In re Trust Created by Fenske
930 N.W.2d 43
Neb.2019Background
- Settlor Jack B. Fenske died in 1998; his will/trust left 95% of principal in trust to his niece (who predeceased him) with income to his great-nieces Jennifer Wheeler and Laura Grace (Wilson) and limited corpus invasion only for their educational expenses; remaining corpus to be distributed to their heirs at their deaths.
- Elkhorn Valley Bank & Trust (the Bank) was named trustee; trust assets (as of 2017) were mostly agricultural land plus cash and a promissory note; beneficiaries were adult and had completed their educations.
- Jennifer and Laura (all qualified beneficiaries) sought the Bank’s removal and replacement by David P. Wilson (Laura’s husband and an attorney), alleging removal served beneficiaries’ interests, fees exceeded income, and Wilson would serve free.
- The Bank refused to resign, asserting Fenske selected it for its independence and local trust expertise and that removal might contradict the settlor’s material purpose of preserving and keeping land intact.
- The county court denied the petition, finding (1) no substantial change in circumstances, (2) insufficient proof removal would best serve all beneficiaries, (3) removal would be inconsistent with a material purpose of the trust (particularly settlor’s desire for an independent, non-relative trustee and to keep assets together), and (4) Wilson was an unsuitable successor given his stated intent to pursue termination.
- The Nebraska Supreme Court affirmed, focusing on whether replacement of the Bank would be inconsistent with a material purpose of the trust and finding that it would be.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal is permitted under § 30-3862(b)(4) when requested by all qualified beneficiaries | Jennifer/Laura: All beneficiaries requested removal; removal best serves beneficiaries (reduce fees, possibly terminate and distribute assets); suitable successor available (Wilson) | Bank: Even if all beneficiaries request removal, removing the Bank would conflict with settlor’s material purpose (independence and preservation of land); Wilson unsuitable as he may pursue termination | Held: Removal would be inconsistent with a material purpose of the trust; petition denied and order affirmed |
| What constitutes a "material purpose" under § 30-3862(b)(4) | Plaintiffs: Material purpose should be narrowly construed; settlor’s choice of trustee is not dispositive if legal safeguards remain | Bank: Material purpose includes settlor’s expressed intent for an independent trustee and to keep assets together; replacing Bank with a relative undermines that purpose | Held: "Material purpose" requires showing settlor attached significance to trustee’s particular qualities; evidence showed Fenske valued the Bank’s independence, so removal would be inconsistent |
Key Cases Cited
- In re Henry B. Wilson, Jr., Revocable Trust, 300 Neb. 455, 915 N.W.2d 50 (Neb. 2018) (appellate review de novo for equitable trust matters)
- In re Margaret Mastny Revocable Trust, 281 Neb. 188, 794 N.W.2d 700 (Neb. 2011) (de novo review standards in trust administration)
- In re Trust of Shire, 299 Neb. 25, 907 N.W.2d 263 (Neb. 2018) (statutory interpretation and incorporation of UTC comments)
- Matter of Trust of Hildebrandt, 53 Kan. App. 2d 368, 388 P.3d 918 (Kan. Ct. App. 2017) (where initial trustee selection was incidental, replacement not inconsistent with material purpose)
- In re McKinney, 67 A.3d 824 (Pa. Super. Ct. 2013) (no-fault removal permitted where successor could accomplish material purpose)