The Bankruptcy Court quite sensibly ruled that because Peggy had contributed funds to the trust and because she was not deceased that the trust funds were not property of the estate. I wrote about the Bankruptcy Court's opinion here.
Because the trust designated Mary as the settlor and because she was deceased at the time that Terry filed bankruptcy, Terry's trustee was entitled to 50% of the trust. The only real take-away from this case is that prior to 2007 when the law was changed, the definition of a settlor under a Texas trust depended on whether the trust was self-settled or not. However, under current law, anyone who contributes property to a trust is a settlor.