to Dean v. Garcia, which concluded that the words “CANCILED [sic]” and “VOID” were “words of cancellation” sufficient to revoke a codicil. 795 S.W.2d 763, 764-66 (Tex. App.—Austin 1989, writ denied). Thomas argues that Dean is “illustrative of how few words are necessary to revoke a testamentary instrument.” However, Demry argues that the language at issue “does not come remotely close to the language in Dean” and does not consitute “present and clear revocative language.” We agree that the language “Not right” and “Will write new one” are not clear “words of cancellation” sufficient to revoke the 2007 will.
Demry further argues that the language “Will write new one” refers to “an intent to undertake an act in the future . . . and therefore do[es] not comply with the legal requirement that revocatory language must constitute a present intent to revoke.” “A present intent to change or revoke a testamentary instrument in the future cannot accomplish revocation of the instrument, nor is it evidence of the revocation.” Here, the language “Will write new one” cannot be reasonably interpreted to constitute a present intent to revoke the 2007 will. A liberal reading of the language, at most, suggests an intent to create a new will in the future, not an intent to revoke the current will wherein this language appears; therefore, we conclude that the “Will write new one” language did not accomplish the 2007 will’s revocation nor is it evidence of its revocation.
Thomas argues that the trial court properly considered extrinsic evidence to determine that Doris intended to revoke the 2007 will through the use of the disputed language. In order for consideration of extrinsic evidence to be proper, the trial court must have first found that the disputed language was ambiguous… As explained above, the disputed language does not constitute clear “words of cancellation” or contain a present intent to revoke the will; thus, we find no patent ambiguity. Similarly, we find no latent ambiguity because the words do not sensibly convey a present intent to revoke the will. Therefore, the trial court erred to the extent it found the disputed language ambiguous as a matter of law and when it considered extrinsic evidence to determine the meaning of the disputed language. Based on the foregoing, we hold that the trial court abused its discretion when it concluded that the disputed language revoked the 2007 will.

Id.

Does a Trustee Have a Duty to Investigate Whether the Trust Document is Valid?

Elderly persons often sign new estate documents, including trusts and trust amendments. Certainly, all persons with competence and without improper influences have the right to leave their property to whoever, and however, they please. However, there are instances where individuals have signed documents where they do not have the mental capacity to do so or where they are unduly influenced. This can place the person or entity named in the newly signed document as the executor, trustee, or agent into a difficult position. Does the person or entity have the duty to investigate the document that names them in their fiduciary role?
The first issue is whether the named person or entity has a duty before he, she or it accepts the position. A named person or entity can formally accept the position by signing an acceptance document or being named in a court order or the named person can constructively accept the position. A named successor trustee that has not formally accepted the role of trustee can constructively accept the role of trustee by exercising power or performing duties under the trust, unless the named successor trustee was merely (1) acting to preserve trust property, and within a reasonable time after acting gives notice of the rejection of the trust to the settlor or to the beneficiaries if the settlor is deceased, or (2) inspecting or investigating trust property for any purpose. Tex. Prop. Code Ann. § 112.009(a).
Before formally or constructively accepting the role of successor trustee, a named successor trustee has no duty to take any actions on behalf of the trust. In re Est. of Webb, 266 S.W.3d 544, 549 (Tex. App.—Fort Worth 2008, pet. denied) (stating “A person designated in a trust instrument as a trustee incurs no liability with respect to the trust until he accepts the trust.”) (citing Tex. Prop. Code Ann. § 112.009(b)); Blieden v. Greenspan, 751 S.W.2d 858, 859 (Tex. 1988) (stating “a breach of the duty to administer the trust can only occur if the trustee has accepted or acquiesced in his appointment as trustee.”); Tex. Prop. Code Ann. § 112.009(b) (“A person named as trustee who does not accept the trust incurs no liability with respect to the trust.”); Restatement (Third) of Trusts § 35 (2003) (“A person who has not accepted the office cannot be compelled to act as trustee.”); Restatement (Third) of Trusts § 76 (2007) (“A person has no duty to administer the trust unless he or she accepts the trusteeship.”); Restatement (Second) of Trusts § 169 (1959) (“[T]he trustee is not under a duty to administer the trust unless he accepts” the appointment of trustee); McCarthy v. Poulsen, 173 Cal. App. 3d 1212, 1217 (Ct. App. 1985) (“the universal rule in this country [is] that a person may not be forced to be a trustee without his consent.”). So, a named trustee who has not formally or constructively accepted the position has no duty to investigate whether the trustor had the requisite capacity to execute the trust instrument before accepting the role.
There is little authority in Texas regarding whether a person who has accepted the role of trustee has a duty to investigate whether the trustor had capacity. From a general standpoint, a trustee has two potentially conflicting duties: (1) the duty to uphold and defend the trust instrument as modified by the settlor, and (2) the duty to not comply with a trust instrument that it knows, or should have known, is invalid. Tex. Prop. Code § 113.051 (a trustee has a duty to administer the trust in accordance with the terms of the trust instrument); Tex. Prop. Code Ann. § 113.002 (“a trustee may exercise any powers in addition to the powers authorized by this subchapter that are necessary or appropriate to carry out the purposes of the trust.”); Restatement (Third) of Trusts § 76 (2007) (a trustee has a duty to administer the trust in accordance with the terms of the trust instrument including terms that have been modified or amended by the settlor); 2 Tex. Prac. Guide Wills, Trusts and Est. Plan. § 5:376 (where there is a challenge to the terms of the trust, the trustee is under a duty to uphold and defend the terms of the trust); Restatement (Third) of Trusts § 72 (2007) (“A trustee has a duty not to comply with a provision of the trust that the trustee knows or should know is invalid because the provision is unlawful or contrary to public policy.”).
While there is no case law discussing this issue in regards to a trustee, there is a case discussing this issue in regards to an executor. See In re Estate of Robinson, 140 S.W.3d 801 (Tex. App.—Corpus Christi 2004, pet. dism’d). Because “[t]he fiduciary standards of an executor of an estate are the same as the fiduciary standards of a trustee,” this case law can be applied to trustees. McLendon v. McLendon, 862 S.W.2d 662, 670 (Tex. App.—Dallas 1993, writ denied). In Robinson, the court held that an executor did not have a duty to investigate or contest the validity of decedent’s will and concluded that the trial court abused its discretion in disqualifying the executor based on the alleged duty to investigate or contest the will. In re Estate of Robinson, 140 S.W.3d at 811.
In Robinson, Garland Sandhop (“Sandhop”) served as the co-executor of the estate of Velma Robinson (“Robinson”), and co-trustee of certain trusts executed by Robinson. Id. at 804. The trial court admitted Robinson’s 1995 will to probate. Id. Contestants filed a will contest alleging that Robinson lacked the requisite mental capacity when she signed the 1995 will and was unduly influenced. Id. Contestants offered a different will for probate—one that Robinson had signed in 1983 which named Sandhop as co-executor and named different beneficiaries than the 1995 will. Id. Sandhop did not join in contesting the 1995 will. Id. The 1995 will was set aside and the 1983 will was admitted to probate. Id. When Sandhop sought to be appointed co-executor of the estate under the 1983 will, a contestant filed a motion to disqualify Sandhop alleging, among other things, that he had disregarded his duty to investigate and contest the validity of the 1995 will. Id. at 811. Ultimately, the trial court disqualified Sandhop from serving as co-executor and denied his request for appointment. Id. at 805. On appeal, Sandhop argued that he did not investigate or contest the validity of the 1995 will because: (1) he did not think he had a duty to do so, and (2) he had no reason to do so. Id. at 811. The court addressed the issue, “[Contestant] provides no authority for her argument that [Sandhop], who was named co-executor in Robinson’s 1983 will, had a duty to investigate or contest the 1995 will, and we find none.” Id. The court concluded that the trial court had abused its discretion in disqualifying Sandhop as co-executor based on the alleged duty to investigate or contest the will. Id. Using the court’s rationale from Robinson, it follows that a trustee or executor would not have a general duty to investigate the validity of a will or trust affecting the trust or estate or to bring claims to have the document set aside.
Even if a trustee could be charged with a duty to investigate the validity of a trust document, that duty would only spring forward when the trustee had some knowledge of facts that would trigger the duty and would be judged against the trustee’s discretionary standard. In determining whether a trustee should have known that a trust instrument was invalid, or should have investigated the instrument’s validity, “among the relevant factors for a court to consider are the particular trustee’s experience, familiarity with trust law and practice, and representations concerning competence to serve as a trustee.” Restatement (Third) of Trusts § 72, cmt. c (2007). Trustees owe beneficiaries “an unwavering duty of good faith, fair dealing, loyalty, and fidelity.” In re Estate of Boylan, No. 02-14-00170-CV, 2015 Tex. App. LEXIS 1427, at *10 (Tex. App.—Fort Worth Feb. 12, 2015, no pet.). This duty requires trustees to “exercise the judgment and care that persons of ordinary prudence, discretion, and intelligence exercise in the management of their own affairs.” Id. Good faith is no defense when the trustee or executor has not exercised diligence or has acted unreasonably. See, e.g., id. at *11–12; In re Estate of Bryant, No. 07-18-00429-CV, 2020 Tex. App. LEXIS 2131, at *16–17 (Tex. App.—Amarillo March 11, 2020, no pet.).
Courts scrutinize a fiduciary’s conduct in a given situation for reasonableness and diligence. See Boylan, 2015 Tex. App. LEXIS 1427, at *10–11 (analyzing reasonableness and good faith of executor’s interpretation of a will); American Nat’l Bank v. Biggs, 274 S.W.2d 209, 220–21 (Tex. App.—Beaumont 1954, no writ) (analyzing facts supporting trustees’ reasonableness and good faith when administering trust); In re XTO Energy Inc., 471 S.W.3d 126, 131–32 (Tex. App.—Dallas 2015, no pet.) (analyzing trustee’s conduct and determining that trustee’s understanding of certain conveyances was not wrongful, fraudulent, or an abuse of discretion). The Third Restatement of Trusts states:
The duty of care requires the trustee to exercise reasonable effort and diligence… in making and implementing administrative decisions, and in monitoring the trust situation, with due attention to the trust’s objectives and the interests of the beneficiaries. This will ordinarily involve investigation appropriate to the particular action under consideration, and also obtaining relevant information about such matters as the contents and resources of the trust estate and the circumstances and requirements of the trust and its beneficiaries.
…
In addition to the duty to use care and skill, the trustee must exercise the caution of a prudent person managing similar assets for similar purposes. The duty to act with caution does not, of course, mean the avoidance of all risk, but refers to a degree of caution that is reasonably appropriate or suitable to the particular trust, its purposes and circumstances, the beneficiaries’ interests, and the trustee’s plan for administering the trust and achieving its objectives.

Restatement (Third) Of Trusts § 77 cmt b.
Further, a court may not interfere with the exercise of a trustee’s discretionary powers and substitute its discretion for that of the trustee except in cases of fraud, misconduct, or a clear abuse of discretion. In re XTO Energy Inc., 471 S.W.3d at 131–32 (citing Di Portanova v. Monroe, 229 S.W.3d 324, 330 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). A trustee’s power is discretionary if a trustee may decide whether or not to exercise it. Id. (citing Caldwell v. River Oaks Trust Co., No. 01–94–00273–CV, 1996 WL 227520, at *12 (Tex. App.—Houston [1st Dist.] May 2, 1996, writ denied) (not designated for publication)). When a trustee is granted the authority to commence, settle, arbitrate or defend litigation with respect to the trust, the trustee is authorized, but not required, to pursue litigation on the trust’s behalf. Id. (citing DeRouen v. Bryan, No. 03–11–00421–CV, 2012 WL 4872738 at *4 (Tex. App.—Austin Oct. 12, 2012, no pet.) (mem. op.), and quoting Restatement (Second) of Trusts § 177 cmt c). “It is not the duty of the trustee to bring an action to enforce a claim which is a part of the trust property if it is reasonable not to bring such an action, owing to the probable expense involved in the action or to the probability that the action would be unsuccessful or that if successful the claim would be uncollectible owing to the insolvency of the defendant or otherwise.” Restatement (Second) of Trusts § 177 cmt c. Based on the foregoing, a trustee likely has no duty to investigate whether the trustor had the requisite capacity to execute the trust instrument, unless refusing to do so would be unreasonable or an abuse of discretion.
Finally, a trustee has a duty to disclose “all material facts known to [it] that might affect [the beneficiaries’] rights.” Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex.1984). A trustee may owe a duty to provide the beneficiaries with any information known to the trustee that indicated the trust instrument was invalid. If a trustee fails to do so, it may be in breach of a duty to disclose.
The issue of whether a trustee has a duty to investigate the validity of the document naming it a trustee, is a complicated one, and an issue for which there is little guidance in Texas. The only authority in Texas would seem to imply that there is no duty to investigate. Even if a duty could arise, a trustee’s conduct would likely be judged against a discretionary standard.

ERISA Fiduciary Duties: Compliance Remains Essential

The Employee Retirement Income Security Act of 1974 (ERISA) establishes a comprehensive framework of fiduciary duties for many involved with employee benefit plans. Failure to comply with these strict fiduciary standards can expose fiduciaries to personal and professional liability and penalties. With ERISA litigation on the rise, a new administration, and recent news that the Department of Labor (DOL) is sharing data with ERISA-plaintiff firms, a refresher on fiduciary duty compliance is necessary.
What Plans Are Covered?
ERISA’s fiduciary requirements apply to all ERISA-covered employee benefit plans. This generally includes all employer-sponsored group benefit plans unless an exemption applies, such as governmental and church plans, as well as plans solely maintained to comply with workers’ compensation, unemployment compensation, or disability insurance laws.
Who Is A Fiduciary?
A fiduciary is any individual or entity that does any of the following:

Exercises authority over the management of a plan or the disposition of assets.
Provides investment advice regarding plan assets for a fee.
Has any discretionary authority in the administration of the plan.

Note that fiduciary status is determined by function, what duties an individual performs or has the right to perform, rather than an individual’s title or how they are described in a service agreement. Fiduciaries include named fiduciaries. Those specified in the plan documents are plan trustees, plan administrators, investment committee members, investment managers, and other persons or entities that fall under the functional definition. When determining whether a third-party administrator is a fiduciary, it is important to identify whether their administrative functions are solely ministerial or directed or whether the administrator has discretionary authority.
What Rules Must Fiduciaries Follow?
Fiduciaries must understand and follow the four main fiduciary duties:

Duty of Loyalty: Known as the exclusive benefit rule, fiduciaries are obligated to discharge their duties solely in the interest of plan participants and beneficiaries. Fiduciaries must act to provide benefits to participants and use plan assets only to pay for benefits and reasonable administrative costs.
Duty of Prudence: A fiduciary must act with the same care, skill, prudence, and diligence that a prudent fiduciary would use in similar circumstances. Even when considering experts’ advice, hiring an investment manager, or working with a service provider, a fiduciary must exercise prudence in their selection, evaluation, and monitoring of those functions and providers. This duty extends to procedural policies and plan investment and asset allocation, including evaluation of risk and return.
Duty of Diversification: Fiduciaries must diversify plan investments to minimize the risk of large losses, with limited exceptions for ESOPs.
Duty to Follow Plan Documents and Applicable Law: Fiduciaries must act in accordance with plan documents and ERISA. Plans must be in writing, and a summary plan description of the key plan terms must be provided to participants.

Fiduciaries also have a duty to avoid causing the plan to engage in any prohibited transactions. Prohibited transactions include most transactions between the plan and individuals and entities with a relationship to the plan. Several exceptions exist, including one that permits ongoing provision of reasonable and necessary services.
Liabilities and Penalties
An individual or entity that breaches fiduciary duties and causes a plan to incur losses may be personally liable for undoing the transaction or making the plan whole. Additional penalties, often at a rate of 20% of the amount involved in the violation, may also apply. While criminal penalties are rare, are possible when violations of ERISA are intentional. Causing the plan to engage in prohibited transactions may also result in excise taxes established by the Internal Revenue Code.
To limit potential liability, plan sponsors and fiduciaries should ensure the appropriate allocation of fiduciary responsibilities, develop adequate plan governance policies, and participate in regular training. Plan sponsors may purchase fiduciary liability insurance to cover liability or losses arising under ERISA. In addition, the DOL has established the Voluntary Fiduciary Correction Program (VFCP), which can provide relief from civil liability and excise taxes if ERISA fiduciaries voluntarily report and correct certain transactions that breach their fiduciary duties. The VFCP program was recently updated with expanded provisions for self-correction of errors, which are addressed in a previous advisory.

Texas Supreme Court To Review Whether A Corporate Trust’s Shareholder Has Standing To Sue On Behalf Of The Trust

The Supreme Court granted oral argument in In re UMTH Gen. Servs., L.P., 2023 WL 8291829 (Tex. App.—Dallas 2023), wherein a real estate investment trust entered into an advisory agreement with an entity and gave it authority to manage corporate assets. One of the trust’s shareholders sued the advisor and its affiliates, asserting claims under the advisory agreement for the alleged improper use of corporate funds for legal expenses. The advisor filed motions objecting to the shareholders’ claims due to a lack of capacity and standing. After the trial court denied the motions, the advisor filed a petition for writ of mandamus in the court of appeals, which was denied, and then in the Texas Supreme Court. The advisor argues that the trial court abused its discretion in allowing the shareholder to bring its claims directly rather than derivatively, as it lacked a personal cause of action and a personal injury, and that the shareholder lacked derivative standing because it did not maintain continuous or contemporaneous ownership of trust shares. The Supreme Court has set the case for oral argument.